Highway to heaven

Far North Queensland is the northernmost part of the state. This region, stretches from the city of Cairns, up north to the Torres Strait and to the Gulf Country in the west.

With more than 70 national parks, Far North Queensland supports a significant percentage of the agricultural and mining sector. It is also Australia’s third most important holiday destination after Sydney and Melbourne and Australia’s most popular holiday destination for Japanese visitors.

Cairns is home to the majority of the region’s population and is also the administrative centre. Other key areas include Cooktown, the Atherton Tableland, Weipa, Innisfail and the Torres Strait Islands. The region also consists of many Aboriginal and farming groups. The Bruce Highway combined with a good rail network, links FNQ to the southern states and the highly performing Cairns International Airport, a thriving transport hub, is a featured asset within the region.

Far North Queensland has become increasingly known for its local art and inspiring creative offerings, with many local and contemporary projects involving art, crafts and dance. Influencing this cultural movement, Cairns is home to a variety of indigenous groups from Cape York Peninsula and the Torres Strait Islands, as well as inland communities and the Gulf of Carpentaria and South Pacific islands. With the Australian Bureau of Statistics estimating the region’s population at 275,058 in 2010 and the region having 25.6 per cent of the state’s indigenous population.

But the FNQ region is best known as a gateway to the World Heritage listed Great Barrier Reef and Wet Tropics Rainforests: FNQ is the only place in the world where the ‘rainforest meets the reef’. Being one of the world’s most important and unique natural assets and a beautiful and complex ecosystem it is not an unexpected fact that tourism is a crucial drive for the regional economy. Tourism contributed $2.2 billion in the 12 months ending December 2010 and has contributed $12.4 billion in the last five years toward the regional economy.
Economic overview: Over the last several years, in the wake of the 2008 GFC, Cyclone Yasi and flooding, Far North Queensland’s economy has suffered. According to MR Sales’ North Queensland management rights broker, Geoff Ellis, “These events had the effect of galvanising the whole industry into positive action.”

Mr Ellis does, however, point out that a national media, hungry for the epic “natural disaster” headlines, has been slow to report the remarkable story of the survival and resurgence of the FNQ tourist economy.

The Chamber of Commerce in Queensland business priorities report in 2013 highlighted that the strength of Queensland’s economy is shown by the dynamic nature and resilience of the small and medium businesses that are clearly present in Far North Queensland. This report outlined the CCiQs commitment to supporting the continued growth and prosperity of small and medium businesses across this region. While the report conceded that it is important to reflect on the past it also recommended that it be of greater importance to focus on the current conditions and the future outlook of the region. “Businesses across the FNQ region, after a long negative run, have adjusted their expectations to reflect an overall trend of positive improvements with most indicators (as of the December Quarter 2012) starting to trend upwards.”

Many indicators suggest there is an upturn in the FNQ economy. Danny Adams is the director of the FNQ finance specialists NQ Lending and he describes the interesting findings of a report by Heron Todd White – local economists. This report states, “Cairns continues to experience a mixed economic recovery, with strong forward tourism and construction indicators but a relatively weak labour market.”

Mr Adams also points out that, “Recent visitor arrivals to the region have steadily increased.” The report shows that, “Airport passenger volumes at the domestic terminal during February 2014 maintained the growth acceleration that has been evident over the last six months.” also, “International terminal passenger volumes maintained good strength in February 2014, reinforcing their modestly rising trend.”

In addition, the Herron Todd White’s National Property Clock that is prepared each month based on the local market perceptions of its Australia-wide network of offices clearly shows that Cairns is positioned firmly at the start of a recovery phase. Mr Adams claims that these are very positive indictors that the “profits and prices are starting to return to the pre-GFC days”.

Increasing arrival numbers: UCI world cup – In April 2014 Cairns hosted the international UCI Mountain Bike World Cup for the first time. Cairns should be congratulated for winning this bid for these world cup events to be held in 2014 and 2016, as they will be the focus of the world’s mountain bike community. Investing in these events means the Far North will have ongoing infrastructure, positioning Queensland as a location of choice for future world championship mountain biking events and attracting many visitors to the area.

In May, over 700 buyer delegates will descend on Cairns for the 2014 Australian Tourism Exchange this is Australia’s largest annual travel and tourism business-to-business event and for the first time in its 35 year history the ATE organisers selected FNQ as the first regional destination to ever hold ATE. This event will bring a huge focus to North Queensland for many buyers who have previously attended this event without ever visiting this area.

In June Cairns is set to be the stunning backdrop for arguably the most spectacular bike course in the world, when ironman competitors race up the Captain Cook Highway hugging the coastline from Cairns to Port Douglas. This race has become a ‘must-do’ on the ironman circuit and is expected to attract a plethora of visitors.

In September 2014, international delegates and world leaders are expected to descend on Cairns for the G20 meeting. This meeting will bring about 2000 people into Cairns including international delegates, staff and domestic and international media.

All of these events are to be held in FNQ in one year and will provide significant international exposure for the region. This will make for a very busy year for the industry and visitors have been warned to book early to avoid disappointment. These events will attract the attention of the world and serve as a building block for the future economic growth of the region. Focus is directed at leaders of influence both in the international travel and tourism industry but also in international sporting, political, economic and business sectors.

Accommodation industry revival: Calvin Bailey is a 20 year local in management rights, a consultant for Property Pacific and he believes that the industry in North Queensland is indeed showing very good growth. He points out that the most recent RevPAR report from June 2013 states; “Cairns and Port Douglas hotels are leading Australia in growth”.

Mr Bailey explains that, the RevPAR is an industry performance indicator that multiplies the hotels average room rate by its occupancy percentage and over that period it showed a significant growth of 12.4 per cent. Along with this over the same period room bookings by international visitors grew by 18.2 per cent and domestic visitors grew by 25 per cent.

These 2013 results were well above the forecasted predictions and show that FNQ is one of Australia’s top growth regions. Bailey says this is good news for the resort industry. The results are “very encouraging,” he says, and, “should bring a good general mix of potential buyers – both new to market and experienced into the industry.”

Opportunities: Over the past decade, the majority or buyers have come to North Queensland to seek a better, more stable climate, a fresh start and an incomparable lifestyle. More often than not, they are from the southern states and New Zealand but international investors are also purchasing and more recently according to Geoff Ellis there has been a slight upsurge in inquiry from Asian sources.

There is an increased realisation in Asia and especially China, that the attractions of Australia including the Great Barrier Reef, the rainforests and the outback can be accessed without the need to fly another three hours to Sydney and beyond. Cairns has increasingly become an important gateway into Australia for Asian tourists and there are opportunities to be seized here.

Not to mention the blossoming opportunities there will be if the attempts by Hong Kong billionaire Mr Tony Fung to get approvals for his ambitious Aquis project are successful. The Fung family is presently working hard to meet every milestone, so that they can commence development of this proposed $4.2 billion Casino and mega resort development in Yorkeys Knob by mid 2014.

Calvin Bailey is extremely optimistic that the peak MR Sales days of pre GFC, and five times multipliers will return to FNQ. Current buyers are able to enter the market at present at an industry multiplier of around 3.5 to 4.0 times the approved net profit. Cairns at present is able to provide buyers more resort for the dollar than many other areas and likely greater capital gains. Mr Bailey also notes that current sales multipliers of 5.0 to 5.5 are now regularly being achieved in Brisbane and the Gold Coast as the industry recovers.

Properties for sale: There is currently a comprehensive selection of good management rights businesses on the market in FNQ and Geoff Ellis points out that the buyer dollar goes further here than in the Southern coastal areas but warns that this can change at any time depending on demand. “The resurgence in the economy and increased tourism arrivals and room rates will inevitably drive up business and property values.” He says, “Given that North Queensland is probably approaching year two of the normal seven year economic and business cycle, there is probably no better time to purchase than now.”

This sounds like a very predictable statement from a broker! But to be fair to Mr Ellis there is significant independent evidence to support his view.
In the depth of the GFC it is true that there was a significant slowdown in management rights sales. Naturally this frustrated many vendors who had planned to sell during that period and forced them to put their plans on hold. It appears that the wheel has begun to turn and those vendors are now willing to negotiate a fair market price. Sales contracts are now being negotiated regularly according to MR Sales who has recently negotiated the sale of Paradise Links, a resort in Port Douglas, thus heralding a very significant sale, for the industry, in this region.

In addition to the opportunities in holiday complexes, there are several opportunities in permanent complexes. One real casualty of the GFC was the demise of several long established developers who had until 2009 constructed the vast majority of residential apartment complexes and it may be a few years yet before developers return. Consequently there is an under supply of good modern residential complexes and this will have an effect on the value of those rights for the foreseeable future. With property values significantly less than in SEQ, the astute investor will recognise there is a greater return on investment offered in North Queensland. Rents are climbing as the population grows and this according to Mr Ellis will impact on profitability for any management rights complex.

Peter Hales is a licensed real estate broker and management rights specialist from Resort Accommodation And Sales he has only been in Cairns a little over a year but he has witnessed first hand, the improved mood and the increased numbers throughout the area, “the rental market is busy and vacancies are low”. He suggests that increased buoyancy in the tourism sector is good news for the whole economy. “The work on infrastructure and the forthcoming developments can only further improve the market for permanent rentals. Lots of new hotel rooms mean tourists who need charter boats, coaches, tour guides, road workers, builders and retail workers and all of these are positives for employment growth which will flow into the rental market.”

With the GFC well and truly behind them Cairns is a destination that is recovering well. This is not an aberration; the region has pulled out all stops to work with local tourist operators, economists, small businesses and the aviation sector to commit to continued growth within the region and to attract new business. As Pater Hales admits, “It will take time for new buildings to increase capacity so in the short term I can see less and less vacancies and some growth in rents. This is also very positive for the management rights industry as properties increase or strengthen their incomes.”

Signs are there to show that FNQ is on an upward journey to recovery and opportunities are abound. All the hard work since the devastation of the floods, the cyclone and the GFC it seems is finally starting to pay off, there are many great opportunities still emerging across the region and this is a prime time to grab hold of one. The council and government however need to invest further and promote FNQ as a new business, cultural and sporting hub and to especially embrace those opportunities that are appearing across the Pacific/Asian region.

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