How quickly market sentiment can change

It really is extraordinary how things can change so quickly; for the better and also, unfortunately, for the worse.

I guess one does not exist without the other. Human sentiment and feeling about a particular matter or situation can change the course of activity almost in an instant. As an example, the share market depends on the sentiment of investors for the gains or losses that are experienced every day. Good news, in some, fashion equates to gains and bad news equates to losses.  The change is day-by-day and from one extreme to the other.

How this relates to the accommodation industry has been easy to see with the economic slowdown witnessed in the greater Central Queensland and Bowen Basin regions since late 2012. The contraction of the resources sector, which has affected this area so badly is well-known. The region (which covers a major part of Queensland) and its associated industries, including accommodation, have experienced a massive amount of doom and gloom and negative market sentiment. It is very easy to focus on the negative rather than the positive across all sectors.

There have been various times when it has been mentioned that the bottom had been reached, and then business activity and traveller numbers contracted further. Now, many across all sectors of the economy are saying again, “we have hit the bottom”.  Why should it be any different now than it was say six months ago, or 12 months ago?  Well, this time, the pressure is building, people have been coming out of the doom and gloom attitude for a little while now, and the increased positivity seen is infectious.  Again, it all comes back to how quickly things can change. The word being spread now is “we have hit the bottom, and activity is improving”.

This time it is not based on hope but solid facts. The price of coal is going up and, as a result, mines are preparing to re-open.  The state government has given Adani’s $21 billion Carmichael Coal and Rail Project in the Gaililee Basin ‘critical infrastructure’ status, the first mine ever to receive this government green light.  The spending levels (hence confidence) of the people is growing in these regions.  Car dealerships report that more new cars are being sold in the last few months than in the corresponding periods during the last four years.  Discretionary spending is increasing: the residential property market is seeing more activity now than in recent years.  Occupancy rates for short-term accommodation in many areas is improving and surprisingly quickly.

Being four years down the track from the commencement of the downturn in the resources sector, the feeling is “enough is enough, it is time to get on with the job”. The hard and unforgiving lessons learned from the heavy contraction in the mining industry in these regions has meant that industries will be more careful and selective with whom they do business and how they plan to expand their market share.  It is expected that the economies in these regions will, and already are, heading back to the ‘good old days’ where industries that many towns were built on (such as agriculture, cotton, grain, sugar, grazing, small crops, etc.) will grow, and mining is also expected to increase.

This time, however, it will be on a more manageable level and it will sit nicely as another industry within more stable and equitable local economies.

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