China's Fosun, Sun City casino king bet on luxury Hainan resort

* Fosun to fund $1.6 bln project construction

* Atlantis Sanya hotel to be Kerzner's first in China

* Hainan seen as place where China could allow casinos

By Farah Master

HONG KONG, Oct 10 (Reuters) - Chinese conglomerate Fosun International Ltd and South Africa's Sun City casino king plan to build a $1.6 billion resort on China's Hainan holiday island, joining a pack of players betting on a surge in upscale tourism in the country.

Long touted as a place where China could liberalise casino gambling, the balmy island off the country's southern coast has attracted scores of international developers in the past two years, including InterContinental, Starwood, and casino operators MGM Resorts and Caesars Entertainment .

The latest Hainan project, an Atlantis brand hotel in southern coastal city Sanya that Fosun will jointly develop with tycoon Sol Kerzner's company, will not include a casino, Kerzner chief executive Alan Leibman told Reuters in an interview.

"We have been very successful with and without gaming within our business. It is nothing we have anticipated in why we are building Atlantis" in Hainan, Leibman said.

The executive put the cost of the project at "about $1.5 billion" in the interview, while Fosun and Kerzner said in a joint statement that Fosun will invest "over 10 billion yuan ($1.63 billion)" in the project.

Casino gambling is illegal in China outside of the former Portuguese colony Macau, an hour's flight from Hainan by plane. Earlier this year, the local government shut down a casino bar that had been operating illegally in Hainan after a Reuters report drew attention to it. The bar has reopened now, according to a hotel employee.

While Chinese authorities have maintained an official ban on gambling in Sanya, tourists continue to flock to the southern island. Over 22 million overnight stays were registered in Hainan in the first eight months of the year, most of them by domestic travelers.

Kerzner, which operates the Atlantis casino resort in the Bahamas and Atlantis hotel on Dubai's artificial Palm Island, said the 62-hectare resort in Sanya, close to half the size of London's Hyde Park, will feature a luxury 1,300-room hotel.

SHARK ATTRACTION

Developed by South African tycoon Sol Kerzner, who built the Sun City empire in 1979, the Atlantis brand is known for extravagant attractions, including a six-storey water slide through a shark aquarium and underwater hotel suites.

The Atlantis Sanya, scheduled to open in 2016, comes at a time when Sanya already has more than 200 hotels and an aggressive pipeline for future developments as local authorities seek to tap into the growing upmarket tourism business in China.

The Atlantis Sanya will be Kerzner's first in China and targeted mainly at local clientele. Designed as a sleek dorsal-shaped building, surrounded by lush greenery, lagoons and marine attractions beside the ocean, the resort will employ more than 3,500 staff.

Haitang Bay, a 22 kilometre strip of white sand where Atlantis will be located, will see the development of 30 five-star hotels in the next five years.

The expansion of lavish resorts targeting affluent travelers from Asia including China is taking place at a rapid pace around the region.

Macau has more than seven mega casino resorts under construction. Neighbouring countries such as the Philippines and Vietnam are developing large-scale integrated resorts, while China's Hengqin Island in southern Zhuhai province across the water from Macau is preparing to open the first phase of a $5 billion marine-themed hotel resort in November.

The total construction cost is expected to be around $1.5 billion, the same as Kerzner's Dubai property and will be financed by Shanghai-based Fosun, Leibman said.

Kerzner, which signed a $145 million loan refinancing in March this year to help reduce costs and extend its debt maturity profile to five years, will take on a management role.

Fosun, headed by Chinese billionaire Guo Guangchang who started the conglomerate with friends from university, has more financial power and is in the process of finalizing a takeover of French company Club Med, pending regulatory approval. The company has said it is keen to invest in businesses that give the group exposure to the Chinese consumer.

Partners with U.S. buyout giant Carlyle Group on China investments through a 50-50 joint venture, Fosun's divisions also include property, pharmaceutical, insurance and mining.