Dunk Island. More than 10 of the Sunshine State’s resort islands are in disrepair, closed or for sale. Source: Supplied

 

Queensland islands battle with forces of nature

 

LISA ALLEN - THE AUSTRALIAN APRIL 11, 2015 

 

As Queensland’s $30 billion tourism industry undergoes a long-overdue sea change, driven by a

surge in domestic visitors, more than 10 of the Sunshine State’s exotic resort islands are either

in total disrepair, closed or on the market.

The once dreamy islands of Great Keppel, Brampton, Lizard, Dunk Island and South Molle — many

of which were developed in the 1980s as $100-a-day budget backpacker enterprises — were for years

the first port of call for Australian holidaymakers.

But sluggish government planning approvals, devastating cyclone damage, and the fact that big egos

(some with shallow pockets) are usually keen buyers means many island owners are not enjoying

much of the Sunshine State’s renewed tourism surge. Added to that, many of the islands are rundown,

backpacker-style lodges — of no appeal to the fast-growing Chinese inbound market, who

demand luxury and pay more money travelling in Australia than anywhere else.

“It’s an ego trip buying an island; basically they don’t make money,” says Fred Ariel, a Cairns-based

tourism entrepreneur, who once owned Fitzroy Island off Cairns.

Ariel has been watching the financial performance of the Great Barrier Reef Islands since 1978 and

is adamant they are loss-making concerns, unless they can attract day trippers. “The only way you

can make them work is if you have a consistent backbone of day traffic. If you are relying on

accommodation it does not work. With all those Queensland owners none of them make money

unless they have day traffic.”

Not everyone would agree. Many tourism entrepreneurs insist Queensland islands should be pitched

at the ultra-wealthy.

This week the mainland Chinese owners of Lindeman Island finally revealed their plans for a $500

million three-resort redevelopment on the Great Barrier Reef island. The plans were tabled some

three years after the China-backed White Horse bought the resort.

Paul Nyholt, chief executive of White Horse (the Chinese owner of Lindeman Island), concedes that

any tourism development on an island in Australia is very risky.

“There’s been a lot of carnage out there,” says Nyholt.

“Most of these island resorts have been run down and struggled,” he says. “They are competing

against offshore destinations. People like to go to Fiji or Thailand because it’s cheaper.”

But even the luxury islands are not immune from the forces of nature.

Take Lizard Island — owned by US hospitality giant Delaware North. Fresh from a $45m

refurbishment after the devastation of the category five Cyclone Ita the 40-suite island was due to

reopen last month. But days before the reopening category-four cyclone Nathan hit the island, 240km

north of Cairns, devastating it again, destroying much of the rebuilt villas. Lizard will be closed until

mid next month.

CBRE agent Wayne Bunz says the problem for many island owners after substantial cyclone damage

is the prohibitive cost of obtaining insurance. “That is the greatest challenge facing the industry right

now,” says Bunz. “The cost of insurance is exorbitant.”

Another problem with Queensland islands for both Bunz and former Tourism Queensland chairman

Don Morris is that a lot of islands were built to address the tourist market of the mid 1980s.

“The resort of the future is what Lindeman are talking about doing and it is what the Charlton family

are doing on Bedarra,” says Bunz. “The resort of the future is boutique upscale.”

Both Bunz and Morris expect Australian resorts will only work if they are targeted at high net worth

domestic and international travellers like the billionaire Oatley family’s six-star Qualia on Hamilton

Island (which produced a 98 per cent occupancy last year) and Chris Morris’s luxury Orpheus Island,

off Queensland’s central coast. Hayman Island which was recently taken over by luxe international

operator One & Only is also reportedly doing well after a $80m refit.

“All the new owners (such as Chinese group CCIG which has just bought Daydream Island) will

reposition these islands,” Bunz says. Morris says island owners must build resorts which are classy,

and they must market them consistently and heavily to get high-spending international guests.

“It is no longer the $100-a-day market; we are the highest-yielding country in the world for

international travellers,” Morris says. “We are a long-haul expensive destination; people want quality

and they are happy to pay for it.”

Citing government research, Morris says high net worth Chinese visitors spent $6844 per person, per

trip travelling in Australia last year — the largest expenditure anywhere in the world by Chinese

travellers.

All up, the 789,000 Chinese visitors arriving in Australia last year spent $5.4bn in the year to

September 2014 and Morris says that spending is growing phenomenally. In fact, Tourism Australia

predicts Chinese spending will grow to $13bn by 2020.

But Australia must be able to pitch its resorts at high net worth individuals.

“A lot of that island stuff is degraded,” Morris says. “They were glamour resorts but they need

bringing up to speed and some of them are no longer in tune with today’s market. What there is needs

dramatic rebuilding and all of it needs new approvals and the time delays can be years long -

particularly if environmental impact statements are involved.”

But it is not easy.

Port Douglas-based architect Gary Hunt says island owners are frequently “highly frustrated” when

they try to seek approval for new or revamped tourist projects.

“I am often told by would-be island developers of their nervousness in tackling the approval

process,” says Hunt, principal of Hunt Design.

“The cost of satisfying three levels of government approvals and the massive amount of work

required by consultancy teams upfront is totally at risk of refusal.

“Coupled with the time to prepare applications and the multiple layers of the assessment process it

can be an expensive, and lengthy exercise.

“I have been told by consultants on some projects where the approval was finally granted by the

authorities had such onerous conditions that it is very difficult to make it stack up financially and

extensive further work by consultants is needed to fully satisfy the assessment bureaucrats before

work can finally start on site.”

Former executive chairman of Accor Asia Pacific, David Baffsky, says it is no coincidence

Australia’s largest hotel group has never invested in Australian island resorts. “It’s the cost, logistics,

the staffing issues, and the inconsistency in demand,” Baffsky says. “There are too many

unpredictable issues like weather, access, consistency of staff, getting the right quality of produce.”

Baffsky says the only resort island in Australia that has been successful is Hamilton Island but its

success has come because it has an airport, and off the back of real estate development — not

tourism.

Despite the problems Jones Lang LaSalle Hotels senior vice-president Peter Harper says islands will

never lose their appeal.

“Notwithstanding these challenges, island acquisitions remain aspirational given their global appeal

and the fact they are considered a significant and iconic part of the Australian tourism industry.”

 

The state of Queensland’s once dreamy island resorts. Source: TheAustralian