Global travel may be ailing, but China's biggest city of Shanghai is pursuing luxury travelers with a vengeance, bent on restoring a reputation for opulence and elegance that once made it the Paris of the Orient. As it spruces up for next year's six-month-long World Expo, the metropolis of 20 million is transforming itself from a gritty industrial hub of crammed tenements into a showcase of glittering skyscrapers, quaint but quiet alleyways and meticulously landscaped parks. A complete makeover of the legendary Peace Hotel, which sits astride the city's riverside Bund, is one of scores of projects aimed at packaging the city's Western colonial-style heritage for upscale travelers. "The barrier is just being pushed higher and higher," said Rupert Hoogewerf, a Shanghai-based researcher of wealthy Chinese. "Previously [the hotels] may have sought to be the best in the city. Now they're aiming to be the best in the country, or the world." Shanghai may not be the first name that comes into your head when it comes to elite travel destinations, but luxury-tour operators are flagging it as a choice option, especially for shopping and gourmet dining. Shanghai is "hipper than Hong Kong and more alluring than Beijing," says Concierge.com. "The city is probably China's most fashionable and international, boasting the best shopping and nightlife," enthuses luxurytravel.com. A new cruise-liner terminal is now a regular destination for deluxe Yangtze River tours; a recently opened Peninsula Hotel and the Hyatt on the Bund, both nearby, offering stunning views of the Huangpu River and the Bund's majestic colonial architecture. "We're up against the Ritzes and Park Hyatts. We can't skimp on luxury," said Ian Carr, a principal at Hirsch/Bedner Associates Pte, the design consultants hired to handle the Peace Hotel's refurbishment into a Fairmont-managed hotel. "This is the most competitive market in the world, here in Shanghai and Beijing, for luxury hotels," he said. That would have been hard to believe, just a few years ago. But key parts of the city have been transformed by a craze for upscale urban renewal, encouraged by authorities keen to boost real-estate prices and lure wealthy investors, both foreign and domestic. Freshly renovated art deco masterpieces and colonial-style villas in the leafy former French concession house sidewalk cafes, luxury boutique hotels and elegant restaurants, including one run by renowned chef Jean-Georges Vongerichten. Add to that fashion shows, Formula One racing, art shows and other events catering to the well-to-do. Shanghai's planners expect 70 million visitors to next year's Expo, to be held in waterfront plazas that have replaced rusting steel mills and shipyards along the Huangpu River, which slices the city into crammed, older Puxi to the west and ultramodern Pudong sprawling to the east. China's biggest event since last year's Beijing Olympics is expected to draw scores of dignitaries and other elite travelers. "It's a good excuse to come and have a look at the new showcase that is Shanghai," Hoogewerf said. And then there is the domestic crowd: his last count put the number of mainland Chinese worth more than 10 million yuan ($1.3 million) at 825,000. Among them, at least 116,000 lived in Shanghai. So far the news for travel this year, luxury or otherwise, is discouraging. Shanghai's tourism arrivals were down about 11 percent from January-April from the year before, while hotel occupancy rates averaged only 46%, down about 10 percentage points from a year earlier. Room rates are down by 20% to 50%, according to the Shanghai Tourism Administration. Those figures reflect the downturn even before travelers began worrying over potential exposure to swine flu, or to being caught up in quarantines imposed - no exceptions - on anyone suspected of having been exposed to the virus. "Frankly, it's ugly. I'm dressed in black for a reason, you know," Martin Symes, CEO of travel-search company Wego, said at a conference that opened a regional luxury-travel fair at Shanghai's ornate Exhibition Hall last week. Though business at the fair reportedly was slower than in the previous two years, so far only a handful of Shanghai's own projects have been suspended or delayed due to the economic downturn - among them the completion of two luxury-hotel towers just down the street from the city's chic Xintiandi district. Due to be managed by Dubai hotelier Jumeriah Group, its opening was put off from December until later this year. Most construction continues, though, backed by lavish spending on Expo preparations and a 4 trillion yuan ($586 billion) economic stimulus package heavily focused on building projects. Most of the world's top hotel operators are expanding here: As of the first quarter of this year China had 964 hotels, or 260,560 rooms, under construction or in planning, according to Portsmouth, New Hampshire-based real-estate consulting firm Lodging Econometrics. Nearly two-thirds of those were luxury-grade hotels. At last count, Shanghai had 104 projects with 26,510 rooms under construction. The building boom includes projects like Zendai Hotel Yin and Zendai Art Hotel, located in the "Himalaya Center," a commercial complex rising near Shanghai's International Expo Center - now a virtual no-man's-land of warehouse stores and construction sites that is the terminus for the ultramodern Maglev line to the city's Pudong Airport. Zendai Hotel Yin will be a 75-room boutique hotel with butler-serviced spa suites and a traditional Chinese medicine "wellness center," said Graham Kiy, general manager of both hotels. "The owners are very much aware it's not an ideal time," said Kiy, who has worked in luxury hotels around the region. "But they are planning for the long term."