This article addresses the dynamics of the evolution of a nature-based destination in China. Based on longitudinal studies in Zhangjiajie in Hunan Province, it focuses on the roles of institutions in tourism development in China, demonstrating the centrality of institutions and governments in fostering destination development through policy orientations, attracting investments, and regulations in their capacity as producers, protectors, and promoters of desired processes of change. It describes a five-stage development process from Exploration, through Starting, and then via Fluctuation and Acceleration to the current stage of Transition leading towards a destination seeking better service quality. The study, by incorporating institutions as a driving force, develops a RICI model (Resource, Institution, Capital and Innovation) to account for destination development in China. The paper especially notes the role of inter-institution rivalries, and the impact of those rivalries on sustainable development. It is suggested that the proposed model could be empirically verified and tested in other cultural or regional destination development contexts.