What Made naked Stables' Resort Business a Hit in China?

Its founder is happy to remake himself to fit Chinese culture: he knows fengshui, banquets and baijiu — and how to shape the middle class's longing for nature.

In early 2017, naked Castle — four years in the making, at a cost of 300 million yuan — began taking reservations. The gray castle sits on a hilltop, and guests ride a small golf cart up from halfway down the mountain to reach it. The hotel built around it has 85 suites set into cliffs or tucked among trees, plus 10 themed suites inside the castle, priced from 2,000 to more than 6,000 yuan a night.

The naked Retreats Group likes to publicize the fact that the site was once a summer villa built by a Scottish doctor more than a century ago, along with details like the magnolia cottage that used to be a pigsty.

The company found its opening in China by combining rustic charm with high-end hotel service. Developing mountain-and-water scenery helps local governments create jobs and burnish an image; the hotel service speaks to the middle class's longing for calm in nature.

In 2011, the South African Grant Horsfield and his wife, Ye Kaixin, opened naked Stables together. Six years on, the company has become a template: four naked Retreats resort projects — in Suzhou, Shaoxing, Chongqing and Chengdu — are all due for completion by 2019.

Horsfield's Chinese still isn't fluent, but he has learned to talk the way Chinese people think. Interviewed by QDaily in May, he pointed at naked Stables in the valley below and said: "The site we chose has mountains at its back and water in front. naked Castle faces south, so you can watch the sun rise and set. naked Stables is the same — water in front, mountains behind. The fengshui is excellent."

Six years ago, when naked Stables first opened, he added, "I had no confidence at all, I was very worried." Now that naked Castle has opened, he isn't "even 1 percent worried."

Reporters all know Horsfield's chicken-feet story: his MBA teacher once told him about a Belgian who exported chicken feet — which European farms had to pay to dispose of — to China, and made a fortune. Horsfield came to China with the same hope, wanting to sell some African specialty of his own. He assumed all along that the product would be a physical thing, until he realized that "what I was selling was an African way of life."

That way of life shows up in the stable you see the moment you walk into naked Stables, the televisions deliberately hidden from view, and the rough African clay pots in every room. Ye Kaixin, whom Horsfield met in Shanghai and later married, made the design work. She is an experienced architect who worked on the design and construction of Shanghai's Xintiandi.

In China, the early mover in this business was Banyan Tree. As far back as 2005, it opened the brand's first Chinese resort in Ringha, Yunnan. Banyan Tree Lijiang followed in 2006, Banyan Tree Hangzhou in 2009. But resorts only lodged in ordinary consumers' minds with help from the two If You Are the One films, which made stars of Banyan Tree Hangzhou and the "Bird's Nest" resort inside a forest park in Sanya. That was when people began to really want the views and the ease a resort offered.

Horsfield's chicken-feet epiphany came at the right moment. In 2007, he and some friends took a trip to Moganshan, rented a few earthen huts from villagers and fixed them up, calling the place naked Village — the earliest form of the naked Retreats resorts.

"If you've never lived this way, you don't know you can live this way… back then nobody knew you could live like this. It's like — if you'd known two years ago that people today would love shared bikes, you'd be rich now," Horsfield told QDaily.

naked Village kept Horsfield's original South African idea of a "holiday house": set in the rural hills, with good views and boating, biking, hiking and fishing nearby. The lightly renovated earthen huts had no luxuries and no air conditioning, just simple beds and washbasins made from old water vats cut in half. Ye Kaixin later said that was half because they had little money, so they used local materials wherever they could. But that plain, unadorned country feeling was also a big part of what naked Village was.

This kind of country charm lives off big cities like Shanghai, which have few natural attractions of their own, and at first it caught on among Shanghai's foreigners. By one account, the six earthen huts took in more than 3,000 guests over three-odd years.

Having tested the idea at naked Village, in 2011 Horsfield and Ye Kaixin borrowed from banks and friends to raise about 200 million yuan and build a new resort.

It was a very different place from the raw little huts foreigners knew in 2007. The Horsfields decided expats should not be the target customers; the bigger market was Chinese guests, "and Chinese guests prefer hotels where the basics of daily living are properly built out." So naked Village gave way to the more memorable name naked Stables.

Horsfield also fitted the place with far fuller amenities: air conditioning, roomy bathrooms, comfortable beds — Ye Kaixin designed the outdoor bathtubs that people talked about at the time — plus activities aimed at Chinese guests: spa treatments, tea-picking, horseback riding, swimming, hiking and climbing.

Press coverage back then covered naked Stables the way it would any luxury hotel, but many stories also noted that this was "the first green building in all of China to earn LEED Platinum certification" from the United States. That was still new to Chinese consumers — going green costs money — and naked Retreats used it to show what the brand stood for.

Unlike an ordinary hotel project, naked Stables wasn't only selling rooms; it included resort real estate. All 30 of the treetop villas that make up naked Stables were for sale; only the rammed-earth cottages were kept in-house. "We sold 70 percent of the treetop villas, 22 of the 30. So naked Stables took only 18 months to pay back its costs. We expect naked Castle to take two years," Horsfield said in one interview.

Horsfield did not forget what a resort can offer as a venue for corporate team-building either. The sales team that built naked Stables with him went, from the start, after the many multinationals and large Chinese companies based in Shanghai, chasing team-building and corporate-event business. That filled the weekday hole in a resort's traffic. To this day, 40 percent of naked Stables' customers still come in groups. The same trick has worked at naked Castle: since it opened in February, "about 50 company groups a month come to naked Castle."

naked Retreats' official figures now put annual profit at 1 million yuan per room, nearly double the 550,000 yuan a room the Jing An Shangri-La earns a year. naked Retreats has become one of the most profitable resort businesses in China.

But Horsfield's work at Moganshan might not have moved nearly so fast had he not learned how to deal with the Deqing county government.

The first official he met, when he set up naked Village in 2007, was the head of the village committee. Horsfield got to know his family. In the end they struck a deal. He gradually got used to Chinese banquets, and learned the word baijiu and how to drink it.

"The village committee head is about the smallest, smallest, smallest bit of government there is. That was our first relationship with the locals. Then I met the heads of bigger villages, the heads of small towns, the county chief… eventually I met the Deqing county government, then I went to Huzhou, then I met officials from the Zhejiang provincial government, and even met the central agency in charge of tourism that came down from Beijing. You know, that's how it went — starting from the smallest level of government, I built ties with them, and step by step we became partners," Horsfield said.

naked Castle stands in the hilltop castle zone, which the naked Retreats Group leases from the Moganshan Scenic Area Management Committee for 40 years. The resort land outside the castle zone was bought from Deqing County. The management committee is a provincial body reporting directly to the Zhejiang provincial government, so Horsfield has had to work between the two — "not an easy thing," as he puts it.

After more than a decade doing business in China, Horsfield has worked out his own way of dealing with local people and officials. "The best way to solve a problem is to talk in a friendly way. Arguing never solves anything," he said. "I learned a lesson: a lot of people come to China full of ambition, ready for a fight. But maybe because I've been here long enough, I've become more and more like a Chinese person — I know that here you have to find the right way into a conversation, and talk in a friendly way."

"The most important part of this is understanding what your partner wants most. What we can offer right now, for example, is green tourism, and environmentally minded tourism is one of the top items on the government's agenda, so our business can move ahead smoothly. One important thing I've learned in China is that you row with the river, not against it. And what is the river? Beijing."

Horsfield, who also goes by the Chinese name Gao Tiancheng, thinks being African has made it "easier to be happy" in China. "I'm a farmer myself, and that's something I share with the people I do business with here… I'm not European. Compared with cities, I actually prefer farmland."

The Horsfields count themselves as Chinese: they live in China, are raising children here, and have Chinese friends. They even believe they understand the Chinese market better than some Chinese companies do.

But that understanding may also owe something to being outsiders. "My wife is from Harvard. Me? I'm from Africa" is the odd self-introduction Horsfield likes to offer.

Once naked Stables took off, the Horsfields began getting weekly invitations from local governments around the country, asking them to come look at a site and say whether a similar tourism model could work there. Since opening in 2011, "we've been everywhere except Xinjiang and Tibet." But naked Stables never broke out of Moganshan.

One reason the Horsfields stayed cautious about new resorts is that they needed to build up their own operating experience. One runs the business, the other the design; neither had managed a large hotel or an exclusive villa estate. Kurt Berman, who helped found naked Stables and ran its resort business, had been general manager of Six Senses in the Maldives. He lasted a little over a year as naked Stables' general manager before leaving.

Horsfield has had to keep hunting the hotel industry for people to help him run the resorts. The most recent, who joined in 2014, is Ming Ze, a German who was previously resident manager at the MGM resort in Sanya. He now runs both Moganshan resorts at once.

More important, naked Stables' business model makes it fussy about sites: a location has to sit near a commercially developed city with money to spend, and have natural scenery of its own. Dealing with a new government and new developers, winning approvals and settling land questions are each a complicated process in their own right, which has kept naked Retreats from expanding quickly.

Sites like this are getting scarcer. Interviewed at Moganshan, Horsfield described his choice of location with enthusiasm: "Look around here — can you hear cars? Can you hear that city noise?… We want to be 100 percent close to nature." Just then a plane roared over his head.

And yet naked Retreats has entered a phase of rapid expansion anyway.

The five resort projects appearing all at once are the product of four or five years of the Horsfields' work, and the couple now look more like a hotel management group: they sell hotel design and operating services in exchange for management fees and a share of the profits.

Every resort involves a different local government, developer and landholder, so naked Retreats has to put together a separate team to develop and run each one. "The Suzhou project alone took about three years of negotiation and preparation," Ye Kaixin said. Talks on the hot-springs project in Shaoxing started not long after naked Stables was finished, but "it has never come together."

All five new naked Retreats resorts sit in the countryside within a 2.5-hour drive of a city, but their styles differ — some traditional Chinese architecture, some modern, straight-lined buildings. Horsfield thinks their edge over the big hotel groups is that they have no "thick book of hotel standards," so they can change with the character of each place. Ye Kaixin says the resorts' single defining feature is that they always stay close to nature.

Flexibility really is a trait of this young hotel brand. Horsfield offered an example: he was not keen on putting a mahjong room in naked Bi, the Chongqing resort, but in the end he decided to do it. "But maybe we can invent a new way to play mahjong, or improve the setting people play it in," he told one publication.

They still have plenty of openings. Chengdu, for one, is a big city with few naked Retreats competitors nearby. Type "Chengdu" and "resort" into Ctrip's search box and you get a single-digit number of results.

In 2013, Banyan Tree opened a hot-springs resort in Beibei, Chongqing, an area rich in hot springs. In 2015, Qingcheng Mountain in Chengdu got the first Chinese resort from the Thai brand Six Senses, whose main selling point was sitting next to the Qingcheng Mountain scenic area. The hotel grounds themselves held no great natural assets.

All of this adds up to a reputation, but reputations spread more slowly than competitors appear.

Hotel groups and resort brands from around the world have their eyes on this blank spot in the Chinese market. Boutique resort brands such as Alila, Six Senses, Aman and Anantara have already opened a resort or two in China. Chinese hotel groups are no exception: by the end of 2016, Wanda Group alone was running more than 70 hotels and resorts in China. Plateno Group, parent of 7 Days Inn, is working with the Austrian art-hotel brand H12 to open a string of boutique resorts near cities across the country.

It takes consumers time and money to tell these brands apart. And in the rush to expand, naked Retreats and its competitors alike have to train large numbers of hotel staff.

Right now, 70 to 80 percent of the staff at the two naked Retreats resorts are hired locally. That is not a bad approach, and it has a couple of advantages: local people lead settled lives and are less likely to job-hop for a slightly better salary; and, as Horsfield sees it, resorts are such a new business in China that wherever you hire, everyone is new to it.

For training, naked Retreats uses an apprenticeship. A local hire with little experience joins the hotel as an intern and learns on the job. Only once the company is happy with the work is the person taken on as a full employee. So the length of the internship and training varies from person to person.

This guarantees naked Stables a supply of staff, but not their quality. That "teach yourself" approach to staffing is why service complaints about naked Stables keep coming up. Plenty of reviews on travel sites mention where the service falls short. The problem is likely to follow the company to its new resorts.

"A big part of a resort is service, and service is people," Ye Kaixin told QDaily. "Besides local hires, we also recruit regularly from hotel training schools, but even after we bring those people in, we still have to give them a lot of training."

What makes people love a hotel comes down to three things: location, facilities and service. naked Retreats' main problem is that its prices sit at roughly the same level as 10 years ago, while consumers have grown far pickier. The company has to keep innovating and stay flexible to keep up with young people's shifting tastes.

Horsfield said, half in jest: "I think China today is a lot like Japan in the '90s — young people care more and more about expressing themselves, and their thinking is more and more open. That's why we designed so many different themed suites at naked Castle. Trust me, there will be more and more rooms like that."

The cover image and any images not otherwise credited are courtesy of naked Retreats.