TOURISM SECTOR GAMBLES ON RECOVERY

Mining and resources are leading the pack, education and recruitment is on the way up and property development is tipped to improve.

While these industries are kick-starting economic recovery, it’s a different story for retailers, hospitality and gaming providers and tourism operators. Increases in interest rates, the end of government stimulus packages and further consumer uncertainty surrounding the Reserve Bank’s future decision making, is stalling the recovery process, according to analysts.

Positive sentiment floating around the Gold Coast’s tourism sector must be treated with caution as one of Australia’s highest profile financial analysts predicts nothing but further decline for the industry in Queensland.

Economic commentator Ross Greenwood, says the industry that was one of the great income generators for the Sunshine State is now an economic ‘drain’.

“This is something that’s not well known- that the balance of trade from the tourism industry has turned in the red for the very first time in more than a decade,” says Greenwood.

“Now the deficit has already turned to $1 billion; in other words we are losing $1 billion from our tourism trade because tourists are going overseas, not as many tourists are coming here and inbound tourism is not strong.

“The truth is that this is expected over the next few years to turn dramatically into the red.”

A frustrated Greenwood says interest rate rises and a strong Australian dollar driven by the success of Western Australia’s resources are not being carefully considered by the Reserve Bank and Federal Government.

The Nine Network chief financial and business analyst likens each interest rate rise as ‘another straw on the camel’s back’.

“Most Australians right now would prefer us to be in the depths of recession,” he says.

“If they can keep their jobs, their interest rates are low and the government is giving them money, why wouldn’t you prefer to be in recession?”

“Right now Australian’s can’t work out why their interest rates are going up when things seem a bit tough and businesses can’t understand why interest rates are going up when there aren’t any customers coming through the doors.

“But the fact is that the Reserve Bank and the government are effectively managing the country according to something that is happening in some small part of Western Australia.”

When quizzed on the ‘good news’ for Gold Coast’s tourism operators, Greenwood pulls no punches – “there is none”.

“You’ve (tourism operators) seen the good times actually and I think people need to be really cautious. I suspect that the problem is that right now you’ve almost got false thought,” he says.

“The false thought in the stockmarket in particular is because the US is starting to recover. Our market is now very fully priced, in fact probably overpriced. The truth is that the prices are still being pushed along higher and higher because of what’s happening in the United States and not according to what’s happening here.”

According to Lorraine Duffy, CEO of the Hotel Motel & Accommodation Association (HMAA), recovery will be a slow process.

“Generally the outlook is that domestic travel will grow marginally, but certain sectors will feel the benefit of this growth more than others,” she says.

“Right now we have a high Australian dollar combined with a robust domestic economy and that means strong demand for outbound travel. This can potentially translate into higher tourism imports, lower profits for tourism businesses, and ultimately lower tourism GDP and employment.”

HMAA is joining other major industry bodies, the Queensland Hotels Association (QHA), Restaurant & Catering Queensland, and Clubs Queensland, to refocus and revitalise the industry.

Know when to hold ‘em, know when to fold ‘em

The profitability of Queensland hotels and clubs is being hammered by legislation, with the survivors expected to be those who diversify their business assets and spend wisely.

Director of hospitality project managers Brand and Slater Architects Luke Ponti, says anti-smoking and gambling legislation has forced hotel and club owners to drastically change their long-term business master plans.

“Now that everyone has recognised the difficulties with gaming, we’re seeing a lot more diversification within the industry,” says Ponti.

“They’re looking away from the gaming and there will be masterplans for accommodation or child care centres; shopping centres or whatever it may be within their community that will add value for the event that one day the gaming industry will stop being an income stream for their business.

“The big RSL will still be sitting there, but what you won’t know is that they own the shopping centre next door and the accommodation tower next door and they are getting the diversification and the income streams.”

Garth Graydon is the general director of Reed Construction. He says the gaming industry is not what it once was and clubs can no longer rely on pokies to take up the slack.

“You can see clubs are doing it tough enough out there without having to look at the stats in Queensland,” says Graydon.

“Poker machines aren’t performing to what they were even only a year ago. These days people say they had a honeymoon period where poker machines provided the cash-flow, but the changing of regulations with smoking and poker machines means you can’t have a part of your business now that isn’t making money. If it’s not making money you need to fix it.”

Graydon, whose high-profile projects include the Currumbin RSL and Burleigh Golf Club refurbishments, says hotels and clubs can still plan growth strategies around renovations, but with no guaranteed profit-rise cannot afford to be overly ambitious.

“The market is smarter now than it was years ago and the public want more for their money,” he says.

“If you have a look at the clubs that do their homework, plan for the growth because that’s what it’s about – they can do well and it (new development) doesn’t have to be big.”

Greenwood agrees and says the days of renovating a club or RSL and immediately seeing cash-returns, are over.

“You can’t just make a natural assumption that just because you build something brand new you’re going to increase your revenues,” says Greenwood.

“In actual fact quite often now you’ve got to address what you’re going to build according to the revenues you’ve got in your hand, and you might be able to enhance those down the track.”

Online betting agencies shift the goalposts

With online betting companies such as Sportbet.com.au and Centrebet.com.au taking a large portion of market share away from club and hotels’ TAB facilities, Greenwood says more pressure is added on hospitality and gaming venues to retain profits.

“It’s really interesting the fight that’s going on between the traditional TAB’s and the newcomers, and (online) sports betting is a huge area growth area both here and overseas,” he says.

“Inside the clubs you’ve got customers that are actually making a conscience decision that if interest rates go back there I might save a few bucks here and jam it into the mortgage.

“I suspect that’s the reason why credit card usage is down, I suspect that’s the reason why a whole bunch of retail and leisure sales are down; I just think the people are smart and have gotten quite conservative.”

Greenwood remains heavily critical of the Reserve Bank’s haste to raise interest rates back to pre-GFC figures, saying ‘smarter’ consumers will hold on to their cash in anticipation of future financial pressures that effectively halt the recovery of sectors reliant on customer spending.