Resort Tourism in Australia

Resorting to Profitability
MAKING TOURIST RESORTS WORK IN AUSTRALIA
FULL REPORT
of the TTF Australia 2003 Hallmark Report The full report is available free of charge on the ttf website: www.ttf.org.au
Contents
Foreword from the Minister Foreword Executive Summary Background The importance of tourism in Australia The significance of the resort sector in Australia The importance of tourism in Australia The significance of the resort sector in Australia Objectives of the report Purpose of the study Definition of resort Scope of research Methodology Structure of the report Resort demand Key demand challenges faced by resorts in Australia Evolution of resorts in Australia Tourism demand trends Demand success factors Resorts of the future Demand and the industry response Demand and the Government response Resort operations performance The profitability of resorts The fundamentals of how resorts operate Key resort profitability issues Resort operating performance analysis Barriers to profitability Key success factors and opportunities Role of industry in resort operations Role of government in resort operations Resort development and investment Key impediments to resort development Hotel and resort investment profile Resort investment cycles in Australia Resort investment returns Resort development and investment issues Development/investment success factors and opportunities Role of industry in resort development Role of Government in resort development Case studies Appendices 1 3 4 22 22 23 22 23 23 24 24 26 26 27 28 28 29 36 56 57 59 59 61 61 61 62 62 76 77 77 78 80 80 81 82 85 88 91 92 93 94 140
Resorting to Profitability - Making Tourist Resorts work in Australia
Foreword from the Minister

Hon Joe Hockey MP Minister for Small Business and Tourism
esorts are often famous in their own right and can become international icons. As providers of integrated tourism facilities, resorts have a significant impact on visitor satisfaction levels for a destination. In this way, resorts make a major contribution to the total tourism value of a destination. They can, quite literally, put a new destination on the map.
With the range of unique and stunning tourism destinations that Australia offers and the potential opportunities for new tourism product in Australia, particularly in the regions, developers and operators need to be armed with the best available knowledge of the costs and benefits, the suite of business tools, key success factors and performance forecasts for new and existing resorts. Research into the demand patterns, operational and development success factors that enhance business performance and profitability is at the edge of innovation in the tourism sector and where we need to be if Australia is to remain at the frontier of tourism, domestically and internationally. This report provides the framework that developers and operators need in order to find new and smarter ways of working with the domestic market and capturing a larger share of the international market. Product development and investment issues are closely related and good quality data that can be used to refine the business case for a new project or development while defining and minimising risk is the pathway to successful and profitable resort operations. Understanding the state of play of resorts in Australia will be made easier by this research report which uses a practical, jargon-free approach to analysing the performance and profitability of resorts, the roles of stakeholders, success factors and new opportunities. The case studies enhance and help resonate the reports basic message, which is to do your homework, do it as thoroughly as possible, do it now, and then do it again; if you want to position a resort at the tourism frontier in terms of business capability and investment return maximisation.
HON JOE HOCKEY MP Minister for Small Business and Tourism
Ayers Rock Resort
Resorting to Profitability - Making tourist resorts work in Australia
Published May 2003. The primary sponsors of this report were TTF Australia and the Federal Department of Industry, Tourism and Resources (through the Regional Tourism Program). Gold sponsors were General Property Trust, Tourism Queensland, Tourism New South Wales, Tourism Victoria, and the silver sponsor was Australian Ski Areas Association. The executive summary and this full report are available for free download from www.ttf.org.au
Foreword
Christopher Brown Managing Director and CEO TTF Australia
esorts are perceived by many in Australia as the 'glamorous' sector of the tourism industry. However, following the 'hype' of the 1980s, the resort industry has experienced a period of consolidation in the past decade and new resorts are sleeker and aimed more at niche market groups. This consolidation is a nice way of saying that there have been too many financial disasters in the resort sector. Ego investments, dumb planning and boosterism have led to some developments that were simply never going to return a profit. This has not been helped by some very average commitment to public and private sector destination marketing that has let regional Australia down.
However, today we have a much healthier platform for future resort operations and development, with a better understanding of demand and supply fundamentals, stronger management expertise and adherence to stringent financial codes. This report investigates the success factors underlying resort profitability and sets an agenda for industry and government to follow to revive the sector. After all, resorts are by their very nature regional and Australia has an obligation to its regional communities to encourage tourism development and the jobs and income that will flow. "Resorting to Profitability", conducted by Ernst & Young for TTF Australia would not have been possible without the engagement and co-operation of many people directly involved in the resorts sector, including those who build and create resorts, and those who operate and regulate them. I would like to thank the many TTF Australia Members, and others, who gave their time to be interviewed and contributed to the ideas presented here. My thanks also go to our sponsors, the excellent consulting team at Ernst & Young, especially Andrew Sudholz, Monika Dubaj and Paula Drayton for their rigour and commitment to the project, and to Karl Flowers and Dr Olivia Jenkins as TTFs Project Managers.
CHRISTOPHER BROWN
Definition of a resort Tourist accommodation catering primarily to leisure travellers, providing a range of recreational facilities and differentiated by experiential qualities in the context of a particular regional destination. This definition focuses on the growing importance of experiential tourism and draws attention to the increasingly important relationship between a resort and its surrounding destination.
Executive Summary
The focus for this study is the resorts sector. The future stability and development of the resort sector is an important issue for both industry and Government to consider, given the expected long-term growth of tourism in Australia and the potential for resorts to act as catalysts for regional development. This study reviews current issues facing resorts in Australia and provides recommendations for the tourism industry and Government aimed at improving the demand, operations and development aspects of resort projects.
his report is the third in a series of regional tourism studies conducted by TTF Australia. The first study focused on regional tourism employment and the second on regional tourism success factors.
Why has the profitability of resorts in Australia fallen behind?

Despite the growth of domestic and international tourism in the last two decades, resorts in Australia have performed poorly from a profitability and investment perspective. Unlike city hotels, resorts face additional challenges in the areas of demand, operations and development which impede their performance and act as a deterrent to future investment.
Why are resorts an important part of the Australian tourism landscape?

Australias tourism industry is gaining increasing recognition for its contribution to Gross Domestic Product (GDP). According to the latest available Tourism Satellite Account (TSA) data for 2000-2001, this contribution represented 4.7 per cent of GDP, a growth of 4.5 per cent relative to the first TSA estimate in 1997-1998.
Resort development in Australia has undergone a cyclical shift in recent decades from early retreat style guest houses, followed by larger scale integrated and town style resorts to return to smaller, more intimate niche resorts.
The tourism sector employed 551,000 people in Australia in 2000/2001, or 6 percent of the total workforce, demonstrating growth higher than for overall national employment. Between 1997/1998 and 2000/2001, the number of persons employed in tourism grew by 7.4 per cent. Resorts located in remote or non-metropolitan areas are major contributors to regional and local economies. Moreover, with traditional industries in regional areas in decline, resort and tourism development is an alternative for employment and a means for keeping the bush alive.
Travel for the purpose of holiday is the most significant component of tourism demand in Australia, both for domestic and international travellers. Resorts are primarily in the business of providing accommodation to holiday and leisure travellers and thus play an important part in Australias success as a holiday destination. Resorts also play an important role in the high-yield meetings, incentives, conferences and events (MICE) market. The MICE business has the potential to create flow-on benefits not only to the accommodation sector but also for a range of other industries as a result of strong retail and leisure spending by delegates. Australias ability to grow as an international MICE destination will in part depend on its ability to provide quality resort accommodation to the MICE segment. Finally, in many instances, resorts are located in close proximity to icons of cultural and heritage significance and, as a consequence, have a direct involvement in natural and cultural resource presentation. In particular, bigger resorts link in with global distribution systems to sell their product and as such have a significant impact on profiling a given destination.
Methodology The findings of this report were achieved through:
Evolution of resorts in Australia

Early resorts were developed in locations within day tripping range of capital cities such as the Blue Mountains and Mornington Peninsula. Island and Outback resorts featured heavily in the Australian Resort landscape from the 1950s to 1970s and in the late 1980s to early 1990s, Australias glamour resorts were developed, combining resorts with mixed-use and residential components. The second half of the 1990s witnessed new forms of development, characterised by smaller retreat or special interest style developments, and simultaneously, a wave of serviced apartment resort properties. Special interest style resorts include Spa Resorts, with a focus on health and rejuvenation, Eco-tourism Resorts, with a focus on education and interpretation, Family Resorts with an emphasis on recreation, Golf Resorts, often with a complementary themed experience in food and wine, Themed Resorts such as Palazzo Versace and Liberty Resort and Safari-style Resorts with a nature-based or culturally based experience.
Secondary data analysis, incorporating a review of relevant tourism statistics, such as the Roy Morgan Holiday Tracking Survey, and a literature review of relevant publications, journals and websites. Primary research, including 48 face-to-face or telephone interviews with owners, managers, developers and regulators of resorts and 5 case studies profiling existing resort developments. These involved site visits and interviews with resort owners, operators and stakeholders.
Hamilton Island in the Whitsundays, Ayers Rock Resort in Uluru and Conrad Jupiters Hotel on the Gold Coast are the three largest resorts in Australia.
Resorts scorecard
The key findings of the study present the following snapshot of the performance of the resort sector in Australia: Resort profitability
Resorts achieved significantly lower room yields of approximately $89, compared to $96 for city hotels and $95 for serviced apartments (2001, Andersen Hotel Benchmarking Survey). The profitability of resorts is significantly lower than that of city hotels, with resorts achieving a marginal Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) of 10 to 19 per cent, leaving a narrow margin to cover interest, tax and amortisation expenses (2001, Horwath Survey of Hotel Operations).
Resort destination visitation
Most Australian resorts are located in regional areas. However, capital cities of Sydney, Melbourne and Brisbane dominate the list of most visited tourism regions by international and domestic visitors alike. As a result, city hotels rather than regional resorts tend to benefit from the existing geographic demand spread. Regional visitation to resort destinations by international visitors is strongly correlated with visitation to tourism icons such as Uluru, the Great Barrier Reef, Wet Tropics World Heritage Area and Fraser Island World Heritage Area. Visitation to non-iconic resort destinations is limited, creating a disadvantage for resorts located in such areas.
Resort accommodation usage
Usage of resort accommodation by international visitors is low, with resorts capturing only 1.2 per cent of total international visitor nights in Australia in 1999 (International Visitor Survey, 1999). The most popular form of accommodation for domestic and international visitors is staying with friends or relatives. Domestic usage of resort accommodation is also relatively low, with hotels and resorts together capturing just 24 per cent of total domestic visitor nights in 2001.
Resorts and hotels face strong competition from private dwellings, serviced apartments, self-catering units, caravan parks, backpacker and bed & breakfast accommodation.
Composition of resorts in Australia
Major resort development in Australia took place in the 1980s, including the development of large, integrated resorts such as Ayers Rock Resort, Hyatt Sanctuary Cove, Hyatt Coolum, Sheraton Mirage Port Douglas and Sheraton Mirage Gold Coast. Many resorts built in Australia at that time were founded on unrealistic expectations of the strength of resort demand and poor understanding of resort investment principles. Recent resort development has been limited almost exclusively to strata-titled, lifestyle developments such as Cypress Lakes in NSW, Outrigger Resorts in Queensland and the Sebel Heritage in Victoria. New resort development has also been characterised by smaller, niche style resorts including golf resorts, safari resorts and health and spa retreats.
The resort industry has experienced a period of consolidation in the past decade, following the hype of the 1980s. A better understanding of demand and supply fundamentals, stronger management expertise and stringent financial requirements create a healthier platform for future resort operations and development in Australia.
Resort development and investment
Several major resorts, including Ayers Rock Resort, Hayman Island and Daydream Island, have sold at a significant discount to their development cost, indicating sub-standard investment returns. Resort development continues to be plagued by lengthy and uncertain approval processes, extensive compliance requirements and high upfront capital costs. Listed resort stocks have performed poorly over the past five years compared to listed property trusts, with many major resort companies posting negative returns. This reflects the perceived risk and volatility associated with the resort sector.
Barriers to success
Our study found that the poor performance of resorts in Australia can be attributed to a range of demand, operational and development constraints. The most significant constraints are outlined below.
Demand
Following a period of optimism in the 1980s, there is now a realisation that resort demand in Australia is constrained by a number of factors, particularly on the international front.
Despite strong long-term growth potential, international demand for most resorts located in non-iconic destinations is top-up demand only.
The study suggests that the most significant demand constraints for resorts are:
Australias small population base, which limits the pool of potential domestic resort consumers. Strong seasonality of the domestic market, most travel occurring during peak holiday periods (i.e. Christmas, January and Easter). Appeal of resorts to two segments only, being leisure and conference, exposing resorts to economic and business cycles. High cost of travel, with the cost of airfares to resorts and resort destinations being perceived as expensive compared to packages available for rival South East Asian, Pacific and Australian capital city destinations. Poor accessibility, with a lack of airline and other transport options acting as a barrier to demand. Increasing competition due to:
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Development of international standard resorts in destinations such as Bali, the Maldives, Middle East, South Pacific, Caribbean, Fiji and Thailand. Growth in supply in alternate forms of accommodation, such as serviced apartments and holiday units. Competition from domestic urban destinations such as Sydney and Melbourne offering a high standard of accommodation and infrastructure. Australia is one big resort - witn public access to abundant natural resources, a broad range of leisure alternatives and relatively good weather all year round.
Operations
The findings of the study indicate that resorts in Australia underperform significantly compared to city hotels on key performance indicators of occupancy, average room rate and room yield.
Resorts have historically achieved much lower occupancies than city based hotels. Resorts have historically achieved average rates in-line with, or slightly above, those recorded by city hotels. Resort room yields have historically been below those achieved by city hotels.
These results are presented in the table opposite Resort operations incur much higher operating costs than city hotels, particularly in the following areas:
Higher labour costs, due to the high cost of staff turnover, particularly for resorts in remote locations. Labour costs include Fringe Benefits Tax (FBT) paid on staff accommodation (except where the resort meets the definition of remoteness). This tax treatment is in line with other sectors such as mining and farming which are also conducted in remote areas. Higher administrative costs, reflecting additional costs of obtaining licenses and operating permits for supporting facilities (e.g. power, sewerage, transport vehicles) and ancillary facilities (e.g. tours, golf courses). Higher marketing costs, stemming from the greater effort and resources required to market to the leisure segment, particularly at an international level. Higher property, operations and maintenance costs, arising from the greater cost of maintaining extensive grounds, recreational facilities and plant and equipment. Higher energy and utility costs, reflecting the additional cost of operating in remote, extreme weather or ecologically sensitive environments. Higher capital reserve requirements due to the greater wear and tear on facilities resulting from weathering effects and guest usage.
Accommodation Type
Australian Resort Sample vs. Hotel Sample Year Ended December 2001
Average Daily Room Occupancy %
The weaker operating performance of hotels, combined with a higher operating cost base, results in marginal profitability of 10 per cent to 19 per cent at the Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) level. This level of profitability is unacceptable, as it leaves a narrow margin to cover interest, depreciation and amortisation expenses, which are estimated at approximately 12 per cent. Impact of resort location on profitability The findings of the study indicate that location has a significant impact on resort operations. Analysis of resort operations in secluded, coastal, accessible and island locations revealed the following operational challenges:
Resorts
62.2
142.97
88.86
Hotels & Serviced Apartments
68.9
139.65
96.17
Total Resorts, Hotels & Serviced Apartments
67.7
140.17
94.93
Secluded resorts face additional costs of developing infrastructure in remote areas and need to manage the potential negative impact of tourism activity in environmentally sensitive areas.
Source: Andersen Hotel Industry Benchmark Survey 2002
Average Daily Room Yield $
Average Achieved Room Rate $
Location has a significant impact on resort operations. Secluded resorts face additional costs of developing infrastructure in remote areas and need to manage the potential negative impact of tourism activity in environmentally sensitive areas.
Yield management is critical for secluded resorts given the distance to target markets. Secluded resorts face additional risk associated with heavy reliance on transport and natural attractions which are integral to the guest experience. Many accessible resorts have high costs of developing man-made attractions (e.g. golf courses, indoor spa facilities) in the absence of natural features. Accessible resorts have weaker barriers to entry and face strong competition from residential lifestyle developments offering a tourism component.
Impact of resort style on profitability The study revealed that specific resort styles, including golf and wine, eco-tourism, safari and alpine resorts, face additional operational challenges which may act as barriers to profitability. The most significant challenges are:
The need for strong collaboration with protected area agencies and indigenous societies. The high cost of development in environmentally sensitive areas. The need for highly skilled and knowledgeable staff to deliver nature-based and special interest activities. Exposure to risk associated with changes in the natural environment integral to the guest experience. The high cost of infrastructure, especially for sport based resorts such as ski and golf resorts.
Development
TTF Australias previous study Keeping the Bush in the Game (TTF, 2002) found that accommodation projects in regional Australia were more difficult to develop and harder to sustain profitability than accommodation projects in capital cities. The findings of this study indicate that resort projects, similar to regional accommodation projects, face a range of development issues which impede their development viability. The main impediments to resort development have been identified as:
Marginal and volatile operational profitability, requiring investors to
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take a long-term investment view.
Limited availability of excellent development sites which are accessible and have strong differentiating features. Prohibitive cost of infrastructure development for remote, nature-based sites. Greater risk of competition from additions to supply given the smaller size of resort markets and the longer period required to absorb new supply.
Who are the future resort tourists? Our findings indicate that the future resort tourists are likely to be:
Key success factors and opportunities

Based on our analysis, we have identified several demand, operational and development success factors which have the potential to improve resort performance and profitability.
Australian families, with parents seeking opportunities to spend meaningful time with their children. Australian baby boomers in their 40s, 50s and 60s, with a growing interest in experiential based tourism, including sporting, cultural and health activities. Australian lone parent families and seniors, seeking value for money. Young singles, who are highly educated with a clear understanding of what they expect in terms of service and experience. International tourists from the US, Europe and New Zealand, seeking naturebased and cultural activities. In the longer term, Asian tourists may become potential resort guests as Asian markets mature in the level and depth of travel experiences they seek.
Demand
Based on the predicted changes in the profile and needs of new resort tourists (described at right), resorts in Australia will need to re-consider their positioning, design, services and location.
Fun and exciting or secluded retreat? Given the size of the Australian domestic holiday market, there will be a need for mid-market resorts with no-frills or self catering facilities servicing the family market. These mid-market resorts will continue to face strong competition from the new generation of serviced apartments and holiday lettings. Older, luxury resorts will need to re-vamp their conservative image to a picture of active, fun and exciting; a place where people have fun and do things, particularly if seeking to appeal to the family market. There will be a growing need for retreat style resorts given the significance of existing demand from the 35 - 49 year old segment without children and the 14 - 34 year old singles segments. Existing resorts with extensive grounds have the potential to develop specialised product extensions within the existing resort, creating the opportunity to attract new market segments while capitalising on existing infrastructure.
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Collecting memorable experiences The demand for experiential tourism is likely to grow from domestic and international markets and resorts of the future are likely to provide a range of activities which create learning and relaxation opportunities for guests seeking to experience something new or different e.g. the sounds of silence experience at Ayers Rock Resort or Heritage walks at Alpine resorts. Hip, cool, pristine and safe Resort positioning is likely to reflect the following attributes of Australia which are growing in prominence:
Sounds of silence experience at Ayers Rock Resort
The profile of Australia as a modern, hip, and cool place to be, enhanced by the recent popularity of Australian movies and actors. The purity, diversity and unique qualities of the Australian environment. The perceived safety and security of travel to and within Australia.
The bed is not the most important thing Resorts will need to focus on the attributes of the entire destination and not just the resort product itself, creating a requirement for integrated destination planning. The regional destination profile will play an increasing role in growing the market profile for particular resorts. The importance of the destination may result in a scaling back in the level of facilities provided directly by the resort and an increased focus on tourist operators facilitating experiences within the surrounding destination or leveraging existing features in the natural environment to deliver the range of activities demanded by consumers. Service and value for money Resorts will need to focus on providing services and value for money to increasingly sophisticated domestic and international consumers, in particular to emerging but potentially price-sensitive segments such as young singles, lone parent families and seniors.
Operations
Because resorts are often in the business of creating a unique and memorable experience for a range of leisure travelers with diverse needs, resort operations require careful planning, additional organisation and extra resources for operations. The study findings suggest that critical factors to resort profitability are:
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The ability to recruit, train and retain staff at both management and operational levels. The ability to implement flexible staffing arrangements. Effective yield management to maximise revenue across peak and low seasons. Direct linkages to Global Distribution Systems, which cost-effectively distribute resort inventory nationally and globally. Strategic industry alliances with airline partners, hire car companies and tour operators. Strong relationships with environmental and cultural stakeholders such as Aboriginal communities or National Park authorities.
Mt Hotham
Location, location, location The locations with the most potential for future resort development in Australia are likely to be:
Development
Given the marginal profitability and high failure rate of resort projects, factors and opportunities to improve the success of a resort project are:
A concept which meets market demand, based on sound market and feasibility research. Design that reflects the resorts environment and provides a point of differentiation. Location in a region, which has established demand and barriers to entry for competitors. Community support for the development. Control of construction costs. Partnership with flexible financiers who understand the ups and downs of resort operation and are prepared to take a long-term view. Creation of economies of scale by developing multi-tiered accommodation catering to different target markets such as Ayers Rock Resort, Kingfisher Bay Resort or Hamilton Island. Mixed use development combining land, residential, marina and retail facilities which have the potential to increase the projects viability.
Accessible coastal and mainland regions, reflecting the holiday preferences and travel patterns of the Australian market. In proximity to unique natural or cultural heritage attractions which are a must see, particularly for international travellers. In destinations with established visitation patterns, good transport access and potential to collaborate with other tourism stakeholders or providers. On the fringe of wilderness areas, providing access to natural recreational opportunities in a protected environment in a controlled manner.
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Case Study 1
Alpine Resorts
Managing seasonality
The five alpine resorts considered for this case study (Thredbo, Perisher, Mount Buller, Mount Hotham and Falls Creek) offer insights into how the resorts sector can deal with the issues of seasonality and utilise yield management strategies for profitability. One of the key success factors identified in managing the operation of Alpine resorts is to keep the beds hot, that is, to use every possible accommodation unit (or bed) for as much of the time as possible. Successful resort operators have a number of mechanisms that assist to keep the beds hot:
Recommendations 1. Demand
Demand and the industry response
We have identified the following opportunities for Australias resorts and broader tourism industry to address demand challenges:
Improving the sophistication of yield management within resorts to maximise revenue in peak demand and low season periods. Through State Tourism Organisations, identifying a way to reduce seasonality of demand by extending domestic travel periods. This may involve lobbying for the adjustment of school holiday periods. Resort owners and operators working more closely with destinations in their presentation of the total destination to the consumer. Developing appropriate forms of accommodation that reflect the changing demographic and lifestyle profiles of international and domestic travellers. Supporting and facilitating the development of stronger airline networks to resort destinations. Review the level of aviation taxes and their impact on the competitiveness of domestic and international airfares. Monitor and forecast the impact of airline capacity and pricing on resort demand and performance. Explore the possibility of providing incentives to airlines servicing resort destinations. Undertaking co-operative marketing with airlines, particularly in off-peak seasons. Encourage collaborative planning and marketing opportunities between resorts and other sectors of the tourism industry on a destination basis.
Tiered pricing during peak and shoulder periods. Providing tailored packages for different niche markets.
Working in close co-operation with the accommodation booking service providers.
Ensuring there is a wide range of accommodation types and prices to suit different market segments. Marketing campaigns designed to moderate the peaks and troughs of visitation to alpine regions.

Expanding off-season products e.g. ecotourism, heritage interpretations, education, sight seeing, bushwalking, mountain biking and rest and rejuvination.
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Demand and the Government response

We have also identified the following opportunities for Government responses:
Case Study 2
In the Ten-year Tourism Plan, highlight the importance of regional marketing as a driving element of resort positioning. Encourage State and Territory Tourism Organisations to feature more resort product in their marketing initiatives, both domestically and internationally. Continue to support the See Australia domestic marketing campaign, given the highly competitive environment for resorts in Australia. Create resorts as a niche market within the Australian Tourist Commission (ATC) Market Segment program.
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Couran Cove Island Resort

Evolving strategic focus
Couran Cove Island Resort is an accessible island resort situated on South Stradbroke Island just northeast of the Gold Coast. The property has had an evolving strategic focus since its inception, resulting in a significant upgrade of facilities and alterations in market positioning. Originally conceived as an elite athletes training destination, the strategic focus for the property shifted during the development phase and the resort was repositioned as an ecotourism resort. Since opening, the resort has added significantly to its facilities and activities for the business market in an effort to diversify their market base and moderate the seasonality of demand.
Encourage ATC research programs to identify demand trends and opportunities for resort markets and distribute such information to the resort industry. Enhance promotional effectiveness, through continued funding of the ATC in those countries that provide Australia with high yielding, longer stay international visitors that demonstrate a strong propensity for activities in regional destinations.
Encourage co-operation between resorts and National Parks in the provision of tourist services and facilities in close proximity to National Parks and investigate the opportunity to create edge or gateway resorts adjoining National Parks, given the growing interest in activities and nature-based tourism pursuits. Support education program development and training subsidies for resort employees for advanced skills as well as basic skills especially given the increasing interest in nature-based and cultural experiences, which require highly skilled and knowledgeable staff. Better inform resort industry stakeholders on the framework surrounding eligibility for the Export Market Development Grants (EMDG) scheme. This is the Commonwealth Governments principal financial assistance program for businesses seeking to develop export markets, assisting small and medium sized resorts in developing export markets by partially reimbursing their expenditure on export promotion.
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Case Study 3
2. Operations
Role of industry in resort operations
Given the demand and operating cost constraints identified in our research, it is evident that resorts in Australia operate in a tough environment. The low level of resort profitability seen to date has resulted in limited interest and investment in the sector, leading to deterioration of resort stock and infrastructure. Increasing the level of profitability of resorts in Australia is not only critical to the sectors future success but also the competitive position of Australia as a quality tourism destination. Based on our research of barriers to resort profitability, we have identified the following opportunities for resort owners and operators and other tourism stakeholders to improve the performance of resorts in Australia:
Ayers Rock Resort, NT

Operating in a remote iconic destination
Ayers Rock Resort is a secluded mainland resort bordering the World Heritage-listed Uluru Kata Tjuta National Park. Ayers Rock Resort has been highly successful in the creation of a unique experiential product and brand. The resorts positioning is based on the principles of ecotourism, cultural tourism, soft adventure, lifestyle, and the unique physical icons situated close by. Experiential activities are facilitated both within and external to the resort. The resorts three major operational challenges are driven by its remote location. Specifically the high cost of labour and training required for a relatively transient pool of staff, the high cost of providing employee accommodation and the costs of maintaining and operating major infrastructure in a remote location.
Greater understanding and use of yield management techniques to maximise profitability during high and low periods of demand. Greater collaboration with local communities to develop effective human resource recruitment and retention initiatives to reduce labour costs. Increased collaboration with regional tourism stakeholders and operators, taking an all for one approach. Greater focus on providing non-financial incentives to employees, such as improved housing accommodation or opportunities for education, particularly in remote resorts.
Role of government in resort operations

Based on our analysis, we have identified the following opportunities for Government to increase the operational viability of resorts in Australia: Reduction of labour costs by:
Relaxing the 3-month work permit restrictions on international working holiday maker visa holders willing to work in remote resorts.
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Expanding the working holiday program to other countries. Reducing the level of payroll taxes following the introduction of the GST. With respect to Fringe Benefits Tax on staff accommodation, ensure parity in the treatment of the tourism industry with other industry sectors. Continuing to provide staff accommodation incentives and allowances. Continuing to support regional training schemes to improve the skills-base of resort employees. Increasing remote area tax incentives for staff.
We suggest that seasonal resorts be given access to income equalisation taxation adjustments similar to those allowed for farmers and others who may have large variations in incomes from year to year.
Reduction of uncertainty of cashflow from operations
Providing access to income equalisation taxation adjustments (similar to those used for farmers who have large income variations from year to year) given the sensitivity of resort income to natural, economic and political shocks.
Reduction of property operations and maintenance costs by:
Reducing the number of licences and registrations required to operate plant and equipment. Extending the diesel fuel rebate for remote resorts. Providing incentives (such as tax concessions, rebates or higher depreciation rates) for use of environmentally friendly waste, water and energy management technology. Extending depreciation allowances to include black hole expenses such as resort landscaping, site cleaning and golf course upkeep which form an integral part of resort facilities and are subject to obsolescence without significant upkeep.
Reduction of resort administration costs by:
Reducing the number of licenses required to operate resort facilities. Extending the duration of licenses to reduce administrative costs and increase the certainty of operational continuity.
Water, sewerage and infrastructure design and operation principles have made Couran Cove Island Resort a world leader in renewable energy design and application. These same features also add significant costs to resort development and operations, compliance, licence fees, maintenance and repairs.
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Case Study 4
3. Development
Role of industry in resort development
Kingfisher Bay Resort

Managing the costs of compliance
Kingfisher Bay Resort is located adjacent to the World Heritage-listed Fraser Island National Park. Barriers to entry for new developments in this environmentally sensitive area are high, aiding the nature-based niche positioning for the property. Compliance costs are significant for Kingfisher Bay Resort on account of the infrastructure required due to its remote location and the diversity of operations. Both in the development phase of the resort, and its current operation, compliance codes are imposed across local, State and Federal government tiers. These are particularly onerous in relation to plant and equipment, and to occupational health and safety. Standards and procedures are also subject to review and alteration by respective governing authorities and Kingfisher Bay Resort has in several instances been required to substantially upgrade facilities or processes to meet revised criteria.
Resorts are not only complex to operate but also costly and uncertain development ventures. Reducing the cost and risk associated with resort development is a key factor in improving the development viability and investment performance of resorts in Australia. Based on our research of impediments to resort development and key success factors, we have identified the following opportunities for resort developers and owners to improve the resort development process:
Given the weak performance of resorts and the competitive nature of the resort environment in Australia, focus on refurbishment and re-positioning opportunities for existing resorts rather than on new development in the short to medium term. Undertake detailed market and feasibility analysis prior to undertaking development and understand the high degree of sensitivities associated with demand and supply. Only undertake development in areas where there is existing evidence of demand and a strong attraction base. Consult with development teams of State Tourism Organisations and State Development departments when undertaking new development. Fund research and data collection on resort supply, demand and performance and make this information available to local Councils, developers and other stakeholders to improve investment decision-making. Improve the integration of resort facilities with the destination and off-site attractions.
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Role of Government in resort development

Based on our research we have identified the following opportunities for Government to facilitate the resort development process:
Case Study 5
Work with developers and investors to develop and fund infrastructure facilities, improving the feasibility of infrastructure development through the infrastructure bonds, tax concessions, grants or low cost loans. Ensure that development and planning legislation is manageable, easy to understand for developers and communities, and is applied equitably and with transparency across government jurisdictions. Provide certainty in relation to the approvals process, with accurate indication of time and process. Encourage bilateral arrangements between State and Commonwealth Governments under new environmental legislation to streamline approvals processes. Undertake economic impact assessments to understand the net and flow-on benefits of resort development to the greater community. Provide more certainty in relation to supply through destination master planning. Increase the level and quality of communications between State planning department representatives and local government officers responsible for tourism planning and development. Through the CRC for Sustainable Tourism, provide seed money or research and development grants for new technology, including transport and environmental management. Provide funding for management plans for protected natural areas, which have strong tourism appeal, possibly incorporating gateway or local resort facilities. Investigate innovative sources of funding for National Parks and other heritage attractions, especially for the development of visitor facilities in National Parks.
Heritage Golf & Country Club

Persistence in achieving the development vision
The Heritage Golf and Country Club is an accessible mainland resort located in Victorias Yarra Valley and Australias newest regional golfing resort. From inception to completion of Stage 1, including the Sebel Lodge Yarra Valley, the development process spanned a nine year period, with the hotel commencing operations in April 2002. Since the development crossed two local government areas, local government liaison was particularly intensive and required ongoing management. Persistence on behalf of the developer in navigating a range of rezoning, community consultation and approvals processes across numerous State and local government authorities was a critical success factor in achieving a development to meet the original vision for the resort.
The full report and this summary are available free of charge on the website: www.ttf.org.au Expanded versions of the case studies are included in the full report.
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Resorting to Profitability Making Tourist Resorts Work in Australia
Resorting to Profitability - Making Tourist Resorts Work in Australia
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Given the increasing interest in the development of tourism resorts in the Asia-Pacific region,it is now timely to review the commercial and regulatory factors that impact financial returns for resort owners and operators in Australia
Background
TTF Australia is the only national advocacy body representing the interests of the many sectors that comprise the tourism, transport, leisure and infrastructure industries. A key role of TTF Australia is in-depth research of current issues affecting the performance of the industry. Given the increasing interest in the development of tourism resorts in the AsiaPacific region, TTF Australia believes it is now timely to review the commercial and regulatory factors that impact financial returns for resort owners and operators in Australia. This report is the third in a series of regional tourism studies conducted by TTF Australia. The first study focused on regional tourism employment and the second on regional tourism success factors. The focus of this study is on the resort sector. It builds on the previous reports by focusing on regional tourism resorts. TTF Australia has requested Ernst & Young to conduct a study to examine the operations, development and demand issues facing resorts in Australia and provide recommendations aimed at enhancing the profitability and investment viability of the resort sector. The importance of tourism in Australia Australias tourism industry is gaining increasing recognition for its contribution to Gross Domestic Product (GDP). According to the latest available Tourism Satellite Account (TSA) data for 2000-2001, this contribution represented 4.7% of GDP, and growth of 4.5% relative to the first TSA estimate in 1997/98. The faster growing international tourist market accounted for 24% of visitor consumption, whilst domestic demand accounted for the remaining 76%. The tourism sector employed 551,000 people in Australia, or 6% of the total workforce, demonstrating growth higher than for national employment. In regional areas, tourism employs (35)% of the total workforce (TTF Australia, 2001). Beyond the traditional economic gauges for tourism performance, increasing regard for environmental, heritage and social impacts of the industry have been identified as critical success factors in industry and Government strategic planning. On 11 February 2002, the Minister for Small Business and Tourism, the Hon Joe Hockey MP, initiated the development of a comprehensive 10-year Strategic Plan for Tourism. Currently in progress, the plan was conceptualised to identify opportunities and obstacles to sustainable tourism growth and encourage partnerships between the various sectors of the industry and Governments.
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The significance of the resort sector in Australia Despite the growth of domestic and international tourism in the last two decades, resorts in Australia have performed poorly from a profitability and investment perspective. Unlike city hotels, resorts face a series of unique challenges in the areas of demand, operations and development which impede their performance and act as a deterrent to future investment. Travel for the purpose of holiday is the most significant component of tourism in Australia, both for domestic and international travellers. Resorts are in the business of primarily providing accommodation to holiday and leisure travellers and thus play an important part in Australias success as a holiday destination. Resorts also play an important role in the high-yield meetings, incentives, conventions and exhibitions (MICE) market. The MICE business has the potential to create flow-on benefits not only to the accommodation sector but also for a range of other industries as a result of strong retail and leisure spending by delegates. Australias ability to grow as an international MICE destination will in part rely on its ability to provide quality resort accommodation to the MICE segment. In many instances, resorts are also located in close proximity to icons of heritage significance and, as a consequence, have a direct involvement in natural and cultural resource presentation. In particular, bigger resorts link in with global distribution systems to sell their product and as such have a significant impact on profiling a given destination. Finally, resorts located in remote or non-metropolitan areas are major contributors to regional and local economies. A previous study conducted by TTF Australia, titled Keeping the Bush in the Game indicated that in 1997-98, there were 207,000 jobs regional Australia directly due to tourism. Moreover, with traditional industries in regional areas in decline, resort and tourism development is an alternative for employment and a means for keeping the bush alive. The future stability and development of the resort sector is an important issue for both industry and Government to consider, given the expected long-term growth in tourism in Australia and the potential for resorts to act as catalysts for regional development. Objectives of the report Given the challenges facing the resort sector, the objective of this study is to examine the demand, operational and development issues faced by resorts and to identify opportunities for industry and Government to increase the profitability of resorts in Australia.
Resorts located in remote or nonmetropolitan areas are major contributors to regional and local economies and have the potential to act as catalysts for regional development
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A Resort is: Tourist accommodation catering primarily to leisure travellers, providing a range of recreational facilities and differentiated by experiential qualities in the context of a particular regional destination
The study also seeks to identify the unique challenges and opportunities specific to emerging resort styles, including eco-tourism, golf tourism, cultural tourism and alpine tourism and to explore the influence of geography, including island, coastal, outback and inland locations, on resort operations and development. The specific objectives of the study are to: Identify opportunities to capitalise on emerging demand trends to enhance future resort profitability and performance. Identify opportunities to improve the existing regulatory environment (State and Federal Government level) for resort development and operations. Develop a set of success factors and recommendations for existing and future resort development and operations. Purpose of the study The information from this report will be used to inform current and potential resort developers, owners and operators and will be a guide for TTF Australia lobbying. Definition of resort In defining a resort, we have consulted a range of sources, including the Oxford Dictionary, the Australian Automobile Association, and the Horwath Survey of Hotel Industry Operations. Our analysis suggests that: A resort is a place frequented by holiday or leisure guests for tourism or recreational purposes, although meeting business is also a significant focus for resorts; A resort is expected to comprise a wide range of recreational facilities; and A resort forms part of a destination, whose underlying natural or cultural attributes are a motive for travel. Accordingly, for the purposes of this study, we have adopted the following definition of resort: Tourist accommodation catering primarily to leisure travellers, providing a range of recreational facilities and differentiated by experiential qualities in the context of a particular regional destination.
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This definition focuses on the growing importance of the experiential nature of tourism and draws attention to the increasingly important relationship between a resort and its surrounding destination. Taking into account the objectives of TTF Australia, the study examines development, operational and demand issues of four styles of resorts prevalent in Australia: Secluded island resorts (for example: Kingfisher Bay Resort, Daydream Island, Hayman Island); Secluded mainland resorts (for example: Ayers Rock Resort, Gagadju Crocodile Resort, Thredbo Alpine Resort); Accessible coastal resorts (for example: Couran Cove Resort, Sheraton Mirage Port Douglas); and Accessible inland resorts (for example: Sebel Heritage Resort, Cypress Lakes Resort). The following matrix presents a visual representation of the four resort styles that form the focus of this report. The factors of seclusion and accessibility were primarily derived in response to findings from the TTF Australia Keeping the Bush in the Game study (2002), which indicated that the performance of regional tourism destinations in Australia was falling behind mainstream city and urban destinations.
There is an increasingly important relationship between a resort and its surrounding destination
Secluded Outback Inland Island Coastal Acce ssib le
The study also explores changing consumer values and the emerging demand patterns for tourism forms and associated resort styles. These include: Eco-tourism;
Golf tourism; Food and Wine tourism; Cultural tourism;
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Alpine tourism; and Safari tourism. Scope of research Our research is primarily focused on the 4 and 5-star resort sector due to the availability of data. The lack of available data on the performance of other resort grading or classes precludes an in-depth study of emerging forms of resorts such as, for example, backpacker resorts, and is a limitation of this study. Methodology To accomplish the objectives of this study, we undertook the following tasks: Developed the research design and framework methodology in conjunction with the Project Steering Committee, comprising private and public sector resort and tourism industry experts. Secondary data analysis, including: - Review of relevant tourism statistics, including Australian Bureau of Statistics (ABS) Tourist Accommodation Statistics, Bureau of Tourism Research (BTR) statistics (National Visitor Survey and International Visitor Survey) and Roy Morgan Holiday Tracking Survey; and - Literature review of relevant publications, journals and websites. A literature review list is attached as Appendix 1. Primary research including: - 48 face-to-face or telephone interviews with selected industry leaders (see Appendix 2); and - 5 case studies profiling existing resort developments based on site visits and interviews with resort owners, operators and stakeholders. Following the secondary and primary data gathering, we analysed the results of the faceto-face surveys and identified the main themes in the areas of resort demand, operations and development. Steering Committee members reviewed the preliminary findings and provided feedback.
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Based on the identified themes, we prepared a set of recommendations in the areas of resort demand, operations and development for Government and resort industry stakeholders. Structure of the report The report is structured in three main parts: Analysis of resort demand; Review of resort profitability; and Analysis of resort investment and development. Each section presents a summary of the main issues, identifies key success factors and presents recommendations for Government and resort industry stakeholders.
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Australias small population base limits the available pool of potential resort consumers
Resort demand
Resorts in Australia rely on domestic and international visitors to generate room nights demand. The discretionary nature of travel, combined with the small size of the Australian population base and the long distance between Australia and key source markets such as Europe and the USA, create a highly competitive and sometimes volatile demand environment for resorts in Australia. In this section of the report we identify the existing demand fundamentals specific to resorts in Australia and review key drivers influencing resort demand. Changing consumer holiday and leisure values and the implications for existing and future resort supply in Australia are reviewed. We then analyse resort demand challenges, success factors and opportunities and provide recommendations for the tourism industry and Government in addressing demand issues. Key demand challenges faced by resorts in Australia Our research and analysis identified a number of key issues for resorts in Australia from a demand perspective. The most significant demand constraints for resorts are: Australias small population base, which limits the available pool of potential resort consumers. Strong seasonality of the domestic market, with most travel occurring during peak holiday periods. Limited market appeal of resorts, with leisure and conference markets being the main two sources of demand. Distance from international source markets, with time and distance being major inhibitors for international visitors. Despite strong long-term growth potential, international demand for many resorts is top-up demand only. High cost of travel, with the cost of airfares to resorts and resort destinations being perceived as expensive compared to rival South East Asian and Pacific destinations. Poor accessibility, with lack of diversity in airlines and other transport options acting as a barrier to demand.
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Increasing competition, with: - Development of international standard resorts in destinations such as Bali, the Maldives, Middle East, South Pacific, Caribbean, Fiji and Thailand; - Growth in accommodation supply in alternate forms of accommodation, such as serviced apartments; - Competition from domestic urban destinations such as Sydney and Melbourne offering a high standard of accommodation and infrastructure; and - Public access to abundant natural resources and all year round good weather Australia is one big resort. We discuss these challenges in more detail in the subsequent sections of the study. Evolution of resorts in Australia As a background to our analysis, we have undertaken a review of resort supply in Australia. We examine the changes in resort types in the last decade, review trends in resort styles and positioning and identify the resorts of the future based on the anticipated tourism and consumer trends. Our research suggests that resort development in Australia has undergone a cyclical shift in recent decades from early retreat style guesthouses, followed by larger scale integrated and town style resorts to return to more intimate, smaller niche resorts. The early days The first resorts in Australia were regional resorts located within the day trip range of capital cities. These were developed in the early twentieth century to cater for demand arising from the nearby population centres and include properties such as the HydroMajestic, Medlow Bath in the Blue Mountains and Delgany on the Mornington Peninsula. These properties were essentially retreat style developments, characterised by elements of seclusion and escape with some recreational activities available, usually based on the attributes of the natural environment within which the resort was developed. Island and outback resorts Island resorts featured heavily in the Australian resort landscape from the 1950s to the 1970s, including Daydream Island, Hayman Island (developed by Ansett Airlines) and Great Keppel Island (developed by TAA). Due to their remote locations, these resorts evolved primarily as town resorts, combining land uses and activities of a town community with a primary economic focus on resort activities and containing other types of accommodation and tourist facilities and services.
Australia has undergone a cyclical shift in recent decades from early retreat style guesthouses, followed by larger scale integrated and town style resorts to return to more intimate, smaller niche resorts
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The second half of the 1990s witnessed new forms of development, characterised by smaller retreat or special interest style developments on the one hand, and a new wave of serviced apartment resort properties on the other hand
The development of Hamilton Island and Ayers Rock Resort are prime examples of Australias more iconic town resorts, combining a wide range of infrastructure and facilities, including airport, retail, housing and medical facilities. Developments during this era were not commercially focused and in many instances driven by investment from airlines seeking to generate airline demand via resort product, Government investment and private developer real estate motives. Glamour resorts The late 1980s and early 1990s saw a proliferation of integrated resorts throughout Australia, with the Mirage properties, Hyatt Regency Sanctuary Cove and Hyatt Coolum combining mixed use and residential components. The design of these resorts, including expansive grounds, extensive recreational facilities and opulent fit-out embodied the glamour and glitz of the 1980s era. The evolution of Integrated Tourist Resort legislation facilitated increased foreign investment in Australias resort sector at this time, which was predominately Japanese led. Integrated resorts are planned for virtually exclusive use by tourists and oriented towards particular destination features such as the beach or marine recreation areas. These vary in size from one to several hotels and are typically self-contained, including various tourist facilities and services of a commercial centre and a broad range of recreational facilities. The second half of the 1990s witnessed new forms of development, characterised by smaller retreat or special interest style developments on the one hand, and a new wave of serviced apartment resort properties on the other hand. Niche resorts Special interest style properties developed during the late 1990s share similarities with those originally conceived at the turn of the century, being smaller and more intimate in design, although locationally, the new developments span a broader cross section of environments, located in more remote areas such as small islands or mountains regions. These include: Spa resorts with a primary or secondary focus on health and rejuvenation such as the Golden Door Health Retreat, Gold Coast and Cypress Lakes Resort and Spa, Hunter Valley. Eco-tourism resorts with a focus on integration with and interpretation of the physical environment such as Peppers Casuarina Lodge, Byron Bay.
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Family resorts that are usually a lower priced alternative to mainstream town or integrated resorts with an emphasis on recreation such as the range of family resorts that have evolved from Caravan Parks on the New South Wales south coast, such as the Boathaven Holiday Park, Edben (Wodonga). Golf Resorts, with their primary focus being golf and in some instances, wine and food pursuits as compatible activities, such as Joondalup Resort in Perth and the Sebel Heritage Yarra Valley. Themed resorts, themed and positioned to attract a niche market of consumers, such as Liberty Resort, Kuranda, aimed at the gay and lesbian market. Safari-style resorts based on special interest demand, such as Paperbark Camp near Jervis Bay, NSW and Longitude 131 near Uluru, providing a nature or culturally based experience. Serviced apartment resorts Substantial serviced apartment development has taken place within Australias holiday and capital city regions since the late 1990s. Serviced apartment projects usually comprise a higher number of rooms, incorporate recreational amenities such as swimming pools and restaurants and are in close proximity to other regional attractions and service centres. The following graph illustrates the growth of the serviced apartment accommodation category in Australia during the period from 1998 to 2001:
Substantial serviced apartment development has taken place within Australias holiday and capital city regions since the late 1990s
Australian Accommodation Mix - by type of accommodation

Year Ended December 1998 and 2001
100% 90% 80% 70%
Room nights available
60% 50% 40% 30% 20% 10% 0 1998 2001
Serviced Apartments Motels & Guest Houses Hotels & Resorts
8,692,811 30,648,128 25,584,761
12,638,413 30,748,835 28,515,870
Source: ABS Tourist Accommodation Australia 8365.0 1998/2001
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The previous table illustrates that: Serviced apartment style accommodation experienced dramatic growth during the 4-year period, with a 45% increase in the number of room nights available, albeit off a smaller base. The growth in serviced apartment style accommodation in both city and resort locations have created a highly competitive trading environment for hotels and resorts. The number of hotel and resort room nights available increased by 11.5%. This increase reflects new hotel additions in capital cities such as Sydney and Melbourne rather than new resort supply. Overview of resort supply in Australia The table below provides an overview of major resort supply in Australia for the period from 1946 to 2002. The table illustrates the resort trends discussed in the previous section and highlights emerging resort trends.
Overview of Resorts in Australia Property Location No. of rooms Year Ownership began structure operations 1946 1948 1952 1956 1962 1967 1967 1970 1974 Various Private Public unlisted Private company Public listed company Independent Public real estate trust Private company Private company Resort style Resort location
1 Mt Buller Resort 2 Falls Creek Resort 3 Perisher Blue Resort 4 Dunk Island Resort 5 Thredbo Resort 6 Great Keppel Island 7 Alice Springs resort 8 South Molle Island Resort 9 Lizard Island Resort
Mt Buller, VIC Falls Creek, VIC Perisher Valley, NSW Whitsunday Islands, QLD Thredbo, NSW Whitsunday Islands, QLD Alice Springs, NT Whitsunday Islands, QLD Great Barrier Reef, QLD
3,500 beds 4,200 beds 3,114 beds 148 4,200 beds 192 144 200 40
Integrated Integrated company Integrated alpine company Conventional Integrated alpine resort Conventional Resort Conventional Integrated resort Retreat resort
Accessible inland alpine resort Accessible inland alpine resort Accessible inland resort Accessible inland resort Island Accessible inland Island resort Remote mainland resort Island Island
Total Pre-1980s
724
(rooms excluding beds)
1 Heron Island Resort 2 Bedarra Island Resort 3 Hamilton Island Resort 4 Silky Oaks Lodge & Healing Waters Spa 5 Ayers Rock Resort
Whitsunday Islands, QLD Whitsunday Islands, QLD Whitsunday Islands, QLD Daintree, QLD
117 15 754 60
1980 1981 1981 1983
Private company Private company Public company Private company Eco-tourismSpa Public real estate trust
Eco-tourism resort Retreat resort Conventional resort Retreat resort (recent addition)
Island Island Island Secluded mainland
Yulara, NT
805
1984
Conventional resort Remote mainland Safari resort new addition
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Overview of Resorts in Australia Property Location No. of rooms Year Ownership began structure operations 1984 1985 1985 1986 1986 1986 1986 1987 1987 1987 1987 1987 1988 1988 1988 1989 1989 1989 Private company Public unlisted company Public listed company Private company resort Private company Golf Resort style Resort location
6 The Lakehouse 7 Brampton Island 8 Conrad Jupiters Hotel & casino 9 Novotel Palm Cove Resort 10 Rydges Capricorn Resort 11 Peppers Fairmont Resort 12 Courtyard Surfers Paradise Resort 13 Sheraton Mirage Resort
Dayelsford, VIC Whitsunday Islands, QLD Broadbeach, QLD Palm Cove, QLD Yeppoon, QLD Leura, NSW Surfers Paradise, QLD Gold Coast, QLD
33 108 609 342 280 210 405 312 294 214 405 417 247 324 180 299 263 99
Retreat resort Conventional resort Casino resort Conventional Accessible Integrated resort
Accessible mainland Island Accessible coastal coastal Secluded coastal Accessible mainland Accessible coastal Accessible coastal
Public listed company Retreat resort Private company Public unlisted company Public unlisted company Public unlisted company Public real estate trust Public listed company Public unlisted company Private company Strata title Private company Private company Timeshare & Private company Conventional resort Integrated resort
14 Sheraton Mirage Resort Port Douglas, QLD 15 Hayman Island Resort 16 Sea World Nara Resort 17 Burswood Hotel & Casino 18 Hyatt Regency Sanctuary Cove 19 Hyatt Regency Coolum 20 Cypress Lakes Resort 21 Rydges Reef Resort 22 Cable Beach Club 23 Cumberland Resort Whitsunday Islands, QLD Surfers Paradise, QLD Perth, WA Hope Island, QLD Coolum, QLD Hunter Valley, NSW Port Douglas, QLD Broome, WA Lorne, VIC
Integrated resort Secluded coastal Conventional resort Conventional Themed resort Casino resort Integrated resort Golf Integrated resort Spa, golf Integrated resort Golf, wine, spa Integrated resort Integrated resort Conventional resort Island Accessible coastal Accessible coastal Accessible inland Accessible coastal Accessible mainland Accessible coastal Secluded coastal Accessible coastal
Total 1980s
6,672
1 All Seasons Premier Pacific Bay Resort 2 Royal Pines Resort coastal
Coffs Harbour, NSW
226
1990
Public real estate trust Conventional (in process of resort being strata titled) Private real estate company Public listed company Private company Private company Strata title Golf Private company Eco-tourism Proprietary company Integrated resort Golf Luxury retreat Conventional resort Integrated resort Eco-tourism Integrated resort Integrated resort Retreat resort
Accessible coastal
Gold Coast, QLD
329 169 379 164 368 192 104
1990 1991 1991 1991 1992 1992 1992
Accessible Accessible coastal Accessible coastal Remote mainland Accessible coastal Island Island
3 Sheraton Resort Noosa Noosa, QLD 4 Parkroyal Surfers Paradise 5 Kings Canyon resort 6 Novotel Twin Waters Resort 7 Kingfisher Bay Resort 8 Club Med Lindeman Island 9 Lilianfels Blue Mountain Resort Surfers Paradise, QLD Kings canyon, NT Mudjimba Beach, QLD Fraser Island, QLD Whitsunday Islands, QLD Katoomba, NSW
86
1992
Public real estate trust Retreat resort
Accessible mainland
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Overview of Resorts in Australia Property Location No. of rooms Year Ownership began structure operations 1992 1993 1993 1995 1995 1996 1997 1997 1997 1998 1998 1999 1999 1999 Public listed company Private company Golf Private company Resort style Resort location
10 Marriott Surfers Paradise Resort 11 Laguna Quays Resort 12 Novotel Opal Cove Resort 13 Radisson Treetops 14 Mercure Resort 15 Joondalup Resort 16 Radisson Palm Meadows 17 Oasis Resort Cairns 18 Novotel Vines Resort 19 Outrigger Mooloolaba 20 Couran Cove Resort 21 Broadwater Sanctuary Resort 22 Novotel Barossa Valley 23 Beach Club Resort
Surfers Paradise, QLD resort Proserpine, QLD Coffs Harbour, NSW Port Douglas, QLD Surfers Paradise, QLD Joondalup, WA Gold Coast, QLD Cairns, QLD Swan Valley, WA Mooloolaba, QLD Stradbroke Island, QLD Dunsborough, WA Barossa Valley, SA Hamilton Island, QLD
330 150 136 305 405 70 280 314 139 204 356 180 140 55
Conventional Integrated resort Conventional resort
Accessible coastal Secluded coastal Accessible coastal Accessible coastal Accessible coastal Accessible mainland Accessible coastal Accessible coastal Accessible mainland Accessible coastal Coastal/island Secluded mainland Accessible mainland Island
Public listed company Eco-tourism resort Strata title Private company Strata title Public listed company Public unlisted company Strata title Strata title Private company Strata title Public company Conventional resort Retreat resort Golf resort Conventional resort Golf and wine resort Serviced apartment resort Integrated resort Eco-tourism Retreat resort Conventional resort Retreat style addition to Hamilton Island Resort
Total 1990s
5,083
1 Outrigger Beach Resort 2 Outrigger Reef Resort 3 Pacific International Waterfront Resort 4 The Mansion Hotel 5 Sebel Resort Noosa 6 Peppers Links 7 Pacific International Bel Air Resort 8 Peppers Hidden Vale 9 Aqualuna Resort 10 Peppers Casuarina Lodge 11 Daydream Island 12 Erskine House 13 Liberty resort
Coolangatta, QLD Cairns, QLD The Entrance, NSW Werribee Park, VIC Noosa, QLD Port Douglas, QLD Broadbeach, QLD Lockyer Valley, QLD Coffs Harbour, NSW Byron Bay, NSW Daydream Island, QLD Lorne, VIC Kuranda, QLD
130 90 145 92 84 66 167 30 90 18 296 120 64
2000 2000 2000 2000 2000 2000 2001 2001 2001 2001 2001 2001 2002
Strata title Strata title apartment resort Strata title Private company Strata title Strata title Strata title Private company Strata title Private company Private company Strata title Strata title
Serviced apartment resort Serviced Serviced apartment resort Retreat resort Serviced apartment resort Serviced apartment resort Serviced apartment resort Retreat resort Serviced apartment resort Retreat resort Conventional resort Serviced apartment resort Serviced apartment resort
Accessible coastal Accessible coastal Accessible coastal Accessible mainland Accessible coastal Accessible coastal Accessible coastal Accessible mainland Accessible coastal Accessible coastal Island Accessible coastal Accessible mainland
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Overview of Resorts in Australia Property Location No. of rooms Year Ownership began structure operations 2002 2002 Strata title Strata title Resort style Resort location
14 Sebel Heritage Lodge 15 Outrigger Beach Club
Yarra Valley, VIC Palm Cove, QLD
102 65
Serviced apartment resort Serviced apartment resort
Accessible mainland Accessible coastal
Total 2000s Total
1,559 14,038
There has been a recent shift from island and secluded mainland resort development to accessible mainland resorts
Source: Ernst & Young Research
The information in the table above indicates the following resort supply trends: No major resorts were developed during the period from 1994 to 1996. The information in the table above indicates the following resort supply trends: No major resorts were developed during the period from 1994 to 1996. There has been a recent shift from island and secluded mainland resort development to accessible mainland resorts. This is likely a reflection of consumer preferences for short breaks, rather than holidays of significant duration. The majority of resorts continue to be developed in coastal locations, reflecting continued popularity of the traditional beach and sun holiday. Serviced apartment resorts have been the dominant new form of development. The majority of these developments are larger scale, comprising in excess of 100 rooms. Serviced apartments, being strata titled by design, have been easier to finance, since they are sold as units to individual investors. This reduces the risk for the developer and enhances the short-term profit gain from the project itself. The average size of resorts is much smaller compared to the 1980s, with Daydream Island being the largest resort to have opened (post refurbishment) in 2001 with 296 rooms. There has been an emergence of special interest resort styles, including golf, wine, eco-tourism and safari resorts in response to increasingly sophisticated consumers demanding more experiential holidays. Retreat and niche style developments, being smaller scale are not as capital intensive as their larger integrated resort counterparts and are less costly to develop.
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Leisure related demand is a function of income levels, the price of airfares, exchange rates and the cost of goods and services in Australia compared with alternative destinations
Tourism demand trends Resort demand is strongly linked to the level of domestic and international tourism flows in Australia. In this section of the report, we examine economic, market and political factors influencing tourism demand. We also review the historical and forecast domestic and international tourism trends and assess the implications for resorts. Factors influencing tourism in Australia In general, leisure related demand is a function of income levels, the price of airfares, exchange rates and the cost of goods and services in Australia compared with alternative destinations. Business traveller demand, also including meetings demand, which is of relevance to resorts, is particularly influenced by levels of economic activity, both in Australia and abroad. Economic factors The long-term outlook for domestic and international tourism in Australia is positive based on the following anticipated trends: A forecast modest recovery in world growth to around 2.8% in 2002, with a further pick-up to the long-run average of 4% in 2003 (IMF and consensus forecasts). Strong domestic economic fundamentals, supported by expected low interest rates, increased household wealth, higher consumer confidence levels and strong growth in employment (Access Economics forecasts). Despite a positive long-term outlook, both domestic and global economies have experienced a period of contraction and uncertainty during 2001 and 2002. The risks to tourism and resort demand growth are: Continued global softening, especially further declines in key global economies. Potential further appreciation of the Australian dollar, which is likely to increase the propensity of Australians to travel overseas. An appreciation of the dollar also has the potential to lower the price-value perception of international visitors travelling to Australia. Other factors In addition to the macro-economic environment, recent events in the Australian aviation landscape and world political scene are of significance to the Australian resort sector. These are discussed below.
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Political and International events The terrorist attacks in the US in September 2001, the Bali bombings in October 2002, the recent Afghanistan conflict and the 2003 War in Iraq have impacted travel patterns around the world. Terrorism against international tourism has impacted global travel patterns and medium to long-term effects on travel demand are not clear. The additional deterring impact of the SARS (severe acute respiratory syndrome) crisis has further threatened international travel uptake, by both Australians and inbound tourists alike. In response to such volatility, domestic tourism to resorts might increase in the short-term, as travellers steer from political and health-related danger zones. Aviation Vast distances to and within Australia and the countrys limited population base create unique challenges for tourism, destination connectivity and the potential profitability of any airline operating within the country. Australias limited population and current low rate of carrier competition forces the cost of air travel upwards according to the supply and demand equation. Higher airfare costs further prohibit the bulk of the population from frequent access to air transport as an alternative to private vehicle or train. As airlines strive to maintain profitability levels and business viability, they naturally focus on those routes and markets that are high yielding such as flights between Sydney, Melbourne and Brisbane and the less price sensitive corporate market. The Australian aviation environment has seen several airlines come and go, including: Compass Airlines; Impulse Airlines; and Ansett Airlines. The launch and demise of airlines within Australia has significantly affected Australian resort operators, particularly those dependent on air transport as a primary means of transporting guests (such as Ayers Rock Resort). Fluctuations in prices, service frequency and certainty in flight schedules are factors built into the cost and accessibility equation for consumers. As these change, price-based competition from South East Asian and South Pacific destinations intensifies by default. For consumers themselves, the perception of rising costs, infrequent services, and more recently, doubts as to the viability of airlines themselves at the time of travel, create an undercurrent of doubt and uncertainty. Consumer behaviours such as short booking lead times, an increased tendency to purchase distressed or short notice inventory via the internet, and in 2001, a reversion to travel by private vehicle are responses to such uncertainties.
Vast distances to and within Australia and the countrys limited population base create unique challenges for tourism and destination connectivity
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Guaranteed air access is a critical issue in improving resort profitability
Since September 2001, Qantas has strengthened its position as Australias dominant domestic carrier and has endeavoured to pick up lost Ansett capacity through larger aircraft and increased flights. Budget airline Virgin Blue has expanded rapidly since September 2001 and the combined Hazelton and Kendell Airlines, renamed Regional Express Airlines (Rex) was created in 2002 and is currently servicing 35 South East Australian destinations. The success of the Virgin Blue budget airline model and the growth potential exhibited by several Asian markets contributed to the development of Australian Airlines, a subsidiary of Qantas. Australian Airlines commenced operations in October 2002 and will initially service Osaka, Nagoya, Singapore, Taipei, Hong Kong and Fukuoka, non-stop from Cairns the new Northern hub. Australian Airlines have rapid expansion plans and expect to be offering services between most Australian capital cities by the end of 2003. International capacity has also been affected by the worldwide downturn in aviation travel post September 11, 2001. The reduced capacity on routes to Australia, has proved problematic for inbound group and incentive travel organisers trying to secure volume, discounted seats for their clients and as such has constrained some hotel and high yielding resort demand. Guaranteed air access is a critical issue in improving resort profitability. There remains a perception that the focus on developing high yielding corporate business routes is at the expense of leisure routes, leisure destinations and as such, resorts. Domestic tourism Domestic visitor nights Domestic visitors are the foundation of the Australian tourism industry, generating 76% of all revenue flows in 2000/01. Despite its dominance, the growth rates recorded for domestic tourism have been below those of international tourism, albeit from a much larger base. The Tourism Forecasting Council predicts domestic visitor nights will grow at a compound annual growth rate of 0.5% from 2002 through to 2012. This conservative grow rate is a concern for resorts relying on the domestic market to provide the majority of room night demand. Purpose of visit The majority of Australians travel for the purpose of holiday and leisure, which accounted for 46% of total visitor nights in the year ended December 2002. Visiting friends and relatives was the next most important reason for domestic travel, accounting for 31% of total visitor nights. Travel for business related purposes accounted for 15% of domestic visitor nights.
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Long-term forecasts for domestic visitor nights by purpose of travel provided by the Tourism Forecasting Council (TFC) in May 2003 are as follows: Compound annual growth rate of 0.4% is forecast for the domestic holiday segment from 2002 to 2012, representing an increase of 5.1 million visitor nights over the forecast term; Business visitor nights are expected to grow at a faster pace than any other domestic segment, increasing by a compound annual growth rate of 1.1%; and Visiting friends and relatives (VFR) market has a forecast growth rate at 0.5% per annum over the period from 2002 to 2012. The following graph presents the historical and forecast level of domestic visitor nights by purpose of visit for the period from 1995 to 2012. Significant movement between 1997 and 1998 indicates a break in series, when ABS regions and sample inclusions were adjusted.
With international visitors typically displaying low dispersal rates to regional areas, the resort industry may not benefit as strongly from the forecast inbound visitor growth
Domestic Visitor Nights by Purpose of Visit (millions)

Year Ended December 1995 to 2012
150
120
90
60
30
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Business Holiday VFR Other
Source: Tourism Forecasting Council, May 2003 Note: Break in series in National Visitor Survey and Domestic Tourism Monitor data collection ini 1997 to 98. 2003 forward are forecasts.
The above graph illustrates that domestic tourism is forecast to grow at a very conservative rate of approximately 0.5% per annum in the next decade. Accordingly, by the year 2012, domestic visitor nights are expected to account for 68% of total visitor nights in Australia. In 2001, domestic visitor nights represented 71% of total visitor nights. The increasing share of international visitor nights as a component of total tourism visitor nights will more than likely benefit hotels located in capital cities and iconic regional destinations. With international visitors typically displaying low dispersal rates to regional areas, the resort industry may not benefit as strongly from the forecast growth. Additionally, there will be increasing competition in the resort industry to capture the shrinking domestic component of visitor demand.
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The census portrays an aging population increasingly living alone, a middleaged population deciding not to have children or forced by divorce to bring up children alone and a younger population increasingly choosing to live alone
Domestic visitor accommodation preferences The most popular choice of accommodation for overnight visitors in the year ended December 2002 was a friends or relatives property, accounting for 41% of total visitor nights. Accommodation in a hotel, resort, motel, motor inn was the next most popular choice, representing 23% of total visitor nights. Self-catering accommodation and caravan parks remain popular types of accommodation for domestic travelers and together accounted for 20% of total visitor nights. The following table illustrates the share of domestic visitor nights in selected types of accommodation by purpose of visit:
Share of Domestic Visitor Nights in Selected Types of Accommodation by Purpose of Visit Year Ended December 1999 and 2001 1999 Holiday /Leisure Hotel, resort, motel, motor inn Self catering cottage or apartment Friends or relatives property Caravan park, commercial camping group 26% 14% 21% 19% VFR 7% 2% 87% 2% Business 54% 7% 18% 3% Total 24% 9% 41% 11% Holiday /Leisure 26% 16% 21% 17% VFR 7% 2% 85% 2% 2001 Business 56% 7% 15% 4% Total 24% 10% 40% 10%
*VFR = Visiting friends and relatives Source: BTR Travel by Australians 1999 and 2001
The above table indicates that: Business travellers have the greatest propensity to utilise hotel accommodation, representing 56% of total business visitor nights in 2001. This is a positive trend for city hotels but likely of lesser consequence for the resort sector. Leisure travellers displayed much lower usage of hotel and resort accommodation, which accounted for 26% of total holiday visitor nights in 1999 and 2001. Staying in a friends or relatives property, caravan park or self-catering accommodation are popular accommodation choices for holiday travellers, presenting a high degree of competition for the hotel and resort sector. The VFR segment has the lowest propensity to utilise hotel and resort accommodation. Demographic trends 2001 Census data published by the ABS in 2002 revealed a number of important demographic changes in the Australian population. The census portrays an aging population increasingly living alone, a middle-aged population deciding not to have children or forced by divorce to bring up children alone and a younger population increasingly choosing to live alone.
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The latest census statistics that are of most relevance to this study are summarised below. Changing family structure There have been substantial changes in the family structure in the past 30 years. While the proportion of couples with children and couples without children has remained relatively stable over time, the proportion of lone parent families and lone person households has increased over time. Divorce and the ageing of the population are two factors that are thought to be contributing to this trend. Australia is no longer a country of mums, dads and kids. Couples with children now represent 47% of households, down from 50% in 1996. Lone parent families represented 15.4% of all families in 2001, increasing from 5.7% in 1971. The proportion of couple families without children has increased to 35.7%, up from 34.1% in 1996. This can be attributed partly to the ageing population, with the older baby boomers becoming empty nesters as their children leave home and to the trend towards remaining childless or having children later in life among the younger age group. Australians are delaying marriage, with 75% of 20 to 29 year olds describing themselves as never married, compared to 35% in 1971. Living alone The number of people living alone is growing and is an important indicator of social change in Australia. The proportion of lone dwellings has increased to 23%, compared to 22% in 1996 and 18.1% in 1971. Older people are more likely to be living alone, however, more younger people are likely to be living alone than in the past. Greater education The number of Australians with a higher education (bachelor degree or above) has increased to 17%, up from 9% in 1991. Losing the faith The proportion of people who described themselves as having no religion increased to 25% in 2001, compared to 11% in 1961. The number of non-believers is another indicator of social change in Australia.
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Getting older The Australian population is getting older, with the median age of the total population in 2001 recorded as 34, compared to 32 in 1991. This can be attributed to longer life expectancy and lower fertility rate. The following graph provides an overview of the size of the Australian population by age category in 2002 and the expected changes in the next 18 years to 2020.
Projected Population Growth - Australia

2002 to 2020
0-4 5-9 10-14 15-19 20-24 24-29
Age Categories
30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+ 0 200000 400000 600000 800000 1000000 1200000 1400000 1600000 1800000
2002 2020
Population
Source: ABS Population Projections 3222.0 1999-2101
The above table indicates that: The younger population is expected to get smaller by 2020, with all age groups from 0 to 19 forecast to decrease. The 20 to 44 age group is expected to display conservative growth in the next 18 years to 2020. Strong growth is anticipated in the 45 to 59 age groups. The most significant growth is expected to occur in the 60 to 74 age groups, albeit from a smaller base. Implications of demographic changes for resorts Based on the above analysis, the implications of the demographic and social changes that are taking place in the Australian population for resorts are set out below.
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While dual parent families with children are no longer a majority, they continue to account for a significant proportion of the population. Demand for family holidays is likely to continue and thus will be an important consideration for resorts. The provision of facilities and experiences that allow families to spend time together in a fun and meaningful way is likely to be of increasing importance. The rise in lone parent families may be an opportunity for resorts, as spending time with children is likely to be an important consideration for single parents. Additional research on the needs and spending capacity of this segment could be beneficial to resorts, allowing for the tailoring of services and marketing initiatives. The growth in couples with no children is a positive factor for resorts, particularly in the Double Income No Kids (DINKS) category. DINKS tend to have stronger spending capacity and are likely to seek indulgence, retreat or nature based activity style resort experiences. The rise in the number of younger and older people living alone may create opportunities for resorts to act as a platform for social interaction, offering special interest, retreat style experiences appealing to particular groups. An increase in the number of Australians with a university education is resulting in more educated consumers with well-defined expectations of what they seek from a holiday experience. Better-educated consumers are likely to require a high level of services and activities that create opportunities to experience, learn and grow. The shift in religious beliefs may be considered an indication of a less conformist society, where people are happy to make their own rules and feel capable of organising their own life. At the same time, there has been a growing interest in alternative philosophies, for example Buddhism, which incorporates lifestyle elements such as yoga, meditation and nutrition. These changes create a range of opportunities for resorts, including: - Re-positioning resorts as a place where people can relax and have fun rather than conform to a rigid experience; - Providing flexibility so that guests can do as little or as much as they want; and - Creating lifestyle experiences where people can re-connect with the basics, re-energise the body and mind and gain a greater sense of well being through retreat style facilities and activities.
The rise in the number of younger and older people living alone may create opportunities for resorts to act as a platform for social interaction, offering special interest, retreat style experiences appealing to particular groups
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Strong growth anticipated in the 45 to 59 age group is a positive factor for resorts, especially if this segment were to comprise a large proportion of DINKS, with relative strong spending capacity and interest in travel.
Growth in the 20 to 44 age group is a positive factor for resorts; however, the expected small growth may not suffice to create incremental demand growth as the rise in the propensity to holiday overseas is likely to continue. The conservative growth in this segment signals the need for destinations and resorts in Australia to remain competitive with their overseas counterparts through product and marketing initiatives. It also highlights the importance of attracting international guests to resorts as a means to drive future demand growth. The strong growth anticipated in the 45 to 59 age group is a more positive factor for resorts, especially if this segment were to comprise a large proportion of DINKS, with relative strong spending capacity and interest in travel. The significant growth forecast in the 60 plus age group is both an opportunity and a threat for resorts. While the older Grey Nomads have typically retired, are time rich and have a strong propensity to travel, their spending capacity can be limited by lack of income. Accordingly, resorts wishing to cater to this growing segment will need to re-evaluate their positioning and service delivery strategies to appeal to older Australians. Psychographic trends In addition to the National Visitor Survey, we have also examined the accommodation and activity pattern preferences of domestic travellers using data obtained from Roy Morgan Research. Roy Morgan data has been gathered through the Holiday Tracking Survey (HTS), an ongoing measure of holiday and leisure travel. The HTS provides comprehensive and detailed information on travel preferences, intentions and behaviour, holiday types and attitudes towards holidays and travel for the Australian population.
Life Satisfaction Individualism Quality Expectations Roy Morgan Value Segments
Developed with Colin Benjamin. The Horizons Network
Visible Achievement
Something Better
Basic Needs
Real Conservatism
Traditional Family Life
Conventional Family
Young Optimism
Socially Aware
Look at me
Fairer Deal
Price Expectations Innovation Progressiveness
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Roy Morgan Value Segments Roy Morgan Value Segment data is widely used by Australian State and Territory Tourism Organisations as a guide in developing marketing strategies. It provides an insight into consumer purchasing decisions and activities. The Roy Morgan segmentation divides Australias population into ten separate categories based on their patterns of thinking, demographic characteristics and travel behaviour. A detailed description of the ten segments is attached at Appendix 3. Our analysis indicates that the most significant value segments for resorts are: Socially Aware; Visible Achievement; and to a lesser extent Traditional Family Life. Together these three segments account for approximately 50% of the domestic population. The Socially Aware and Visible Achiever segments account for approximately 30% of the population. The segments demonstrate: The most frequent rate of holiday travel; A higher propensity to utilise luxury 5 and 4-star hotel and resort accommodation; Strong holiday spending capacity; and Interest in undertaking activities. The following table provides a summary of the three Value Segments:
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Roy Morgan Value Segments Year Ended December 2001 Value Segment Approx. % of population 20 Pattern of thinking /demographic characteristics Travel Behaviour
Traditional Family Life
Personifies middle-aging Australian homeowners with a relatively stable income. Reflects a household where dependents have moved out to start their own families and lifestyles. Energies revolve around them becoming grandparents or getting children home for visits or at least to keep in touch. Health and spirituality dominate sense of meaning and purpose in life and being well-respected in the community is very important.
Keen holiday tourers, which is reflected in the high use of caravans and campervans. A planned itinerary is a priority, hence the greater use of package tours and bookings through tour operators. Tend to stay in comfortable but good value accommodation, such as standard hotels and motels - they don't want any surprises. Sightseeing is an important aspect of their holiday experience, with a greater tendency to visit museums, art galleries, historical places, and wineries. Visiting friends or relatives is also an important aspect of the TFL's holiday experience.
Visible Achievement
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This pattern of thinking is associated with the proof of having made it up the seemingly never ending social ladder, demonstrated by the swimming pool, the Jaguar or Mercedes and an exclusive private school education for their children. Personal recognition, higher incomes, job satisfaction and other tangible rewards of success such as travel, recreation and high quality homes, vehicles, holiday locations provide the very best of visible good living.
Travel frequently. Spend a lot on holiday. As with other purchases, they look for quality and value for money in their holidays. For those with family, the holiday is a chance to spend time together doing activities with the children. Enjoy holidays that provide the opportunity to play golf and tennis. Generally stays in luxury hotels, serviced apartments, and bed and breakfast accommodation. Show the highest frequency of travel amongst the Values Segments. Spend a lot on holidays.
Socially Aware
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This pattern of thinking is usually associated with the highest socio-economic group in the community. Most often associated with public servants, pressure groups and politicians of all political persuasion. Addicted to finding out, or trying, anything that's new or different. Don't make decisions lightly, argue the facts and figures - but end up buying the latest, and the brightest, anyway - just because they have to have it.
Frequency of overseas travel is higher than that among other segments. Travel to destinations such as Tasmania and the Northern Territory that offer the opportunity to explore and have new and different experiences. Enjoy planning the holiday and value flexibility, hence they book transport, accommodation and other services directly with the service provider. Enjoy boutique accommodation such as bed and breakfasts and luxury hotels. Like to experience cultural activities, such as musical and theatre performances, and enjoy restaurants, arts festivals, wineries galleries and museums, outdoor and nature activities on holiday.
Source: Roy Morgan Holiday Tracking Survey
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Who are the Resort users? Using Roy Morgan data, we have undertaken an analysis of the use of 4 and 5-star hotel and resort accommodation by each value segment. Our analysis indicates that the Socially Aware and Visible Achievers are the top users of 5 and 4-star hotels, resorts and serviced apartments. The results of our analysis are presented below:
Luxury 5-star hotel and resort demand by value segment

Basic Needs A Fairer Deal Socially Aware Traditional Family Life
Conventional Family life
Look at Me
Visible Achievement
Something Better Real Conservatism Young Optimism
Source: Roy Morgan Research
Traditional Family Life and Young Optimists are the next most significant users of 5-star resorts, followed by Look at Me and Conventional Family Life segments. Luxury 5-star resort and hotel users had a slightly higher weighting towards female visitors. 14 to 34 year old single travellers showed a relatively strong preference for luxury 5-star resort and hotel accommodation. This supports broad demographic shifts in the greater population, whereby more people in this age category are opting to remain single. 4-star hotel and resort demand by value segment
Basic Needs A Fairer Deal Socially Aware Traditional Family Life Visible Achievement
Conventional Family life Look at Me Young Optimism Source: Roy Morgan Research Something Better Real Conservatism
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The similarities between users of 4-star accommodation and luxury 5-star accommodation demonstrates a high degree of competition between these forms of hotel and resort accommodation
Traditional Family Life has a stronger propensity to utilise 4-star hotel and resort accommodation, likely reflecting their propensity to seek value for money accommodation. The similarities between users of 4-star accommodation and luxury 5-star accommodation demonstrates a high degree of competition between these forms of hotel and resort accommodation. Rented Serviced Apartment demand by value segment
Basic Needs A Fairer Deal Socially Aware Traditional Family Life
Conventional Family life
Look at Me Visible Achievement Something Better Real Conservatism Young Optimism Source: Roy Morgan Research
Relative to 5-star and 4-star hotel and resort demand, serviced apartment accommodation reflects the highest level of demand from Socially Aware and Visible Achiever segments, accounting for 48% of total serviced apartment demand. As with 4 and 5-star hotel and resort accommodation, Traditional Family Life represents the third most significant source of serviced apartment demand. Our analysis suggests that the characteristics of serviced apartment, 5-star, 4-star and standard hotel and resort users are similar in terms of demographic and psychographic profiling. Shared traits for users of luxury 5-star resort or hotel, 4-star resort or hotel, serviced apartment and standard hotel,motel or resort were: Married, 35 years and older with children or married, 35 and older with no children. Most likely to be aged 35 to 49 or 50 to 64. Equally likely to be male or female. Likely to be ranked in the top 20% of the nation in terms of income, education and profession, termed the AB Quintile.
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Most likely to be in the Socially Aware, Visible Achiever or Traditional Family Life value segments. This indicates that the respective forms of accommodation are likely in strong competition for the same demand base. Activities undertaken In addition to accommodation preferences, the Roy Morgan data also surveys the activity preferences of holiday makers. Our analysis of Roy Morgan profiles indicates the increasing significance of activities for domestic vacation takers. Results show that both the Visible Achievers and Socially Aware segments demonstrate increasing demand for experiential style holidays and seek a range of physical and cultural activities, including: Restaurants and international food and wine; Golf and tennis; Wineries and vineyards; Rest and relaxation; Social and other activities; Special interest activities; and Total outdoor activities. Given the high propensity of these segments to utilise resort accommodation, the ability to either provide or facilitate the above experiences is an important consideration for resorts. Analysis of the profiles of the most important domestic segments supports the opportunity for resorts to: Take advantage of the short-term deterrents to overseas travel, particularly following the SARS outbreak and international political conflicts, to capture the overseas travel leakage. Cater for a range of lifecycle stages, including the needs of families with children and increasingly, the growing single population. Provide pampering or rejuvenation opportunities for short break vacations and simultaneously provide opportunities for outdoor pursuits for longer vacations. Provide high quality, stylish and personalised facilities for the Socially Aware segment.
There are opportunities for resorts to provide pampering or rejuvenation opportunities for short break vacations and simultaneously provide opportunities for outdoor pursuits for longer vacations
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Peak travel periods in Australia are strongly correlated with the occurrence of school and public holidays
Provide value for money accommodation for the Traditional Family Life segment, which is likely to increase in size as the population ages. Cater to guests who are likely to be well educated and as such interested in interpretation experiences, seeking to understand the context of their travel. Facilitate recreation opportunities in wilderness or areas of the natural environment. Integrate food and beverage facilities into their product offering. Seasonality According to data analysed from the 2001 National Visitor Survey, the most popular month for travel by Australians domestically during 2001 was January, with 10.8% of total visitors undertaking travel in this month. The next most popular months for travel were April, October and July. Peak travel periods in Australia are strongly correlated with the occurrence of school and public holidays. Analysis of 2002 school holiday schedules for New South Wales, Victoria and Queensland indicates that at least two states are having holidays at the same time for ten weeks of the school year. All three states are on school holidays at the same time for seven weeks of the school year. The table below summarises the 2002/03 school holiday schedule.
NSW, VIC, QLD School Holiday Schedules 2002/03 NSW Easter holidays Winter holidays Spring holidays Summer holidays 15 April 8 July 30 September 23 December 8 April 21 July 13 October 26 January 1 April 1 July 23 September 23 December VIC 14 April 14 July 6 October 26 January 1 April 24 June 23 September 16 December QLD 7 April 7 July 6 October 26 January
Source: Ernst & Young Research Note: Dates represent the first and last days of the school break.
The seasonality of demand is a key constraint for resort properties, which are heavily reliant on domestic holiday travel. Reducing the overlap in school holiday periods among the States may have the potential to extend the peak holiday period for resorts and reduce seasonality of demand. Top 20 domestic visitor destinations During 2001, capital cities dominated the list of most visited tourism regions. Sydney, Melbourne and Brisbane ranked 1, 2 and 3 respectively for the number of overnight domestic visitors. Among regional destinations, the Gold Coast, the Hunter Region, the South and North Coasts of NSW and the Sunshine Coast were among the most popular. The following table presents a ranking of the top 20 domestic visitor destinations:
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Overnight Visitors: Top 20 Tourism Regions Visited Year Ended December 2000 and 2001 2000 Tourism Region Sydney, NSW Melbourne, VIC Brisbane, QLD Gold Coast, QLD Hunter, NSW South Coast, NSW Perth, WA North Coast, NSW Adelaide, SA Sunshine Coast, QLD Canberra, ACT Explorer Country, NSW Northern Rivers, NSW Western, VIC Big Sky Country, NSW South West, WA Central Coast, NSW Peninsula, VIC Tropical North Queensland, QLD Darling Downs, QLD Total (top 20 destinations) TOTAL Rank 1 2 3 4 5 10 9 6 7 8 11 12 13 14 16 15 18 19 17 20 000 8,293 6,233 4,410 3,341 2,697 2,342 2,415 2,695 2,563 2,467 2,128 1,922 1,800 1,768 1,431 1,528 1,370 1,121 1,430 1,118 52,177 73,771 Percent 11 8 6 5 4 3 3 4 3 3 3 3 2 2 2 2 2 2 2 2 71 100 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2001 000 8,355 6,416 4,514 3,542 2,835 2,657 2,503 2,494 2,286 2,242 2,107 1,919 1,843 1,694 1,565 1,457 1,395 1,347 1,325 1,221 53,717 74,585 Percent 11 9 6 5 4 4 3 3 3 3 3 3 2 2 2 2 2 2 2 2 72 100
Source: BTR, National Visitor Survey 2001 Note:The regions are ranked according to the number of visitors in 2001.
The popularity of urban destinations among domestic travellers creates additional competitive pressures for resorts and resort destinations. The recent investment in tourist and accommodation infrastructure in the capital cities is likely to contribute to their future appeal as leisure destinations. The Keeping the Bush in the Game study recently undertaken by TTF Australia states, in recent years the capital cities have seen substantial increases in both cultural and sporting infrastructure. This infrastructure has made the capital cities a more desirable location and it is common for capital city residents to have an overnight stay in the same city. International tourism Australia experienced double-digit growth in international visitor arrivals during the 1980s, with Japan being the primary new source of visitor arrivals. The growth in international visitor arrivals slowed in the 1990s, particularly in the second half of the decade. The most significant trends in the level and composition of international arrivals to Australia are: The 1997 Asian Crisis resulted in a fall in visitation levels from key Asian source markets of Japan, South Korea and Other Asia. Visitor numbers have however been more than restored to pre-Asian crisis levels. The strong depreciation of the Australian dollar (as well as targeted marketing initiatives) following the Asian crisis resulted in an increase in visitation levels from Europe and the United States.
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A record 4.9 million international visitors came to Australia in 2000, coinciding with the staging of the Olympic Games in Sydney. International visitor levels have been below expectations since 2001, dampened by global economic uncertainty and a disruption to travel patterns following the terrorist attacks in the United States on 11 September 2001, Bali bombings, the 2003 War in Iraq and the SARS outbreak. International visitor arrivals are expected to grow at 4.6% per annum in the next decade (TFC May 2003). The fastest growing source markets are expected to be China (12.6%), South Korea (8%), Other Asia (5.4%) and Other Europe (5.1%). Arrivals from the United Kingdom and North America are expected to display more moderate growth rates of approximately 4% per annum. The following graph presents a summary of historical and forecast international visitor nights by source market to Australia:
International Visitor Nights by Source Market (millions)

Year Ended December 1993 to 2012
30
25
20
Millions
15
10
0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
New Zealand Other Asia
Japan United Kingdom
China
Singapore Other Europe
South Korea North America
Source: Tourism Forecasting Council, December 2002 Note: Other Asia includes all Asian countries except Japan, China, South Korea and Singapore. Other Europe includes all of Europe. Note: 2002 forwards are forecasts.
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The fastest growing inbound markets predicted by the TFC for the next decade are from non-Japan Asia, such as China and South Korea. Tourists from these markets have shown lower dispersal rates to date (ATC). For example, Chinese visitors spent 93% of their nights in Australias capital cities, the Gold Coast and Tropical North Queensland in 1999 and this trend is expected to continue in the short to medium-term. In contrast, the more mature markets of United Kingdom and North America, which have a high participation rate in regional activities and a greater propensity to utilise hotel and resort accommodation, are expected to grow at more moderate levels of approximately 4% per annum for the next decade. With inbound visitor nights from non-Japan Asia forecast to increase from 19.7 million in 2002 to 42.3 million in 2012, the threat to growth in regional dispersion rates and thus regional resort demand could be significant until the market matures. Purpose of visit Data from the International Visitor Survey (IVS) for the year ended September 2002 shows that the main reason for traveling to Australia was for the purpose of a holiday (54%), followed by visiting friends and relatives (20%) and for business (15%). Visitors on holiday spent an average of 20 nights in the country while those travelling with the primary purpose of visiting friends and relatives spent 25 nights in Australia. The dominance of the holiday/leisure traveler is important for the broader accommodation industry, as these visitors generally require commercial accommodation as opposed to staying at the home of a friend or relative. Furthermore, the holiday market has the greatest propensity to stay in resort accommodation during their stay. The TFC predicts that international visitor arrivals for the purpose of business will grow most strongly in the next decade at a compound annual rate of 9.0%. Holiday arrivals are forecast to grow at 7.9% per annum during the period from 2002 to 2012 while inbound arrivals for the purpose of VFR travel are predicted to show growth rates of 5.8% annually. While VFR arrivals are not forecast to grow as strongly as business and holiday arrivals, regional dispersal rates are a lot higher for VFR travellers. This is a potential benefit for regional tourism operators but not necessarily accommodation providers. International visitor accommodation preferences Our research indicates that resort accommodation accounted for only 1.2% of total visitor nights, of which 87% were by holiday visitor nights. The relatively low usage of resort accommodation by international visitors is a negative factor for the resort sector. The following graph illustrates the share of international visitor nights in selected types of accommodation by purpose of visit:
Resort accommodation accounted for only 1.2% of total international visitor nights, of which 87% were holiday visitor nights
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Dispersal rates for different markets may be considered an indicator of demand for regional destinations and resort style accommodation
Share of International Visitor Nights in Selected Types of Accommodation by Purpose or Visit

Year Ended June 2000
100
80
Percent
60
40
20
Holiday
Hotel Motel Resort
VFR
Backpacker/youth hostel Rented house or flat
Business
Caravan, cabin or tent Home of a friend or relative
*VFR = visiting friends and relatives Source: BTR International Visitors in Australia June 2000
Of the total international visitor nights spent in Australia during the year ended June 2000, accommodation in the home of a friend or relative was the most popular (33%), followed by rented house or flat (24%) and hotel (14%) regardless of the purpose of visit. The popularity of alternative forms of accommodation by international visitors points to a competitive trading environment for resorts. Data available on accommodation used by international visitors between 1996 and 1999 shows Japan to be the highest user of resort accommodation in Australia, followed by the United Kingdom, United States, Other Europe and New Zealand. This correlates strongly to arrivals weightings for the same period, with the top five arrivals markets being Japan, New Zealand, the United Kingdom, Other Europe and United States. The expected moderate growth in international holiday nights in the top resort source markets over the long term should translate to growth in resort demand. Despite the recent strong growth rates recorded for numerous Asian inbound markets, their propensity to utilise resort accommodation has been low. The challenge for resort operators will be to tailor and distribute their product to new and emerging markets to capitalise on potential inbound Asian demand from Korean and Chinese visitors. Activities undertaken by international visitors Leisure activity preferences are an important factor in influencing visitors choice of destination and accommodation. The level of interest for sporting, cultural and naturebased activities is strongly correlated to visitor dispersion rates, which refers to the percentage of nights spent outside of the top eight tourist regions (Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra, Gold Coast and Tropical North Queensland). The dispersal rates for different markets may be considered an indicator of demand for regional destinations and resort style accommodation.
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A review of international visitor preferences indicates that the five most popular activities during their visit to Australia were: Go shopping (for pleasure); Go to the beach; Visit friends/relatives; Visit National Parks; and Visit Botanical or other public gardens. While the data indicates strong interest in nature based activities, such as visiting national parks and beaches, these activities can be accommodated in Australias capital cities and do not necessarily translate into regional visitation. The source markets with the highest propensity to engage in nature based, cultural and sporting activities are the United Kingdom, Europe, Japan and New Zealand, with the United States displaying moderate activity levels. This is a positive factor for the resort sector, in that these markets account for a significant proportion of international visitor nights to Australia and (with the exception of Japan) are forecast to grow at a moderate level in the long term. The provision of a range of activities is an important consideration for resorts seeking to attract these markets. A significant proportion of inbound demand from Asian destinations such as Singapore, China and Hong Kong, display low levels of interest in nature based, cultural and sporting activities. These markets are likely to visit mainstream capital city destinations and utilise conventional hotel accommodation. Although, as these markets mature, the level of interest in a wider range of activities and destinations is likely to increase. Sydney, Melbourne and the Gold Coast held the top three places as the most popular Australian destinations for international travellers (1999). The list is dominated by capital cities, however, Tropical North Queensland, Petermann (Ayers Rock), the Sunshine Coast and the Whitsunday Islands are regional areas that were among the most popular. The following table presents a ranking of the top 20 international visitor destinations:
The provision of a range of activities is an important consideration for resorts seeking to attract markets with a high propensity to engage in nature based, cultural and sporting activities
Overnight Visitors: Top 20 Tourism Regions Visited Year Ended December 1998 and 1999 1998 Tourism Region Sydney, NSW Melbourne, VIC Gold Coast, QLD Tropical North Queensland, QLD Rank 1 2 3 4 000 2148.4 983.3 855.9 704.2 Percent 56.2 25.7 22.4 18.4 Rank 1 2 3 4 1999 000 2275.6 997.7 875.8 755.8 Percent 55.5 24.4 21.4 18.4
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Overnight Visitors: Top 20 Tourism Regions Visited Year Ended December 1998 and 1999 1998 Tourism Region Brisbane, QLD Perth, WA Adelaide, SA Petermann, NT (Ayers Rock) Alice Springs, NT Sunshine Coast, QLD Whitsunday Islands, QLD Northern Rivers, NSW Canberra, ACT Darwin, NT Hervey Bay/Maryborough, QLD Northern, QLD Fitzroy, QLD Western, VIC Kakadu, NT Hunter, NSW Total (top 20 destinations) Rank 5 6 7 8 10 11 12 13 9 14 15 16 17 18 20 23 000 631.8 487.2 279.8 248.6 204.8 180.2 176.3 167.2 207.8 158.2 158.2 128.5 110.2 101.4 83.7 77.1 3825.4 Percent 16.5 12.7 7.3 6.5 5.4 4.7 4.6 4.4 5.4 4.1 4.1 3.4 2.9 2.6 2.2 2.0 100.0 Rank 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1999 000 704.4 519.2 296.8 254.8 211.1 199.6 197.7 182.6 180.7 179.2 177.9 146.3 121.2 107.7 98.9 88.4 4096.7 Percent 17.2 12.7 7.2 6.2 5.2 4.9 4.8 4.5 4.4 4.4 4.3 3.6 3.0 2.6 2.4 2.2 100.0
Source: BTR International Visitors in Australia 1999 Note:The regions are ranked according to the number of visitors in 1999.
Similar to domestic visitors, the popularity of capital city destinations among international visitors creates additional pressures for the resort industry, typically located in regional areas. However, the regional destinations such as Petermann with iconic attractions such as Ayers Rock and Kakadu National Park do feature on the list. For NSW, the lack of international drawcards, outside of Sydney, is evident with only two regional areas featuring amongst the most popular destinations. Queensland dominated the list and this is reflective of the demand for tourist icons such as beaches, the Great Barrier Reef, Wet Tropics World Heritage Area and Fraser Island World Heritage Area. Demand success factors Based on our research, we have identified several success factors that have the potential to improve resort performance from a demand perspective. These factors can be summarised as follows: Location in a destination which has convenient access by air and road; Proximity to unique tourism demand generators such as the Great Barrier Reef, Uluru, Kakadu National Park; Opportunities for genuine interaction with local culture and environment; Location in a destination or market with high barriers to entry, including environmental restrictions, limiting further development; Differentiated product with unique features;
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Appeal to multiple sources of demand, which may be created through integrated leisure, conference, business and recreational facilities; Potential to create a resort within a resort in the form of a personalised product offering with appeal to different target markets i.e. eco-tourists or special interest tourists; Diverse range of facilities and activities such as spa facilities or 4WD tours, which can be a lucrative source of revenue; and Utilisation of market intelligence to shape new product evolution. Resorts of the future Based on our analysis of existing demand constraints, success factors and anticipated changes in tourism patterns, we have identified a range important considerations for resorts in Australia. These factors are described below. Fun and exciting or secluded retreat Given the size of the Australian domestic holiday market, there will be a need for midmarket resorts with no-frills or self catering facilities servicing the family market. These mid-market resorts will continue to face strong competition from the new generation of serviced apartment resorts. Older, luxury resorts will need to re-vamp their conservative image to a picture of active, fun and exciting; a place where people have fun and do things, particularly if seeking to appeal to the family market. There will be a growing need for retreat style resorts given the significance of existing demand from the 35 to 49 year old segment without children and the 14 to 34 year old singles segments. Existing resorts with extensive grounds are likely to develop specialised product extensions within the existing resort, creating the opportunity to attract new market segments while capitalising on existing infrastructure. Collecting memorable experiences The demand for experiential tourism is likely to grow from domestic and international markets and resorts of the future are likely to provide a range of activities, which create learning and relaxation opportunities for guests seeking to experience something new or different.
Older, luxury resorts will need to re-vamp their conservative image to a picture of active, fun and exciting; a place where people have fun and do things
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Resorts will increasingly focus on the attributes of the entire destination and not just the resort product itself, creating the need for integrated destination planning
Hip, cool, pristine and safe The positioning of resorts is likely to reflect the following attributes of Australia, which will continue to grow in prominence: Profile of Australia as a modern, hip, and cool place to be, enhanced by the recent popularity of Australian movies and actors. Purity, diversity and unique qualities of the Australian environment. Perceived security of travel to and within Australia. The bed is not that important Resorts will increasingly focus on the attributes of the entire destination and not just the resort product itself, creating the need for integrated destination planning. The regional or destination profile will play an increasing role in the growing profile for particular resorts. The importance of the destination may result in a scaling back in the level of facilities provided directly by the resort and an increased focus on facilities within the destination or existing features in the natural environment as a means of delivering a range of activities demanded by consumers. Service and value for money All resort types will need to focus on providing services and value for money within the resort or in the destination to increasingly sophisticated domestic and international consumers. Location, location, location The locations with the most potential for future resort development in Australia are likely to be: Accessible coastal and mainland regions, reflecting the holiday preferences and travel patterns of the Australian market. In proximity to unique natural or cultural heritage attractions, which are a must see, particularly for international travellers. In destinations with established visitation patterns, good transport access and potential to collaborate with other tourism stakeholders or providers. On the fringe of wilderness areas, providing access to natural recreational opportunities in a protected environment in a controlled manner.
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Demand and the industry response Based on our research on emerging demand challenges and opportunities for Australian resorts, we have identified the following opportunities for Australia's resort and broader tourism industry. These include: Improving the sophistication of yield management within resorts to maximise revenue in peak demand and low season periods, for example through seasonal pricing; Through State Tourism Organisations, identifying a way to reduce seasonality of demand by extending domestic travel periods. This may involve lobbying for the adjusting of school holiday periods; Resort owners and operators working more closely with destinations in their presentation of the "total destination" to the consumer; Developing appropriate forms of accommodation that reflect the changing demographic and lifestyle profiles of international and domestic travellers; Support and facilitate the development of stronger airline networks to resort destinations; - Review the level of aviation taxes and their impact on the competitiveness of domestic and international airfares; - Monitor and forecast the impact of airline capacity and pricing on resort demand and performance; and - Explore the possibility of providing incentives to airlines servicing resort destinations; Undertaking cooperative marketing with airlines, particularly in off-peak seasons. Demand and the Government response Based on our research on emerging demand challenges and opportunities for Australian resorts, we have identified the following opportunities for Government: In the 10-year Tourism Plan, highlight the importance of regional marketing as a driving element of resort positioning; Encourage State and Territory tourism organisations to feature more "resort" product in their marketing initiatives, both domestically and internationally; Continue to support the "See Australia" domestic marketing campaign, given the highly competitive environment for resorts in Australia;
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Encourage collaborative planning and marketing opportunities between resorts and other sectors of the tourism industry on a destination basis. Create "resorts" as a niche market within the Australian Tourist Commission (ATC) Market Segment program. - Encourage ATC research programs to identify demand trends and opportunities for resort markets and distribute such information to the resort industry. - Enhance promotional effectiveness, through continued funding of the ATC in those countries that provide Australia with high yielding, longer stay international visitors that demonstrate a strong propensity for activities in regional destinations. Encourage co-operation between resorts and National Parks in the provision of tourist services and facilities in close proximity to National Parks and investigate the opportunity to create "edge" or "gateway" resorts adjoining National Parks given the growing interest in activities and nature-based tourism pursuits. Support education program development and training subsidies for resort employees for advanced skills as well as basic skills. Especially given the increasing interest in nature-based and cultural experiences, which require highly skilled and knowledgeable staff. Better inform resort industry stakeholders on the framework surrounding eligibility for the Export Market Development Grants (EMDG) scheme. This is the Commonwealth Government's principal financial assistance program for businesses seeking to develop export markets, assisting small and medium sized resorts in developing export markets by partially reimbursing their expenditure on export promotion.
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Resort operations performance

The profitability of resorts Resorts in Australia have earned a reputation for being inherently unprofitable. In this section of the study, we examine the fundamentals of how resorts operate and analyse the operating and profitability results of resorts in Australia compared to standard central city hotels. We discuss the operational challenges faced by various styles of resorts operating in a uniquely Australian environment and identify a range of key success factors. We conclude this section with a discussion of the role of Government in resort operations and provide a set of recommendations aimed at enhancing the operational viability of resorts in Australia. The fundamentals of how resorts operate Even standard hotels with a relatively simple product offering are service intensive, multifaceted operations comprising a wide range of facilities and services which operate 24 hours a day, 365 days a year. In addition to providing accommodation, resorts are often in the business of creating a unique and memorable experience for a range of leisure travellers with diverse needs, ranging from families to couples. The staging of an experience requires careful planning, additional organisation and extra resources, which add another layer of complexity. The operating structure of a resort depends on the type and style of the resort and the guests to which it is catering. Factors which drive the operation of a resort and its profitability typically, include: The type of resort, with Do It Yourself resorts such as caravan parks typically having less facilities and services and a simpler operating structure than a conventional resort with a wide range of accommodation and recreational facilities.
Resorts in Australia have earned a reputation for being inherently unprofitable
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Given the complexity of their operations, resorts are perceived to under-perform relative to city hotels
The style and positioning of the resort, with No Frills resorts having lower staff to guest ratios compared to experience style resorts which require more and higher skilled staff to deliver customised services and experiences. The degree of specialisation is also an important factor impacting on the operations of a resort. The more customised the experience, the higher the service requirement and the narrower the target market for the product. The location of the resort, with resorts located in remote areas having to deal with additional challenges relating to transportation, labour supply, infrastructure and environmental issues. Key resort profitability issues Given the complexity of their operations, resorts are perceived to under-perform relative to city hotels. A comparison of key performance indicators of market mix, rate, occupancy and room yield achieved by resorts and hotels indicates that: Resorts rely heavily on leisure related demand, which is generally more price sensitive than corporate travellers, which make up the majority of city hotel demand; Resorts have historically achieved much lower occupancies than city based hotels; Resorts have historically achieved average rates in line with or slightly above those recorded by city hotels; Resort room yields have historically been below those achieved by city hotels; The observations presented above are discussed in detail in the remainder of this section. Resort operating performance analysis Source of business The market mix of a resort is an important factor, which dictates the operating strategy of a resort and impacts on profitability. The table on the following page presents a comparison between the sources of business for resorts and hotels.
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Market Mix - Resorts and Hotels 2001 Market Segment Business Traveler Leisure FIT Tour Groups Meeting Participants Government Airline Crew Other Total Resort Market Mix % 5.9 54.3 15.7 17.9 2.0 0.3 3.9 100.0 Hotel Market Mix % 31.8 32.7 14.2 6.7 4.6 4.7 5.3 100.0
Source: Horwarth Hotel Industry Survey of Operations 2002 Note: FIT = Free Independent Travellers
Strong price sensitivity of domestic leisure demand, limits the ability of resorts to achieve rate growth
The above table indicates the greater dominance of the individual leisure traveller for the resort market and less reliance on business demand, relative to hotels. Meeting participants are also a significant source of demand for resorts as most businesses and organisations look to hold retreat style conferences away from the usual place of business. The business composition outlined in the table above has the following characteristics which impact on resort operations and profitability: High seasonality of domestic leisure demand, strongly favouring the summer and school holiday periods, which diminishes the operational efficiency of a resort in low demand periods; and Strong price sensitivity of domestic leisure demand, limiting the ability of resorts to achieve rate growth. Increasing seasonality of conference demand, with a growing preference of businesses to hold meetings during the weekend rather than mid-week is resulting in displacement of weekend demand and creating operating inefficiencies during the weekdays. Occupancy and room rate performance Occupancy, average rate and room yields (revenue per available room) are the key indicators used to measure hotel performance. We have undertaken a comparative analysis of hotel and resort performance benchmarks based on Andersen Hotel Industry Benchmark Survey results for 2001. The total sample comprised hotels, serviced apartments and hotels representing 4 and 5star branded quality supply in Australia. The resort sample included 49 properties, accounting for 17% of total room nights in the sample. A detailed list of the resort properties included in the sample is attached at Appendix 4.
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The significant underperformance of resorts relative to hotels in terms of occupancy which is offset by a marginal premium in room rate is of particular concern
Australian Resort Sample vs. Hotel Sample Year Ended December 2001 Accommodation Type Average Daily % Room Occupancy 62.2 68.9 67.7 Average Achieved Room Rate $ 142.97 139.65 140.17 Average Daily Rooms Yield $ 88.86 96.17 94.92
Resorts Hotels & Serviced Apts. Total Resorts, Hotels & Serviced Apts.
Source: Andersen Hotel Industry Benchmark Survey 2002
The data in the table above indicates that: Resorts achieved weaker occupancies of approximately 62.2% in 2001, significantly below the 68.9% achieved by the sample of hotels and serviced apartments; Resorts achieved a slight room rate premium of approximately $3.32 compared to the sample of hotels and serviced apartments; Resorts achieved room yields of $88.86, approximately $7.30 below room yields achieved by the sample of hotels and serviced apartments. The significant underperformance of resorts relative to hotels in terms of occupancy which is offset by a marginal premium in room rate is of particular concern given the higher capital investment and higher operating costs associated with resort development and operations. Seasonality of demand In addition to analysing the annual performance of resorts, we have also reviewed occupancy levels on a monthly basis to assess the seasonality of demand. As an example, we have analysed a sample of 15, 4 and 5-star resorts located in New South Wales and is based on the Andersen Hotel Industry Benchmark Survey results for 2000 and 2001. A detailed list of resorts included in the NSW resort sample is attached in Appendix 4. The results of our analysis are presented in the following graph:
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NSW Resort Sample Average Monthly Occupancy

Year Ended December 2000 and 2001
100 90 80 70
Percent
60 50 40 30 20 10 0 Jan
76.7% 80.0%
Feb
68.8% 69.6%
Mar
67.7% 66.2%
Apr
62.0% 68.9%
May
54.2% 56.1%
Jun
58.2% 57.2%
Jul
66.5% 67.0%
Aug
58.3% 56.0%
Sep
61.3% 64.1%
Oct
68.3% 69.4%
Nov
64.6% 66.0%
Dec
61.4% 67.4%
2001 OCC 2001 OCC
Source: Andersen Hotel Industry Benchmark Survey 2000 and 2001 Note: OCC=Occupancy
The above graph indicates the following trends: The resort sample achieved an occupancy level in excess of 70% in one out of 12 months only (January); and February, April and October are relatively strong months, with the sample of resorts achieving occupancies ranging from 68% to 69%. Despite rate discounting and promotional campaigns, the sample of resorts achieved occupancy levels ranging from 54% to 67% during the remaining months. This is indicative of the difficulty of stimulating demand in off-peak periods, resulting in profits earned in peak season being eaten up during periods of low demand. Profitability analysis Following our analysis of resort operating performance, we have also reviewed the revenue and expense results of resorts compared to hotels using the Horwath Survey of Hotel Operations. An explanation of the operating departments and undistributed expenses is included in Appendix 5. Resorts have historically achieved lower income before fixed costs (IBFC) levels compared to both hotels and serviced apartments. The following table provides a summary of the IBFC performance of resorts:
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The greater spend on food and beverage can be primarily attributed to the captive nature of a resort.
Income before fixed costs - Serviced Apartments, Hotels and Resorts Accommodation type Serviced Apartments Hotels Resorts 1997 (%) 38.1 28.8 19.3 1998 (%) 41.8 25.1 18.3 1999 (%) 39.6 27.3 16.3 2000 (%) NA 28.0 19.2 2001 (%) NA 27.3 19.7
Source: Horwath Hotel Industry Survey of Operations 2002
As the table above indicates, resorts have consistently performed at the bottom of the scale in terms of profitability. We review the revenue and expense performance of resorts and discuss the profitability constraints faced by resort properties in more detail in the remainder of this section. Revenue analysis Typical sources of revenue for resorts and hotels include room sales, food and beverage, telecommunications (telephone calls made by guests) and revenue from other departments, which may include tour activities, sports activities and spa/health club. The revenue results for resorts and hotels are summarised in the table below:
Profit and Loss Ratio Analysis - Revenue Analysis 2001 Resort Market Department Revenues Rooms Food and Beverage Telecommunications Other Operated Departments Rentals & Other Income (Net) Total Source:Horwath Hotel Industry Survey of Operations 2002 % 52 - 60 35 - 39 1 3-6 1-2 100 Hotel Market % 57 - 65 30 - 38 1-3 2-3 1-2 100
Rooms revenue Rooms revenue accounts for a lesser proportion of total revenue for resort properties (52% to 60%) compared to hotels (57% to 65%), indicating the greater revenue generating potential of resort departments such as food and beverage outlets and other operated departments. Food and beverage revenue Food and beverage revenue accounted for 35% to 39% of total revenue for resorts, compared to 30% to 38% for hotels. The greater spend on food and beverage can be primarily attributed to the captive nature of a resort.
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Telecommunications revenue Revenue from telecommunications accounted for 1% of total revenue for resorts, compared to 1% to 3% for hotels. This reflects the lower usage of telephone and data services by holiday resort guests relative to corporate hotel guests. Other operated departments revenue Resorts generated a much higher proportion of revenue from other operated departments, representing 3% to 6% of total revenue compared to 1% to 3% for hotels. This is a result of a captive guest market, particularly in remotely located resorts, as well as a growing propensity of tourists to engage in recreational activities. Rental and other income Rental and other income accounted for approximately 1% of total revenue for resorts, which is in line with the result achieved by hotels. Expense analysis The expense performance of resorts and hotels for each operating department is summarised in the table below:
Profit and Loss Ratio Analysis - Expense Analysis 2001 Resort Market Department Expenses Rooms Food and Beverage Telecommunications Other Operated Departments Total Gross Operating Income % 29 - 34 78 - 83 89 - 96 74 - 78 47 - 55 44 - 53 Hotel Market % 33 - 36 82 - 85 60 - 81 60 - 76 51 - 53 47 - 49
Source: Horwath Hotel Industry Survey of Operations 2002 Note: Departmental expense ratios are based on their respective departmental revenues.
Rooms expense Rooms expense in resorts accounted for approximately 29% to 34% of room revenue, slightly below the levels recorded by hotels. This result is surprising, given the higher costs of servicing rooms, particularly in low rise, villa style properties. Food and beverage expense Resorts achieved a food and beverage expense ratio of 78% to 83%, slightly below the expense levels recorded by hotels. This result is indicative of the greater profitability of resort food and beverage outlets stemming from a captive market. However, resort operations incur higher food costs associated with transport expenses.
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Our analysis indicates that resorts incur significantly higher payroll costs than city hotels in the course of operations
Telecommunications expense Resorts show lower telecommunications costs, which is a result of the lower volume of calls by leisure guests compared to guests travelling on corporate or government related business. Other operated departments Other operated department expenses are slightly higher for the resort sector, again representative of the greater services and facilities usually provided. Labour costs Labour costs are typically one of the highest costs of operating a resort. Our analysis indicates that resorts incur significantly higher payroll costs than city hotels in the course of operations. The following table presents a summary of historical payroll costs for hotels and resorts:
Payroll and Related Expenses - Hotels and Resorts Accommodation type Hotels Resorts 1997 (%) 34.3 38.3 1998 (%) NA NA 1999 (%) 35.6 38.6 2000 (%) 35.5 37.5 2001 (%) 36.8 39.4
Source: Horwath Hotel Industry Survey of Operations 2002 Note: Payroll and related expense ratios are based on total revenue.
Gross operating income Resorts achieved a gross operating income of approximately 44% to 53%, which is in line with the range achieved by hotels. Undistributed operating expenses The undistributed operating expenses for resorts and hotels are summarised in the table below:
Profit and Loss Ratio Analysis - Undistributed Operating Expenses Analysis 2001 Resort Market Undistributed Operating Expenses Administrative & General Marketing Utility Costs Property Operation & Maintenance Total Income Before Management Fees & Fixed Costs Management Fees (Base + Incentive) Income Before Fixed Costs Furniture, Fittings & Equipment Reserve* Income After FFE & Before Fixed Costs Income After FFE & Before Fixed Costs % 7 - 11 5-6 3 5-8 23 - 24 20 - 29 2 18 - 27 6 12 - 21 12 - 21 Hotel Market % 8 4-6 2-3 4 18 - 19 29 2 27 - 28 4 23 - 24 23 - 24
Source: Horwath Hotel Industry Survey of Operations 2002 Note: Undistributed operating expense ratios are based on total revenue. Note: * Ernst & Young Estimate.
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Administrative & General, Marketing and Property Operation & Maintenance Expenses Total Undistributed Operating Expenses (UOE) accounted for 23% to 24% of revenue in resorts, compared to 18% to 19% achieved by hotels. Factors which contribute to higher UOE include: Higher administrative and general expenses (7% to11% compared to 8%) associated with: - recruiting and retaining management staff in resort locations; and - administrative costs such as operating licences and environmental permits. Higher marketing expenses (5% to 6% compared to 4% to 6%) due to extensive marketing campaigns that are required to attract leisure business in both domestic and international markets; and Increased property operations and maintenance (POM) costs (5% to 8% compared to 4%) associated with operating and maintaining resort buildings, recreational facilities, gardens and equipment. Furniture, fittings and equipment (FF&E) costs
The exposure of resort buildings and plant equipment to harsh outback or island environments results in higher capital expenditure levels to maintain the asset, requiring resorts to maintain higher FF&E reserves
The exposure of resort buildings and plant equipment to harsh outback or island environments results in higher capital expenditure levels to maintain the asset, requiring resorts to maintain higher FF&E reserves of approximately 6% of total revenue compared to 4% for hotels. Income after FF&E and before Fixed Costs The higher FF&E requirement for resort properties increases the performance gap between resorts and hotels. Resorts achieved an Income after FF&E and before fixed costs of 12% to 21% compared to 23% to 24% achieved by hotels. Earning before Interest, Depreciation, Taxes and Amortisation (EBITDA) The following table provides a summary of fixed expenses for resorts and hotels:
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Resorts are only marginally profitable at the operating level
EBITDA - Resorts and Hotels
Resort Market % Income After FF&E & Before Fixed Costs Fixed Expenses Property Taxes Insurance Other (i.e. Equipment or Ground Rent) Total EBITDA Source: Ernst & Young Research Note: Fixed expense ratios are based on total revenue. 0.3 - 1.0 0.2 - 0.7 0.0 - 0.4 1-2 10 - 19 12 - 21
Hotel Market % 23 - 24 0.3 - 1.0 0.2 - 0.7 0.0 - 0.4 1-2 21 - 22
Property taxes and insurance Fixed costs account for approximately 1 to 2% of revenue for both resorts and hotels. EBITDA The table above indicates that resorts achieved estimated earnings before interest, taxes, depreciation and amortisation (EBITDA) of 10% to 19% in 2001, compared to a level of 21% to 22% recorded by hotels. While the result is positive, the degree of profitability achieved by resorts is marginal in that: Wide range in the result reflects the greater variability and risk associated with resort operations. According to the 2000/01 ABS Accommodation Industry Survey, hotels recorded interest, depreciation and amortisation expenses of approximately 12% of total revenue. Accordingly, an EBITDA of 10% to 19% is at the lower end of the scale of profitability benchmarks, and points to a narrow margin to cover interest and depreciation costs. Barriers to profitability Our analysis indicates that resorts are only marginally profitable at the operating level. The reduced level of profitability can be attributed to the following range of revenue constraints and expense factors which act as barriers to profitability. Revenue constraints Despite a diversified source of income, the resort demand fundamentals in Australia constrain the ability of resorts to maximise their revenue generating potential. These fundamentals are discussed in detail in the previous section and include:
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Limited demand base, with resorts relying in most part on one to two target markets; High seasonality of the domestic market; High price sensitivity of the domestic leisure market, limiting the ability of resorts to drive room rates; The cost of airfares and transport, which must be factored into the resort holiday for both domestic and international travellers; Competition from alternate destinations and products, including serviced apartment style resorts and resorts in neighbouring Asian destinations; Long distance to and within Australia, resulting in lower dispersal rates to resort destinations. Operating cost factors The location and complexity of resort operations results in greater operating costs. The most significant costs of doing business for a resort in Australia are as follows: Labour costs Labour costs are by far the highest expense incurred by a resort. The ability to control labour costs in a resort environment is severely limited as a result of: Greater number of staff required to provide requisite services and stage specialised experiences for resort guests; Difficulty of retaining staff, particularly for resorts located in remote areas, resulting in high staff and management turnover; Higher cost of recruitment and training associated with high turnover; Additional cost of staff housing for resorts located in remote areas; Difficulty of adjusting staffing levels to meet fluctuations in demand; and Relatively high cost and inflexibility of wage structures in Australia.
Labour costs are by far the highest expense incurred by a resort
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The location of resorts in environmentally and culturally sensitive areas result in a range of additional administrative and compliance costs
Labour costs include FBT paid on staff accommodation except where the resort meets the definition of remoteness (This means it is 100km or more from a town of 130,000 people and 40km or more from a town of 30,000 people, or employees are able to submit a declaration stating that they are paying rent or own a home in their usual place of residence). This tax treatment is in line with other sectors such as mining and farming which are also conducted in remote areas. Resort employees are as transient as guests and managers frequently go troppo. Property operations and maintenance costs The costs of operating and maintaining resort facilities is a significant expense, stemming from: Inability of resorts to share in the infrastructure of metropolitan areas, such as sewerage and power systems; and Expansive nature of resort grounds, facilities and high cost of operating equipment, which must be maintained in frequently harsh environments. A broken sewerage pipe can wipe out a years profits. Utility costs Utility costs form a major expenditure for resorts as a result of: Higher water and energy usage by guests; Higher energy costs (heating, air conditioning) in extreme environments; Higher energy and water costs associated with operating recreational facilities; and Higher energy costs associated with extensive built facilities and landscaped grounds. Administration costs The location of resorts in environmentally and culturally sensitive areas result in a range of additional administrative and compliance costs, including: Planning and environmental permits; Licences to operate facilities, activities, plant and equipment; and Costs associated with undertaking community and indigenous consultation.
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Marketing costs Marketing expenditure is a significant cost of doing business for resorts as a result of: Extensive marketing campaigns that are required to attract leisure business in both domestic and international markets; Heavy reliance on wholesale agents to package and distribute the product, incurring substantial commission rates of between 25% and 30%; and Greater importance of marketing collateral. The impact of location on resort profitability In addition to the general barriers to profitability identified above, we have analysed the performance issues of a resort operation in the context of its location. Our analysis is focused on the four types of resorts under consideration in this study: Secluded mainland resorts; Secluded island resorts; Accessible coastal resorts; and Accessible mainland resorts. In considering the operational issues that are unique to the above set of resorts, we have identified a range of barriers to profitability arising from locational factors. The most significant factors are: Secluded resorts face additional costs of developing infrastructure in remote areas and need to manage the potential negative impact of tourism activity in environmentally and culturally sensitive areas; Yield management is critical for secluded resorts given the distance to target markets; Secluded resorts face additional risk associated with heavy reliance on transport and natural attractions, which are integral to the guest experience; Accessible resorts have high costs of developing man made attractions in the absence of natural features; Accessible resorts have weaker barriers to entry and face strong competition from residential lifestyle developments offering a tourism component.
Accessible resorts have weaker barriers to entry and face strong competition from residential lifestyle developments offering a tourism component
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The locational challenges as well as opportunities for each location type are detailed in the following table:
Resort Location
Challenges
Opportunities
Secluded mainland resort Ayers Rock Resort Perisher Blue Resort Thredbo Village Mt Buller Mt Hotham Falls Creek
- Heavy reliance on infrastructure, which is costly to develop and operate. - Access by air and road is critical. - Reliance on specific attractions to deliver desired guest experience and the need to manage the associated risk (for example potential impact of global warming on snow conditions). - Need to manage the potential impact of tourist activity on an environmentally sensitive location. - Need to work with and manage the tourism impact on traditional societies. - Yield management is critical given the distance to target markets and seasonality of demand.
- Increased revenue potential from captive guests - Natural features offer strong point of differentiation. - Strong barriers to entry given higher set up and operating costs.
Secluded island resort Island retreat resorts: Lizard Island Heron Island Bedarra IslandIntegrated island resorts: Hayman Island Fraser Island Dunk Island Brampton Island Kingfisher Bay Resort
In addition to above - Access by boat or airplane only - High cost of development in sensitive environment.Limited size of market due to specialization for retreat style resorts - High cost of providing personalised service and activities such as fishing expeditions or spa treatments, requiring careful organisation and knowledgeable staff. - Additional cost of providing and managing staff accommodation.
- Natural and resort design features provide a point of difference. - Potential to charge a premium for retreat style experience. - High barriers to entry due to environmental restrictions and cost of development. - Potential to build operating efficiencies of scale in integrated resorts. - Potential to reduce risk by through provision of a broader range of facilities appealing to several target market in integrated resort such as dormitory style accommodation to 5-star. - Opportunity to diversify investment through timeshare or strata title structures.
Accessible coastal resort Couran Cove Resort Hyatt Regency Coolum
- Compliance with strict coastal development and management policies - Competition from serviced apartment and residential style developments. - Potential lack of differentiation due to lack of unique natural features.
- Proximity to leisure and conference sources of demand, reducing seasonality - Good access to labour supply. - Potential to reduce investment risk by timeshare or strata title structures.
Accessible inland Hyatt Sanctuary Cove Cypress Lakes Resort Sebel Heritage Yarra Valley
- Potential lack of natural attractions - Land-locked environment.-Need to create and operate capital-intensive attractions such as golf courses or spas. - Potential lack of differentiation.
- Same as above.
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Implications of resort style on profitability Resorts have had to adapt to a growing interest of travellers in special interest tourism. While this demand has created opportunities for new and existing resort operators, it has also generated a range of challenges. Our analysis is focused on the different styles of resorts under consideration in this study, including: Golf and wine resorts; Eco-tourism resorts; Alpine resorts; and Safari resorts. In considering the operational issues that are unique to the above set of resorts, we have identified a range of barriers to profitability relating to the style of the resort. The most significant factors are: Need for strong collaboration with protected area agencies and traditional societies; High cost of development in environmentally sensitive areas; Need for highly skilled and knowledgeable staff to deliver nature-based or special interest activities; Exposure to risk associated with changes in natural environment which is integral to the guest experience; and High cost of infrastructure, especially for sport based resorts such as ski and golf resorts.
Resorts have had to adapt to a growing interest of travellers in special interest tourism
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The challenges as well as opportunities for each resort style are detailed in the following table:
Resort Style
Challenges
Opportunities
Eco-resorts O'Reilly's Rainforest Retreat Silky Oaks Heron Island Kingfisher Bay Resort
- Requires careful coordination and collaboration with traditional societies or protected area agencies. - High cost of development in environmentally sensitive areas. - Requires skilled and knowledgeable staff to deliver nature based or educational activities.-Need to manage potential negative impact of guest activity in environmentally sensitive areas - Need to manage potential negative impact on traditional societies. - In addition to above: - Requires specially trained and experienced guides - Need to provide specialised equipment for tours and activities. - Need to obtain licenses and permits. - High cost of providing and managing staff accommodation. - High cost of infrastructure. - Yield management ("keeping the beds hot") is critical given the high seasonality of demand. - Exposure to risk of global warming and the potential negative impact on snow conditions. - Mature market in Australia with limited growth potential. - Strong competition from other leisure/sport based activities. - High cost of developingman-made attractions. - Special interest activities require skilled staff. - High cost of operating golf courses.
Increased revenue potential from captive guests Does not require large scale or expensive facilities and infrastructure. Ability to charge a premium for tours and activities. Strong barriers to entry due to increasing environmental restrictions. Growing demand for nature based travel.
Safari resorts Longitude 131 (Ayers Rock Resort)
- Same as above.
Alpine resorts Thredbo Village Mt Hotham Mt Buller Falls Creek
- Advances in snow making technology reduce the risk of poor snow conditions. - High barriers to entry as a result of high set up costs and stringent environmental protection regulations. - Opportunities to create operating efficiencies of scale through vertical integration of associated resort facilities and services.
Golf and wine resorts Cypress Lakes Resort Sebel Heritage Yarra Valley
- Good access to demand sources and labour pool. - Need to provide premium quality accommodation and food and beverage facilities. - Opportunity to combine residential and resort accommodation.
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Key success factors and opportunities Based on our analysis, we have identified several operational success factors, which have the potential to improve resort profitability. These factors can be summarised as follows: Strong relationships with environmental and cultural stakeholders such as Aboriginal communities or national parks authorities; Strategic industry alliances with airline partners, hire car companies and tour operators; Drect linkages to Global Distribution Systems, which cost effectively distribute resort inventory nationally and globally; Ability to recruit, train and retain staff at both management and staff levels; Ability to implement flexible staffing arrangements; and Effective yield management to maximise revenue during peak and low seasons. Role of industry in resort operations Given the demand and operating cost constrains identified in our research, it is evident that resorts in Australia operate in a tough environment. The low level of resort profitability seen to date has resulted in limited interest and investment in the sector, leading to deterioration of resort stock and infrastructure. Increasing the level of profitability of resorts in Australia is not only critical to the sector's future success but also the competitive position of Australia as a quality tourism destination. Based on our research of barriers to resort profitability, we have identified the following opportunities for resort owners and operators and other tourism stakeholders to improve the performance of resorts in Australia: Greater understanding and use of yield management techniques to maximise profitability during high and low periods of demand; Greater collaboration with local communities to develop effective human resource recruitment and retention initiatives to reduce labour costs; Increased collaboration with regional tourism stakeholders and operators, taking an "all for one" approach; and Greater focus on providing non-financial incentives to employees, such as improved housing accommodation or opportunities for education, particularly in remote resorts.
The low level of resort profitability seen to date has resulted in limited interest and investment in the sector, leading to deterioration of resort stock and infrastructure
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Role of government in resort operations Based on our analysis, we have identified the following opportunities for Government to increase the operational viability of resorts in Australia: Reduction of labour costs by: Relaxing the 3-month work permit restrictions on working holiday maker visa holders willing to work in remote resorts; Expanding the working holiday program to other countries; Reducing the level of payroll taxes following the introduction of the GST; With respect to Fringe Benefits Tax on staff accommodation, maintain parity in the treatment of the tourism industry with other industry sectors; Continuing to provide staff accommodation incentives and allowances. Continuing to support regional training schemes to improve the skill-base of resort employees; and Increase remote area tax incentives for staff. Reduction of uncertainty of cashflow from operations Provide access to income equalisation taxation adjustments (similar to those used for farmers who have large income variations from year to year) given the sensitivity of resort income to natural, economic and political shocks. Reduction of property operations and maintenance costs by: Reducing the number of licenses and registrations required to operate plant and equipment; Extending the diesel fuel rebate for remote resorts; Providing incentives (such as tax concessions, rebates or higher depreciation rates) for use of environmentally friendly waste, water and energy management technology; and Extending depreciation allowances to include "black hole expenses" such as resort landscaping, site cleaning and golf course upkeep which form an integral part of resort facilities and are subject to obsolescence without significant upkeep.
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Reduction of resort administration costs by: Reducing the number of licenses required to operate resort facilities; and Extending the duration of licenses to reduce administrative costs and increase the certainty of operational continuity.
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The resort development process is perceived to be unnecessarily complex, costly and fraught with uncertainty
Resort development and investment

The marginal profitability of resorts in Australia identified in the previous section of this study has been a major impediment to new resort development. Furthermore, the resort development process is perceived to be unnecessarily complex, costly and fraught with uncertainty. The lack of profitability and development hurdles has resulted in historically poor investment performance of resorts in Australia and a lack of investor confidence in the resort sector. In this section of the report, we review investor attitudes towards hotel/resort investment and analyse historical hotel/resort returns in Australia. We then discuss the main development and investment issues identified in the course of our research and review the key success factors for resort development. We conclude with a review of the role of Government in facilitating future resort development. Key impediments to resort development A 1998 study conducted by Arthur Andersen, for TTF Australia and Planning Australia, titled Developing Viable Tourist Accommodation in Regional Areas, found that tourist accommodation projects in regional Australia were more difficult to develop profitably and harder to sustain in profitability than accommodation projects in capital cities. Our research indicates that little has changed four years later, with resort developers and investors identifying a range of development issues, which impede the viability of resort development. The main impediments to resort development have been identified as: Marginal and volatile operational profitability, requiring investors to take a longterm investment view; Limited availability of excellent development sites which are accessible and have strong differentiating features;
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Prohibitive cost of infrastructure development for remote, nature-based sites; and Greater risk of additions to supply given the smaller size of resort markets and the longer time required to absorb new supply. The issues presented above are discussed in detail in the remainder of this section.
Hotel and resort investment profile Public and Private Hotel Investment, produced by Jones Lang LaSalle Hotels (March 2002) has identified that private investors on a global basis dominate investment in the hotel sector. The level of public investment is low for the US, Europe and Australasian hotel markets, with publicly traded companies accounting for approximately 20% of total investment: USA Europe Australasia 18.9% 21.5% 19.4%
The public investor profile in hotels in Australasia is as follows: Listed hotel owner/operators Listed investment companies Institutional investors 6.8% 11.1% 1.5%
In contrast, private investors account for the majority of hotel investment: USA Europe Australasia 81.1% 78.5% 80.6%
Some of the reasons for the low level of public interest in hotel investment have been identified as follows: Service intensive nature of hotels, with hotels comprising a unique hybrid of business and real estate. As a business concern, the asset is exposed to business and market risk, which can lead to periods of cash flow volatility. Daily tenanting of rooms relative to long-term lease arrangements of more traditional property investments, which provide a predictable cash flow. The above factors contribute to the volatility of the asset and increase the perceived level of risk from an investment perspective.
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The lack of stable and predictable income streams has resulted in hotels being categorised as offering a higher return in exchange for a higher risk profile
In addition the lack of stable and predictable income streams has resulted in hotels being categorised as offering a higher return in exchange for a higher risk profile. The owner benefits from the improved income flow in a strong market but is also exposed to the downside in a weaker operating climate. Despite the higher risk and return profile, equity analysts often tend to rate direct investment in hotel and tourism assets as offering a neutral return but with a higher risk profile. Indirect investment in hotel or tourism assets as a class of equities is considered to attract a higher return to compensate for the higher risk. Given the high risk, neutral return perceptions, it is understandable why investment is dominated by private equity or specialist investment vehicles. Private equity and smaller investors tend to be: Opportunistic buyers of hotel properties; More appreciative of the upside and have a greater understanding of the downside; and Motivated by the real estate and opportunistic attraction of the asset, including yield, capital growth or trophy status. Recent investment in the resort sector in Australia has been characterised by: Private hotel companies seeking strategic buys to generate economies of scale or protect brand presence in certain markets (for example Marriott Surfers Paradise); Private opportunity funds seeking to acquire under-valued or under-performing assets which can be turned around with appropriate asset management, allowing the investor to exit within a three to five-year period with a substantial gain (for example Commonwealth Property Hotel Fund); Private high net worth individuals seeking trophy assets (for example Daydream Island); and Individual mum and dad investors seeking a lifestyle investment, in return for which they are prepared to accept a much lower return of 2% to 4%. Resort investment cycles in Australia Ownership of Australian resort assets has undergone several changes since the boom years of the 1980s. The key milestones in the hotel and resort industry are as follows:
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1980s - Japanese led investment The level of investment in the hotel and resort industry in Australia increased significantly in the 1980s, influenced by factors such as: Dramatic increases in the number of international visitors; Increasing occupancy and room rates for hotel and resort accommodation properties; The expectation of substantial capital gains; and The availability of finance. This gave rise to the creation of luxury, international standard resorts such as the Sheraton Mirage Port Douglas, the Sheraton Mirage Gold Coast, the Sheraton Noosa, the Hyatt Sanctuary Cove and the Hyatt Regency Coolum. The majority of these developments were built at a high capital cost, driven by local entrepreneurial developers backed by foreign (Japanese) capital motivated by the real estate capital gains rather than income considerations. 1989 Pilots Strike and 1990-92 Gulf War/Recession The pilots strike in 1989 and the economic recession in the early 1990s had a negative impact on hotel and in particular, resort performance, with several hotels and resorts going into receivership. By default, Westpac, one of Australias major banking groups, became one of the largest hotel owners in Australia at that stage. Mid 1990s to 1997 Asian Investment Following the recession, overseas investors were active in the Australian hotel market, taking a counter cyclical approach and purchasing properties from receivers at a significant discount to their replacement costs. Thakral Holdings purchased the Westpac portfolio of hotels in 1994, making it the largest owner of hotels in Australia at that time. Several listed hotel and resort trusts were floated on the Australian Stock Exchange in the mid 1990s, including BT Hotels, Tourism Asset Holdings, Peppers Hotel Trust and Grand Hotel Group.
The majority of these developments were built at a high capital cost, driven by local entrepreneurial developers backed by foreign (Japanese) capital motivated by the real estate capital gains rather than income considerations
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Resorts have performed poorly in the post Olympic period not just due to additions to supply but as a result of exposure to political, economic and natural events
1997 Asian Crisis With the onset of the Asian Crisis in 1997, the ownership of hotels swung into the hands of Australian investors, with listed property trusts such as General Property Trust, Tourism Asset Holdings, Grand Hotel Group and Peppers Hotel Trust making hotel and resort acquisitions. The 1990s were marked by the acquisition of properties built during the pervious decade at a significant discount to the initial development cost. The second half of the 1990s saw a return to hotel development in capital cities, fuelled by improving hotel performance driven by a strengthening economy and the anticipation of the Sydney 2000 Olympic Games. The Sydney 5-star hotel market doubled in size during this period, with 11 new hotel properties added to the previous supply. The second half of the 1990s also saw the rise of the strata titled investment in both capital cities and holiday destinations. Strata titled resort models allow the developer to recoup the cost of the high upfront capital investment required for the accommodation and recreational facilities through the sale of residential products. Owners tend to be mum and dad investors motivated by the lifestyle aspect of the investment for which they are willing to accept a lower return in the range of 2% to 4%. Post-Olympic blues The increase in new supply experienced in the late 1990s has resulted in depressed hotel performance in key hotel markets of Sydney and Melbourne. The Sydney hotel market has witnessed strong investment activity with several significant hotel properties changing hands, including the ANA Harbour Grand Hotel, the Westin Hotel and the Hotel Ibis World Square. Counter cyclical buying opportunities have been the catalyst for much of this activity, with a return of Asian investors to the Australian market for the first time since the mid 1990s. This may suggest that markets have bottomed and a major upturn is anticipated. Resorts have performed poorly in the post Olympic period not just due to additions to supply but as a result of exposure to political, economic and natural events. Long haul destinations such as Tropical North Queensland and Northern Territory have suffered as a result of turbulence in the global and domestic aviation market and the dampening effects of terrorist attacks on international travel and global economic volatility. The following table presents an ownership profile of the 20 largest resorts (based on room number) in Australia:
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20 largest resorts in Australia Based on room number Property Location Owner No. of rooms Star Grading Development/ acquisition date 1994 1997 1985 1987 2000 1995 1987 1999 1992 1998 2000 2000 1990 1988 1997 1987 1995 2000 1999 1987
Hamilton Island Resort Ayers Rock Resort Conrad Jupiters Hotel & Casino Burswood Hotel & Casino Courtyard Surfers Paradise Resort Mercure Resort Sea World Nara Resort Parkroyal Surfers Paradise Novotel Twin Water Resort Couran Cove Resort Novotel Palm Cove Resort Marriott Surfers Paradise Resort Royal Pines Resort Hyatt Regency Coolum Oasis Resort Cairns Sheraton Mirage Gold Coast Radisson Treetops Rydges Reef Resort Novotel Daydream Island Resort Sheraton Mirage Port Douglas
Whitsunday Islands, QLD Yulara, NT Broadbeach, QLD Perth, WA Surfers Paradise, QLD Surfers Paradise, QLD Surfers Paradise, QLD Surfers Paradise, QLD Mudjimba Beach, QLD Stradbroke Island, QLD Palm Cove, QLD Surfers Paradise, QLD Ashmore, QLD Coolum Beach, QLD Cairns, QLD Surfers Paradise, QLD Port Douglas, QLD Port Douglas, QLD Daydream Island, QLD Port Douglas, QLD
Hamilton Island Trust General Property Trust Jupiters Ltd Burswood Property Trust Cheng Yu-Tung Strata Title Sea World Nara International Pty Ltd Teo Lay Swee Strata title Strata title Daysun Marriott MID Corporation Kumagai Gumi Metro Holdings Ltd Mirage Resorts Port Douglas Reef Resorts Ltd Raglan Investments/Selpam Ltd Vaughan Bullivant Mirage Resorts
754 685 609 417 405 405 405 379 368 356 342 330 329 324 314 312 305 299 296 294
2, 3, 4, 5 2, 3, 4, 5 5 5 4 4 4 4.5 4 5 4 5 4 5 4 5 3.5 4 4 5
The information in the above table indicates that: Three largest resorts in Australia are owned by publicly listed Australian companies; Majority of the 20 largest resorts remain in Japanese or Asian hands; Three out of the 20 resorts are strata titled; and Only one of the 20 resorts is owned by an individual. Resort investment returns Major resort transactions verse development cost We have reviewed some of the more significant sales of hotel and resort assets during the period from 1997 to 2002, including the development cost and purchase price. The following table presents a summary of a sample of resort sales:
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Sales Price verse Development Cost Property Completion date Estimated development cost ($ million) 400 270 200 100 Sale price ($ million) Sale date
Ayers Rock Resort Laguna Quays Marriott Surfers Paradise Daydream Island Source: Ernst & Young Research
1983/84 1992 1992 1989
220 13 63 12.5
1997 1999 2000 1999
The information in the table above indicates that some of the most significant resort assets in Australia have sold at significant discount to their initial development cost, attesting to the misperceptions of developers and investors of the previous decades as to the potential of the hotel and resort sector. Hotel and resort yields An analysis resort transaction suggests the following indicative (stabilised) property yields for resorts and hotel assets:
Indicative yields for hotel assets Asset type Trophy hotel Quality CBD hotel Mid market city hotel Suburban or regional hotels and resorts Source: Ernst & Young Research Yield 8% 8% - 10% 9.5% - 11.5% 12% plus
The information in the above table indicates higher stabilised yields for regional hotels and resorts, reflecting the higher risk profile of these assets. The table on the following page presents a summary of the major Australian hotel and resort sales from 1995 to 2002, including information on the purchase price and initial yield.
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Australian Resort and Hotel Sales 1996 to 2002 Property Location State Price ($M) 26 16.2 40 220 12.5 46 35 37.5 63 17.5 30 16 20 13 Rooms Price /Room 103,543 202,500 190,476 378,657 41,667 155,405 92,348 92,593 190,909 58,528 121,457 84,656 232,558 67,358 Star Date grading 5 4.5 4 2,3,4,5 4 4 4.5 4 5 3.5 5 4 5 5 1996 1996 1997 1997 1999 2000 1999 2000 2000 2000 2001 2002 1999 1999 Vendor Purchaser Initial Yield
Pacific Bay Resort The Anchorage Fairmont Resort Ayers Rock Resort Daydream Island Gold Coast International Hotel Parkroyal Courtyard by Marriott Marriott Resort Rydges Reef Resort Hyatt Sanctuary Cove Courtyard by Marriott Great Barrier Reef Lilianfels Resort Laguna Quays Source: Ernst & Young Research
Coffs Harbour Port Stephens Leura Uluru Whitsundays Gold Coast Surfers Paradise Surfers Paradise Surfers Paradise Port Douglas Hope Island Palm Cove Katoomba Whitsundays
NSW NSW NSW NT QLD QLD QLD QLD QLD QLD QLD QLD NSW QLD
254 80 210 581 300 296 379 405 330 299 247 189 86 193
Destination Resorts NA Bank Mitsui/AIDS ARR Co/NT Gov. Village Roadshow Ltd GCI Properties Pty Ltd Sun Australia Kokusai Motorcars
Thakral Holdings Peppers Hotel Trust Peppers Hotel Trust General Property Trust Vaughan Bullivant Daikyo Teo Lay Swee Cheng Yu-Tung
NA 8.14% NA NA NA NA 2.7% NA 6.7%
Long Term Credit Bank Marriott Hotels NA KPMG (receivership) Thakral Nara
Raglan Investments/Selpam NA Mulpha Horbelt Family Orient Express Hotels 7.3% 6.0% NA NA
Long Term Credit Bank David Marriner/Cbus
The information in the table above illustrates a wide range in initial resort yields, from 2.7% to 8.14%. The lower yields may be considered indicative of the opportunistic buyer profile previously described, with investors willing to sacrifice initial returns in view of an anticipated turnaround opportunity. Lower yields may also reflect the competition for quality assets and the willingness of buyers to secure these at a premium price to build a hotel portfolio or protect their brand presence. Listed hotel and resort trusts A review of the performance of listed hotel and resort trusts indicates that they have under-performed relative to other listed property trusts. The following table presents a performance comparison between the Standard & Poor (S&P) Property Index and selected hotel and resort companies over a 5-year period: Investment Performance Comparison
Lower yields may be considered indicative of the opportunistic buyer described, with investors willing to sacrifice initial returns in view of an anticipated turnaround opportunity
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Investment Performance Comparison Returns as at 31 July 2002 Security Name S&P/ASX 300 Property Hamilton Island Trust Peppers Hotel Trust Cypress Lakes Trust Port Douglas Reef Resorts Grand Hotel Group Source: UBS Warburg, ASX 1 yr (%) 4.5 -10.66 -39.47 -9.33 -13.33 -44.66 3 yr (%) 11.1 2.84 -18.78 -2.21 -3.09 -21.49 5 yr (%) 10.4 8.24 -14.99 N/A -10.83 -15.97 Net Cap ($M) N/A 90 17 17 19 104
The information presented in the table above indicates that: Resort and hotel stocks have generally performed poorly in 2001 and 2002. A disruption in international travel patterns and the collapse of Ansett Airlines have severely impacted long haul resorts reliant on international demand, such as Hamilton Island and Port Douglas. The stock prices of listed hotels and tourism entities such as Grand Hotel Group, Peppers Hotel Trust (now Australian Hotel Fund) and Hamilton Island has fallen to a level where the shares are trading at a significant discount to their net tangible asset value. Peppers Hotel Trust, comprising a portfolio of premium regional resort properties in NSW, Victoria and Queensland, has been a poor performer. Grand Hotel Group, which has a hotel portfolio incorporating 25 hotels including the Hyatt, Chifley and Country Comfort brands, has also been a poor performer, despite a diversified portfolio of both capital city and regional hotel assets. In contrast, Hamilton Island and Cypress Lakes Resort, mixed-use resorts with marina, golf, retail and land development components, have achieved stronger returns, albeit below the listed property index. Resort development and investment issues We have reviewed resort development and investment issues in detail in the context of the development process, including the site selection stage, the market analysis stage, the approval stage, the construction stage and the operating stage. The results of our analysis are summarised below.
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Issues during the site selection stage Limited availability of excellent development sites, which are accessible and have strong differentiating features. Tighter environmental and planning controls surrounding natural attractions such as national parks or beachfront areas. Issues during the market analysis stage Bringing all parties together at the beginning of the project, including Government. Despite the maturity of the resort market, there is still a lack of understanding of market and demand fundamentals by various resort development stakeholders, including developers, financiers and planners. Project stakeholders are reluctant to undertake market feasibility studies, particularly in equity-led projects. There is a lack of accurate data on regional visitation patterns, demand trends and future projections, which limits the ability of investors to assess the feasibility of a resort project. Issues during the approvals stage Local councils often do not have sufficient resources or expertise to deal with complex planning regimes. Local communities, particularly retirement communities, may object strongly to resort development and influence local council decisions (not-in-my-backyard syndrome). Building and safety codes can be inflexible and need to be considered according to the level of risk, particularly in remote areas. The approvals process is characterised by lack of certainty in terms of time and outcome. Resort development requires extensive community consultation, which is time consuming and costly.
Despite the maturity of the resort market, there is still a lack of understanding of market and demand fundamentals by various resort development stakeholders, including developers, financiers and planners
Local councils often do not have sufficient resources or expertise to deal with complex planning regimes
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New resort developments must comply with stringent environmental legislation such as the Environment Protection and Biodiversity Conservation Act, resulting in additional time and expense. Resort developments adjoining World Heritage Areas may require compliance with Commonwealth legislation in addition to state and local approvals. Issues during the construction stage Resort development incurs higher construction costs as a result of building in sensitive and remote environments. The cost of infrastructure such as roads, energy, water and sewerage facilities on green-fields sites is cost prohibitive. Accordingly, as a stand-alone economic entity (that is, the operational aspect of the accommodation and service related business) resorts do not work. In many instances it is necessary to sell off a component such as residential or land banks to cover the high infrastructure costs and achieve project viability. Availability of start-up capital to sustain development costs and initial trading period, which can be lengthy, is a major constraint. Resort projects in remote areas are subject to higher pre-opening costs, including staff recruitment, training and marketing. Issues during the operating stage The time to achieve a stabilised level of trading for a resort is much longer than for standard hotels, and can range from three to seven years. Other issues Resorts face strong competition from generic strata titled developments masquerading as resorts, which are real estate and not market focused. Resorts are more susceptible to supply fluctuations given the small size of markets in which they operate. The lack of supply controls leaves a vicious trail of destruction and creates a bad image of the industry. The resort business is a derivatives business, which exists on the back of transport and infrastructure businesses. It cannot stand-alone and its success is intertwined with the strength of the base businesses.
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The infrastructure, facilities and services at complementary attractions, particularly iconic national parks such as Kakadu, Uluru and World Heritage areas are an integral component of the visitor experience. The availability of funding for the upkeep and future development of visitor facilities to handle the current and projected visitation levels in a sustainable manner is a critical issue for resorts located in proximity to national parks. Development issues specific to resort types and styles In addition to the above resort development issues, we have identified additional factors, which are of relevance to the particular resort types and styles under consideration in this study. The cost of infrastructure development is a major issue for secluded mainland and island resorts. The harsh nature of coastal or Alpine weathering effects is an additional cost for island, coastal and alpine resorts, necessitating more frequent repair and replacement in the operational phase. Maintaining water quality is inherently an issue for secluded, island and coastal resorts. Australia is a world leader in innovative water management technology yet no incentives are given to resorts that utilise new technology. The absence of iconic natural features and the need to create attractions is an important issue for accessible mainland resorts. Cultural tourism based resorts located in proximity to indigenous lands must undergo a process of consultation with traditional owners. This requires a longer time frame for development as well as additional cost. The differing value systems between traditional owners and for profit operators must be skilfully managed. Nature based, eco-tourism resorts face additional development costs associated with building and operating in a fragile area and must deal with various layers of legislation and regulation. Development/investment success factors and opportunities Key success factors Given the marginal profitability and high failure rate of resort projects, it is necessary to understand the factors, which are critical to the success of a resort venture. These factors include: A concept which meets market demand;
The cost of infrastructure development is a major issue for secluded mainland and island resorts
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Design which reflects the resorts environment and provides a point of differentiation; Location in a region which has established demand and barriers to entry for competitors; Access to transport infrastructure, with airline access being of paramount importance for remote resorts; Community support for the development; Control of construction costs; Partnership with flexible financiers who understand the cyclical nature of resort operation and are prepared to take a long-term view; Alliance with complementary facilities, such as national parks or other attractions; Creation of economies of scale by developing multi-tiered accommodation catering to different target markets such as Ayers Rock Resort, Kingfisher Bay Resort or Hamilton Island; and Mixed use development combining land, residential, marina and retail facilities which have the potential to increase the projects viability. Role of industry in resort development Resorts are not only complex to operate but also costly and uncertain development ventures. Reducing the cost and risk associated with resort development is a key factor in improving the development viability and investment performance of resorts in Australia. Based on our research of impediments to resort development and key success factors, we have identified the following opportunities for resort developers and owners to improve the resort development process: Given the weak performance of resorts and the competitive nature of the resort environment in Australia, focus on refurbishment and re-positioning opportunities for existing resorts rather than on new development in the short to medium term. Undertake detailed market and feasibility analysis prior to undertaking development and understand the high degree of sensitivities associated with demand and supply analysis impact assessment. Only undertake development in areas where there is existing evidence of demand and a strong attraction base.
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Consult with development teams of State Tourism Organisations and State Development departments when undertaking new development. Fund research and data collection on resort supply, demand and performance and make this information available to local Councils, developers and other stakeholders to improve investment decision-making. Improve the integration of resort facilities with the destination and off-site attractions. Role of Government in resort development Based on our research we have identified the following opportunities for Government to facilitate the resort development process: Work with developers and investors to develop and fund infrastructure facilities, improving the feasibility of infrastructure development through the infrastructure bonds, tax concessions, grants or low cost loans. Ensure that development and planning legislation is manageable, easy to understand for developers and communities and is applied equitably and with transparency across government jurisdictions. Provide certainty in relation to the approvals process, with accurate indication of time and process. Encourage bilateral arrangements between State and Commonwealth Governments under new environmental legislation to streamline approvals processes. Undertake economic impact assessments to understand the net and flow-on benefits of resort development to the greater community. Provide more certainty in relation to supply through destination master planning. Increase the level and quality of communications between State planning department representatives and local Government Officers responsible for tourism planning and development. Through the Cooperative Research Centre (CRC) Sustainable Tourism, provide seed money or Research and Development grants for new technology, including transport and environmental management. Provide funding for Management Plans for protected natural areas, which have strong tourism appeal, possibly incorporating gateway or local resort facilities. Investigate innovative sources of funding for national parks and other heritage attractions, especially for the development of visitor facilities in national parks.
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Resorting to profitability - Making Tourist Resorts work in Australia
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Case studies
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Couran Cove Island Resort Case Study
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Couran Cove Island Resort Case Study

This case-study of Couran Cove Island Resort illustrates several of the issues common to other accessible coastal resorts in Australia. Location: Unique Attractions: South Stradbroke Island, Queensland Accessible island location with beach frontage, nature-based recreation opportunities, design in sympathy with physical environment. Access: By ferry transfer from Runaway Bay Marina, Southport (20 mins) Closest regional airports in Coolangatta (30 min drive from Runaway Bay). Closest international airport in Brisbane (1 hour from Runaway Bay). Start of operation: Capacity: September 1998 356 units comprising 192 hotel rooms, 60 villas and 104 nature cabins Description of site Couran Cove Island Resort is located on Stradbroke Island in South East Queensland. It is accessible by ferry from Runaway Bay Marina from the northern end of the Gold Coast. The resort land area stretches 3 kilometres across South Stradbroke Island from the Broadwater to the coastal beach strip. Five major eco-systems exist on Stradbroke Island, including spectacular coast dunes, eucalyptus woodland, rainforest, melaleuca wetlands and mangroves. These eco-systems create a unique but fragile natural environment. All of the construction at Couran Cove was created to blend into the existing landscape. Before building began, the site was surveyed and audited by the Australian Conservation Foundation. Most building structures are elevated from ground level. Despite its large scale, the resort was built around existing trees and natural features. Design materials, especially colours, were chosen to blend into the environment. Resort facilities are spread across the site. The main Marine Resort includes a marina, an arrivals and boat launch area, a fine dining restaurant and conference break out rooms. The Nature Cabins are spread throughout the site among the eucalyptus trees. A central road extends eastwards from the nature cabin zone and culminates at the Oceanman Surf Club, a themed restaurant with ocean views. A series of boardwalks link the road to the beach, minimising dune disturbance.
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Couran Cove has also taken immense steps in terms of green living. Innovative and sometimes revolutionary plans were developed to provide drinking water, treat sewerage, manage waste and generate power. There is no vehicular traffic on the resort and some 900 bicycles and electric buggies provide transport to guests. However, 4WD vehicles are allowed on the beach by permit is in conflict with the nature based principles on which the resort is founded. Facilities and activities Accommodation stock is divided into two distinct zones of Marine Resort and Nature Resort. The Marine resort includes deluxe rooms and suites and self contained 2, 3 and 4 bedroom lodges and villas. The Nature Resort component includes fully self-contained Nature Cabins.
Couran Cove Resort - Overview of Accommodation Accommodation Marine hotel Lodges & villas Nature Cabins Total units No. of rooms 192 60 104 356 Style Deluxe 4.5 star Deluxe 4.5 star N/A Description Self contained rooms with views of the Marina or the Lagoon. 1, 2 & 3 bedroom lodges and 3 & 4 bedroom villas which are fully self contained. Studio and 2 bedroom cabins with fully self-contained kitchen.
Couran Cove's facilities comprise three restaurants, including the Oceanman's Surf Club which is perched high above the dunes and offers spectacular ocean views. The food and beverage facilities include a grocery store for guests wishing to self cater. Couran Cove is known for its world class sporting facilities, which were designed for professional athlete training in line with the early vision for the resort. Guests have access to a 100 m sprint track, two gymnasiums and a basketball court, tennis court, batting cages, a rock climbing wall and long jump/high jump area. The resort also comprises extensive facilities and activities for children. At the Sports centre, there is a 0.75 acre sand filled area with slides, ropes, swings and climbing games and the Kites Club offers a range of nature based adventure and learning activities. The Junior Eco-Ranger program offers children a range of educational and fun activities such as special nature walks focused on the island's natural environment. The Spa and Total Living Centre (TLC) is a complete spa and rejuvenation centre, where guests can indulge in treatments and pampering. The TLC also provides a range of lifestyle activities, including yoga, tai chi, art and nutrition classes and retreats aimed at promoting health and well being.
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Catering facilities and the Spa Island's central location make the area suitable for conference activities and special events. In the event of a large sized conference, Couran Cove erects a large temporary tent at a variety of locations serviced by a separate production kitchen. The temporary structure will give way to a permanent conference facility in the near future. The Interpretative Centre is the resort's environmental headquarters. Qualified interpretive guides conduct a wide variety of programs to inform guests about the island's environment, through a range of multimedia and 3-dimensional displays as well as walks, talks and activities with experienced guides. An Environmental Research Trust was established to promote and fund environmental research at Couran Cove. The resort supplies environmental data to the Bureau of Meteorology, Nature Search, Gold Coast City Council and the Environmental Protection Agency. Couran Cove has recently expanded its activities to include nature shows which has included the construction of a special presentation area. The resort works with a local events company to develop performances and activities that allow guests to experience and learn about Aboriginal culture. The resort has also converted several suites and cabins to meeting rooms and has expanded its conference facilities with a temporary structure to meet market demand which was not part of the initial strategy. History Couran Cove Island Resort was conceived by Australia's athletic icon Ron Clarke in the early 1990's and was brought to fruition through the funding and support of InterPacific under the Integrated Resort Development Act. Since InterPacific was a foreign investor, development of Couran Cove was contingent on the company meeting Australia's Foreign Investment Review Board criteria, which reviewed the nature of the proposal, the company, the industry for which the development was proposed and set guidelines on the nature and extent of foreign ownership permitted on the resale of properties. The resort was originally developed to cater for the retreat and training needs of elite athletes, however, due to the limited demand potential demonstrated by this market, the resort expanded its positioning to an ecotourism style resort. Construction activity commenced in 1997 and although the resort officially opened in September 1998, construction activity was not completed until late December 2000. Ongoing construction work was in part due to Couran Cove expanding its product focus to meet the needs of multiple special interest markets and adding new features such as the Interpretive Centre and conference facilities. Total construction cost of the resort is estimated at approximately $200 million. Today, Couran Cove is positioned as Australia's newest island resort and is targeting leisure, family and conference demand.
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Ownership and management structure Couran Cove Island Resort is strata-titled and owned by individual owners and the body corporate. The resort is operated by InterPacific, an American-based company owned by philanthropist Chuck Feeney. InterPacific Resorts owns and operates several other luxury resorts throughout the AsiaPacific region, including Pacific Islands Club resorts in Guam and Saipan, the Laguna Beach Resort in Phuket and the Bali Golf and Country Club Hotel in Bali, Indonesia. During construction, InterPacific strata titled and on-sold individual units within Couran Cove Resort to both local and foreign owners. Foreign demand for units, particularly Asian demand, was strong during the initial sale period, but was capped at 50% according to FIRB regulations. The rest of the resort was 100% equity funded through the InterPacific Group. Resort Demand Top 3 Demand issues: Difficulty in diversifying demand from local domestic leisure. High seasonality of demand. High cost of meeting needs of a range of target markets.
Intrastate domestic leisure visitors are Couran Cove's most significant business segment, representing approximately 50% of total demand and originating mainly from the regional Queensland drive market. Interstate visitors from Sydney account for the next highest proportion of visitors at 23%, followed by Melbourne at 17%. International demand accounts for less than 10% of total demand. In recent years conference demand has demonstrated growth and is now considered an important market segment for the resort. The strong exposure to domestic visitors creates a range of challenges for the resort. The strong level of competition in the Australian leisure market results in significant pressure on pricing. The price sensitivity of the domestic market, and the appeal of self catering, means guest do not have strong on-spend during their stay in the resort. The low revenue generating potential of the market does not cover its high initial investment in resort facilities and infrastructure as well as the ongoing high operating costs
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International visitors are perceived to be the resort's most viable growth market. Accordingly, Couran Cove is actively identifying and targeting potential inbound demand, both leisure and MICE related, to increase the proportion of higher yielding, longer staying international visitors. Couran Cove has taken advantage of the government's Export Market Development Grant (EMDG) in growing its international profile, and has in other instances undertaken cooperative marketing with Tourism Queensland and the Gold Coast Tourism Bureau to increase the effectiveness of promotional expenditure. A strong exposure to domestic visitors makes Couran Cove particularly sensitive to the seasonality of demand, which is highly correlated with school holidays and weekends. Because of its site-specific infrastructure, extensive facilities and island location, the resort is frequently unable to adjust its staffing and operating costs to meet demand fluctuations, creating pressure on operating margins. A reduction in the overlap in school holiday periods in different States would reduce the seasonality of demand for Couran Cove and other resorts in Australia. The seasonality of leisure demand also illustrates the importance of international demand and conference demand which are less seasonal for resorts in Australia. To this end, the EMDG is an important tool for resorts in diversifying into more international markets, while transport infrastructure and airline access is critical to attracting the conference market for both resorts and resort destinations. In order to increase the perceived value of the resort for a number of markets simultaneously, the resort has expanded is product offering and added more experiential opportunities for visitors. The spacious grounds of the resort and the spectrum of accommodation and activities are advantageous, allowing for the effective separation of different user groups within the resort, despite the shared restaurant, pool and recreational facilities. However, the delivery of services and experiences to a diverse range of guests increases the operating cost, which can only be offset by consistently high occupancies. Resort Development Top 3 Development issues Higher development cost due to change in strategic focus. High cost of environmentally sensitive design, compounded by relatively low public acceptance of eco-tourism. High cost of supporting infrastructure.
Couran Cove Resort was originally conceived as an elite-athlete training destination functioning as a limited service, nature-based facility. When the decision was made to change the positioning of the resort and expand its market appeal, a significant shift was required in the design and facilities program of the resort.
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Although the resort was originally opened in September 1998, construction activity extended until December 2000 in an effort to adapt public and back of house facilities to provide the level of service which was required for a luxury, full service resort. The main parts of the resort which required modification included: The addition of kitchen, food preparation and food and beverage areas. Extension of the arrivals/ welcoming and departure area. Expansion of the baggage storage areas. Expansion of resort administrative facilities. Expansion of mainland guest transit facilities. Expansion of conference facilities. The change in the resort's positioning resulted in additional development costs and time delays. It highlights the importance of strategic planning, market research and feasibility analysis in the initial phase of resort development. Since its inception, Couran Cove was built with the environment in mind. Alternate power, including gas, electricity and solar power were sought to minimise fuel and water consumption patterns within the property. The main sources of fuel are LPG and diesel. The benefits of utilising environmentally sensitive technology are reduced gas emissions (up to 70%), lower fuel consumption, minimal water waste (88% returned to the water table) and lower disturbance of the natural environment in the physical construction of the resort and its associated facilities. The resort is a recognised industry leader in the field of water and sewerage treatment and a leading eco-tourism destination as a result of its commitment to environmental stewardship and associated interpretive opportunities for visitors. Despite this, Government funding in support of the 'clean and green' approach relative to more mainstream development and waste treatment methods has to date been limited, as has access to funding for advanced research and development to further perfect methods of waste and water management. Unlike the higher polluting diesel fuel, LPG is not subsidised in Australia.
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In following its environmental vision, the resort has its own gas storage, power plant, water treatment plant, tertiary sewerage treatment plant, rubbish recycling plant, fire reticulation system and bio-organic composting facilities. It also self funded communications and road infrastructure. The costs associated with developing the full range of infrastructure were extremely high. Given the demand constraints identified in the previous section, the resort is not expected to generate a net profit until year 10 of its operations. The weak market fundamentals and high development costs are key barriers to the future development of resorts in Australia. Resort Operations Top 3 Operational Issues: High cost of bulk gas storage, power plant, water treatment and sewerage treatment plants. High cost of facilities maintenance and repair. High cost of staff training, development and retention.
In addition to the costs of developing resort infrastructure, the plethora of compliance and licence costs for operating infrastructure are a significant expense for Couran Cove. The resort employs an in-house certifier to address the range of approvals at local, state and federal government level and ensure compliance. Compliance costs relate to a broad range of resort operating areas, including waste management, ground construction and landscaping, vehicles and workshops, chemical storage and use, water treatment, sewerage treatment, processes and approvals. These costs are ongoing and particularly onerous during the initial years of a resort's operation. The fact that Couran Cove and other resorts have to employ a person to deal with compliance aspects indicates an opportunity to streamline the approvals and compliance processes, helping resorts to reduce operating costs. The location of Couran Cove exposes it to harsh environmental conditions. The resort is constructed on a sand spit island, forcing developers to select the most effective materials and methods to construct durable and appropriate accommodation structures able to withstand weathering. Timber was used predominately, and despite the resort's relative infancy, repair and replacement have been a significant cost. Maintenance costs also extend to specific resort 'precinct' areas which require specialised care, such as grounds and gardens, the swimming pool, the marina, and independent sporting facilities where every day wear necessitates repair and replacement. Relative to mainland hotels, repair costs are amplified by design features which are in sympathy with the environment and protect the underlying natural asset.
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As with other resort properties, staffing costs are the largest single overhead for Couran Cove. The need to consistently train employees given the unskilled labour pool and the high staff turnover is a major barrier to improved resort profitability. It highlights the need for ongoing Government support in the resort training arena in recognition of the role of the employer in providing career progression programs and support mechanisms for employees. Key success factors The factors that contributed to the successful development and operation of Couran Cove Resort are: Modern, full service resort facilities combined with environmental, lifestyle and cultural principles. Wider range of natural and built facilities, allowing the resort to cater to broad and niche segments, such as families, couples and special interest groups. Development of a mixed-use product, comprising hotel and nature cabins, which diversifies the sources of demand. Access to transport networks, including 2 international airports and a major highway. Island location in close proximity to the mainland, offering a secluded yet accessible experience. Long-term commitment to the project, with an owner who is willing to withstand the long start up period. Strong management expertise in the resort sector.
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Ayers Rock Resort Case Study
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This case-study on Ayers Rock Resort (ARR) illustrates some of the unique issues encountered by secluded mainland resorts in Australia. Location: Unique Attractions: Yulara, Northern Territory Ayers Rock Resort is unique due to its extraordinary location adjacent to the World Heritage listed Uluru Kata Tjuta National Park. The resort has uninterrupted views to Uluru and is the only resort within several hundred kilometres of this tourism icon. Access: By air, 3 hours direct from Sydney to the resort airport. Most international visitors pass through customs in Sydney or Cairns before travelling to Ayers Rock. By road, 42 hours from Sydney, 4.5 hours from Alice Springs. Start of operation: 1982, acquired by General Property Trust (GPT) in December 1997 Capacity: 791 rooms, 168 lodge beds and campgrounds for 2,542 persons Resort location
ARR is located on 94 square kilometres of freehold land, approximately 18 km northwest of Uluru. The resort is adjacent to the Uluru Kata Tjuta National Park, owned by and home to Aboriginal people, the Anangu. Located in the centre of Australia in a semi arid desert zone, the National Park and Uluru are renowned for their immense natural beauty. The region is also rich in the cultural and spiritual heritage of the Anangu people Ayers Rock Resort, together with extensive associated infrastructure, forms the 'Yulara' township. The township has no local residents and consists of a transient population comprising resort employees and guests.
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Resort site description The resort was designed by architect Phillip Cox as a series of low-rise buildings, with no part of the resort rising higher than the surrounding dunes, thus minimising the impact on the landscape. The vast size of the site allows the resort to create resorts within a resort, comprising 7 distinct resort components, with accommodation options ranging from wellappointed campgrounds, 3,4 and 5-star hotels and exclusive luxury tents. With the exception of the Tented Wilderness Camp, Longitude 131, the individual resorts are built around a central ring road. A shuttle bus operates to provide access between the resorts.
Facilities and services Ayers Rock Resort functions as a town resort and as such comprises many of the facilities and amenities of a small town, including: Resort facilities A range of accommodation facilities A range of food and beverage outlets Shopping Centre Recreation facilities Visitor Centre
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Infrastructure Ayers Rock Airport Service station Medical Centre On site water, waste and sewerage plant and equipment Employee housing and recreational facilities School Accommodation within the resort is designed to meet the full range of budgets and tastes of visitors and can cater for over 4,000 people at any one time.
Ayers Rock Resort - Overview of Accommodation Accommodation Longitude 131 Sails in the Desert Hotel Desert Gardens Hotel Outback Pioneer Hotel and Lodge The Lost Camel Emu Walk Apartments Ayers Rock Resort Campgrounds No. of rooms 15 232 218 167 hotel rooms 168 Lodge beds 99 60 2,542 persons Style Luxury5 -star Deluxe5-star Superior 4.5-star Budget 3.5-star Boutique hotel 3.5-star Serviced Apartments 3.5-star Powered, unpowered and cabin sites. Description Wilderness camp tents. Facilities include a swimming pool and restaurant. Facilities include a swimming pool, 3 restaurants, bar, tennis court and mini-golf facilities. Facilities include a gift shop, swimming pool, bar, restaurant and BBQ's. Incorporating budget cabins and dormitories. Facilities include a swimming pool, self-catering kitchens, kiosk, restaurant and bar. Self contained guest rooms, bar and swimming pool. Fully self-contained 1 and 2 bedroom apartments with sofa beds, serviced daily. Comprises powered sites, tent sites, cabins and swimming pool.
Total rooms (excluding beds) 791
History Over the past decade, Ayers Rock Resort has been turned around from financial difficulty to the leading resort development in Australia today. The early days Tourism to Ayers Rock began as an informal activity in 1956 , when a series of unofficial camps evolved at the base of the monolith, followed by a rough airstrip and eventually some low quality hotels and hostels. In the early 1970's, when visitor numbers were estimated to be close to 50,000 per annum, National Park authorities and the Commonwealth Government responded to the potentially unsustainable nature of camps and poor quality accommodation, which threatened to impact the natural and cultural values of the National Park.
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In 1973, a Commonwealth Senate Committee recommended the 'village' and airstrip be moved beyond the National Park Boundaries. An area of 104 square kilometres adjoining the National Park boundary was identified as the ideal site for the now Ayers Rock Resort and in 1975, the site was approved by the Aboriginal Land Council and gazetted by the Northern Territory Government. Ayers Rock Resort In early 1980, when visitor numbers had climbed to over 75,000 per annum, construction of Ayers Rock Resort commenced under the direction of the Conservation Commission of the Northern Territory. The existing hotels were compulsorily acquired by the Commonwealth Government, removed and replaced on the new site cby the new hotel facility. In 1982, the campground area opened and by the end of 1984, the majority of the remaining hotels and facilities were operating. The estimated costs of resort development were $600 million, and by 1984, visitor numbers had reached in excess of 130,000 per annum. The hotels were operated by different management companies, including Sheraton and Four Seasons, and synergies between the various components of the resort were not well identified or streamlined. Accordingly, the properties traded poorly until 1992, when the resort was restructured, partially privatised and a new board and management team put in place. The restructuring strategy included repositioning the resort from the domestic to international market, undertaking an extensive capital expenditure program to revitalise the asset and switching from several operators competing with one another to a single operator able to drive operating synergies and economies of scale. Visitor numbers had climbed to over 240,000 per annum by 1992 and the operating performance of the resort improved from $8.5 million to $15.5 million in the 4-year period from 1993 to 1996. Re-inventing Ayers Rock Resort In December 1997, General Property Trust purchased Ayers Rock Resort for a combined cost of $220 million. Ayers Rock Resort Company Limited (now Voyages Hotels & Resorts Pty Ltd) assumed management of operations for the resort. GPT and Voyages have continued to consolidate the previous restructuring of the resort through a range of capital expenditure programs and leading management initiatives to create one of Australia's leading resorts. Ownership and management structure GPT is Australia's largest diversified property trust with assets worth $6.6 billion in hotel/tourism, retail, office and industrial/business park sectors. The Trust has a substantial investor base and units are owned by more than 60,000 investors, including large Australian and overseas institutions.
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The resort is operated by Voyages Hotels & Resorts Pty Ltd (Voyages). Voyages is wholly owned by GPT Hotel Management Pty Limited. Voyages aims to become the premier experiential holiday company in Australia. In addition to Ayers Rock Resort, Voyages operates other GPT experiential tourism assets located in pristine wilderness areas. These include Alice Springs Resort, Cape Tribulation Resorts and Odyssey Tours and Safaris. It also owns 46% of Kings Canyon Resort in its own right and manages the Resort on behalf of all owners. The Ayers Rock Resort experience ARR aims to provide resort guests with a fully integrated tourism experience, comprising four key principles of eco-tourism, cultural heritage, soft adventure and lifestyle. ARR is committed to working and caring for the environment to reflect the beauty and fragility of the natural surroundings. The resort provides a base for guests to explore the unique and extraordinary environment of Uluru. The resort tries to work closely with the local aboriginal people in developing touring options and ensuring the cultural integrity of experiences offered so that guests have the opportunity to sample new and authentic experiences. ARR guests have a range of touring and soft adventure options, which allow them to experience and learn about the natural and cultural heritage of the surrounding environment. The activities program gives guests the opportunity to embark on a journey of discovery and renewal, through opportunities ranging from unique dining experiences to rest and relaxation. In keeping with the above principles, Ayers Rock Resort facilitates a range of experiential activities, both within and external to the resort. Odyssey Tours and Safaris - to Cave Hill Aboriginal art site and a sunrise tour. Sounds of Silence dinner experience - outback dining alfresco style whilst the sun sets behind Uluru. Scenic Flights - primarily over Uluru and Kata Tjuta National Park. Aboriginal cultural tours - conducted by Anangu guides. Camel tours - the region on camel back Motorcycle tours - personally guided Harley tours. Cave Hill (S.A.) tour - to aboriginal Rock Art site and local aboriginal homeland.
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Resort Demand Top 3 Demand issues High costs of marketing to a wide range of domestic and international markets. High risk associated with reliance on air access. Effects of capacity and infrastructure constraints of the National Park on resort demand.
Given the size and diversity of resort accommodation, the marketing function for ARR must drive both broad and niche markets in Australia and globally. Marketing to international segments requires significant resources, both in terms of marketing dollars and sophisticated sales systems. The annual marketing budget of the resort is approximately $5 million or 4.5% of revenue. The marketing expenditure of ARR highlights the high cost of marketing incurred by resorts in Australia, particularly to overseas markets. Marketing of the resort promotes not only the resort itself but also advertises the natural and cultural features of Uluru and Central Australia, contributing to the promotion of the destination as a whole. Despite the high cost of marketing and the significant on-flow benefits which it creates to the wider community, the resort is not eligible for the Export Marketing and Development Grant (EMDG) because it generates revenue in excess of $50 million per year. Air access is a critical issue for ARR and the move away from a one airline monopoly in 1993, resulting in greater frequency of services and more competitive pricing, is considered to have been an important factor contributing to improved resort performance. The collapse of Ansett Airlines in 2001, combined with the disruption to tourism following the economic and political events of 2001, contributed to a 5% decline in occupancy. The impact of air access on demand to ARR illustrates the additional risk of remote operations and highlights the precarious position of Australia's remote resorts which are serviced by one airline. Demand for the resort has displayed moderate growth in the past 5 years. Despite short term shocks such as the terrorist attacks of 2001 and 2002, demand is expected to continue to grow at a moderate pace in the long term, particularly from international markets. The positive demand and supply fundamentals have the potential to further enhance the performance of the resort through occupancy and rate growth. The ultimate ability of the resort to drive demand is strongly influenced by how many visitors the Uluru Kata Tjuta National Park can accommodate without negatively impacting the visitor experience and the natural environment. At present, key sites in the park are overcrowded at peak viewing times (i.e. sunrise or sunset) and do not provide the level of visitor experience that either the resort or park management would like. Due to overcrowding, the visitor experience in the park is devoid of the eco-tourism and wilderness features which are the prime motivators for visitation to a World Heritage listed destination.
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The overcrowding in the World Heritage listed national parks is a growing issue for parks and resorts in Australia alike. It highlights the importance of taking a strategic approach to visitor management planning, including site planning, capital works programs to create additional facilities and walks and better visitor information and processing facilities and creation of new transportation options. The development of niche touring product by ARR such as the Sounds of Silence and other tours in collaboration with park management and the Anangu people has helped to draw visitors away from the key sites and to alleviate the problem of overcrowding. It illustrates the importance of resort owners/operators working closely with industry stakeholders in enhancing the visitor experience in resort destinations. The development of such alliances to create new visitor products and experiences is essential for the future success of ARR and other resorts in Australia. Resort Development Top 3 Development issues High cost of environmentally and socially responsible development. High cost of maintaining resort facilities up to standard. High cost of developing and upgrading resort infrastructure.
Since acquiring the resort in 1997, GPT has embarked on a major capital works program covering accommodation, public facilities and infrastructure, amounting to an estimated $110 million to date, and has largely focused on an upgrade of resort facilities to modern standards. The running reserve for replacement is estimated between 7% and 8% of revenue, significantly higher than the industry average of 3% to 4%. The remote location of the resort requires careful planning and coordination, including setting up a construction village to house construction employees who are flown in from other parts of Australia. The cost of building materials which are sensitive to and can withstand the harsh desert environment and their transportation to the site are additional costs. Building in an environmentally and culturally sensitive area such as Uluru necessities extensive compliance with environmental codes, including the recently introduced Environment Protection and Biodiversity Conservation Act. For example, the development of Longitude 131 required a fauna and flora study to be undertaken. Resort management also undertook a process of community consultation with the local Anangu people in the course of this development. Because of the cultural values and way of doing business of the Anangu people, this process required additional time and financial resources. As a result of the environmental and cultural sensitivities, the resort employs a full time environment manager.
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In addition to the guest facilities, ARR comprises extensive infrastructure, including an airport, roads, and power plant, water plant and waste management systems. The initial development cost of the resort reported at $600 million illustrates the high cost of infrastructure that is required to support resort development in remote locations. Unless greater economic benefits are recognised, the high cost of infrastructure can rarely be justified on purely commercial terms. The additional cost of accommodation and infrastructure development in remote and environmentally and socially sensitive destinations, particularly in greenfield sites, is significantly higher than in metropolitan areas in Australia. The competitive nature of the resort industry in Australia and the fluctuations in demand do not always allow the cost of development to be recouped through higher room rates or increased occupancy. These fundamentals act as a significant barrier to development for existing and new resorts in Australia. Resort Operations Top 3 Operational Issues High costs of labour and training due to transient nature of staffing. Higher cost of providing employee housing and services. Higher cost of maintaining and operating major infrastructure in a remote location.
The resort employs some 1,200 staff recruited from all over Australia. Despite an extensive staff incentive program comprising salary, airfare and holiday bonuses, the average staff employment term is approximately 14.3 months, resulting in a high level of turnover. High turnover creates the need to constantly train and recruit staff, significantly increasing the cost of labour. Given that the majority of employees are unskilled, the cost to train a new employee is estimated at $3,000. ARR has made a significant investment in developing an innovative training and knowledge management tool called Building Great Experiences, designed to capture key operational processes and service delivery methods, assisting with employee training. The expense associated with managing the transient nature of staffing in a remote location emphasises the continued importance of training grants and Government partnerships for resort operations. Employee housing and employee services such as recreational, medical and schooling facilities are also a significant expense for ARR. The resort provides some 750 housing units and employs a full time housing manager and staff. The cost of building in a remote location adds to the cost of providing quality employee housing. Schooling is only available at the primary school level, creating a problem for staff with high school age children. Factors such as schooling and housing contribute to the resort's inability to retain staff over a longer period of time, adding to the cost of operating a resort in a remote environment.
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A significant amount of time and money is expended on operating and supporting resort infrastructure, with the most significant components being roads, water and power, waste and airport facilities management. The management of such infrastructure requires the resort to work with relevant Northern Territory Government departments. Due to the centralised nature of these departments and lack of funding of resources, the communications process can be lengthy and inefficient, adding to the cost of compliance and operations. This illustrates the need for Government departments to streamline the regulatory and communications processes and recognise the greater level of resources required to work with resort operators in remote areas. Key operating statistics The standard of the guest experience and the performance of the resort have improved significantly under GPT ownership and Voyages management. The following table details the most significant performance indicators for the resort.
Ayers Rock Resort - Key Operating Indicators (2000) Number of visitors Capital expenditure program (1998 - present) Annual average occupancy Average rate Total revenue Net income (EBITDA) Net income (EBITDA) % 440,000 $110 million (approx) 80% $177 $110 million (approx) $40 million (approx) 36%
Source: Voyages Hotels & Resorts
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Heritage Golf & Country Club Case Study
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The following case study identifies issues surrounding the development of Australia's newest regional golfing resort in the Yarra Valley, an accessible mainland resort. Location: Unique Attractions: Yarra Valley, Victoria The Yarra Valley is a region known for its wine and food produce. The area features a range of wineries and bed and breakfast establishments and its proximity to metropolitan Melbourne has ensured its popularity as a leisure destination for day trip and weekend short break vacations. The accessibility of the destination to Melbourne also makes it appealing to the conference market. Access: Less than 60 minutes by road from Melbourne CBD Closest regional and international airport is Melbourne, being approximately 80 minutes drive time from the property. Start of operation: Golf Course - December 2000Hotel - April 2002Health Club October 2002 Capacity: 102 rooms
Description of site The following map outlines the layout of the resort along with the key facilities:
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The Heritage Golf and Country Club (HGCC) is an integrated residential resort development located in the Yarra Valley. The resort is spread over a 350-hectare site and is zoned as a special use zone/major tourist facility. It is the first purpose-built, destination golf resort to be developed in Victoria, featuring a golf course carrying the Jack Nicklaus signature brand. The resort has three main components, being two golf courses (1 opened, 1 planned), a 5-star hotel and a separate health club and day spa. These components serve the resorts three distinct markets, being golf club members, resort guests and on-site residents. The hotel and golf clubhouse are located at the centre of the property, situated in an elevated position and overlooking the golf course. Accommodation consists of 102 hotel rooms (96 rooms, 6 suites), overlooking the operating golf course. The second planned golf course (currently waiting for development approval) will be located on the northern end of the property, with the Yarra River acting as a natural boundary between the 2 courses. The hotel porte-cochere joins the hotel and club-house buildings. The health club/retreat is set back from the functional golf course, some 200 metres from the hotel and clubhouse. The health club also acts as a mini store, providing essential needs for resort guests and residents. Carparking has been provided under the 3-level hotel as well as adjacent to the golf clubhouse. The HGCC is connected to main power, gas and water, but has an independent waste-water treatment plant which provides recycled effluent to assist with irrigation of the St. John course.
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Ownership structure HGCC is owned by Yarra Valley Golf Limited (YVGL), a Victorian-based private company with three major shareholders. YVGL added residential property and strata-titled accommodation into the resort to deliver optimum project financing. Despite being an accessible, mainland resort destination, this product mix was identified as the most financially sound way to ensure that the resort could be developed without requiring a large exposure to bank debt and could produce positive project returns in the short to medium term. Accommodation Operator and branding The HGCC has entered into an agreement with Mirvac Hotels to operate all the facilities at the HGCC including Clubhouse, golf course the health club and the 102-room hotel. Officially known as the Sebel Lodge Yarra Valley, the hotel is positioned as a 5-star facility. The hotel was strata-titled by the developer, with guaranteed returns of 6% offered to investors for the first two years of operation. Approximately 70 rooms were sold as strata rights, with YVGL retaining the remaining rooms. YVGL retained the strata title to the hotel common areas, food and beverage and back of house facilities. Facilities The HGCC currently consists of: One completed and operational Jack Nicklaus Signature18-hole golf course. Land for another 18-hole golf course designed by Antony Cashmore in consultation with Nicklaus Design. Tony Cashmore is a well-known Australian golf course designer. A 102-room, strata-titled 5-star Sebel branded hotel operated by the Mirvac Hotel group. A 3,200 square metre club-house for golf club members, containing administration areas, function rooms, pro-shop, spike bar and restaurant. A 1,000 square metre Health retreat/club containing 20 metre heated pool, sauna, day spa, gymnasium, 2 tennis courts, caf and minimart. 120 residential blocks, ranging from 510 square metres to 1180 square metres. The substantial irrigation requirements for the golf course are sourced from self contained storage facilities. All 8 golf course lakes are used for storage and recycled effluent is also used for course watering.
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All course works are controlled from the maintenance compound. The compound is located to the west of the hotel and club-house and has a separate entrance to the main resort entrance. This building houses staff amenities, all course machinery and workshops with fertilizers, chemicals and storage bins. The construction of the second 18-hole golf course will commence as soon as development approvals are received and will coincide with Stage Two of the residential development. History The HGCC development was planned as a private, golf country club modelled on exclusive golf country clubs found in the USA. Such clubs have member only policies for golf course access and often provide a wider range of other recreational pursuits, clubhouse amenity and accommodation. The commercial viability of this same concept in the Australian market was constrained due to the limited domestic demand base and the lodge concept was adapted to become the 102-room Sebel Heritage Lodge, operating as a commercial, resort-style property, allowing non-exclusive utilisation of accommodation and recreational amenities. HGCC was conceptualised in the early 1990's by Dr John Tickell, a director of YVGL, with experience in the Hyatt Coolum development in Queensland. Land for the resort was secured by option by YVGL in 1993 and re-zoning took place to allow the development to proceed. Envisaged as a prestigious golf and country club, development proceeded after an amendment to the local planning scheme was granted by the then Liberal State Government. To date the development has been entirely funded through private interests and revenues received from the strata-titling of the hotel and the sale of the residential lots. The development was split into two stages. The first stage was the golf course and associated club-house, hotel, health retreat and 120 residential lots. Construction commenced in 1997 after a four-year approval process and began with the first golf course, designed by Jack Nicklaus. Construction of the remainder of the resort commenced in November 2000 when the hotel development was undertaken. With two key components of the resort largely in place, construction of the health retreat began in November 2001. The Golf course opened in late 2000, with the hotel opening in April 2002. The Health retreat opened most recently in October 2002. Residential development took place simultaneously with the golf course and hotel and health club and approximately 100 of 120 lots developed as part of Stage One have sold to date. With a limited residential product being developed, strict covenants exist on housing style and form. These covenants maintain continuity in design and ensure that only quality housing is developed on the property, protecting the original vision of the resort as a superior development in all aspects. Stage Two, which was due to commence in early 2003, allows for the addition of another golf course and 120 condominiums/villas.
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From conception to current status, the project has covered a 9-year time span. Income from residential sales and the strata titling of the accommodation allowed the financial investment of YVGL to remain at levels, which were not reliant on large bank loans. The total estimated development cost to date is in the vicinity of $60 million dollars, (excluding land, legal and administration costs) yet bank loans only approximate $2 million. This level of outstanding debt provides the shareholders with a level of comfort and assurance in the success of the project to date. The HGCC development is nearing 75% completion. The following timeline highlights the timing of key development milestones achieved and those to be achieved within the projected 12-year project timeframe.
1993 Late 1994 January 1995 March 1995 April 1995 August 1996 December 1996 December 1996 Site identified (land held under option) Application for planning scheme amendments submitted Panel appointed to hear submissions on planning scheme amendment Planning approval granted by Minister for Planning Planning Scheme amendments gazetted Stage 1 development plan for St John Golf course approved Land purchased Development plan lodged with council for 2nd golf course (subsequently not approved) March 1997 1st golf course construction started Construction of roads/residential infrastructure started March 1999 June 2000 November 2000 Construction of clubhouse started Clubhouse open Construction of hotel started Construction of roads/residential infrastructure complete December 2000 September 2001 November 2001 April 2002 October 2002 1st golf course open for play Development plan resubmitted for 2nd golf course Construction of health retreat/recreation club started Hotel open Health retreat/Recreation club open
Future Timeline December 2002 January 2003 July 2003 December 2005 Infrastructure for Stage 2 residential expected to start Development plan for 2nd golf course expected to be approved Buildings for Stage 2 residential expected to start Stage 2 residential to be complete
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Resort Demand Top 3 Demand issues Seasonality of demand. Domestic market price sensitivity. Alignment of individual and local tourism body marketing efforts.
The business strategy of the Sebel Heritage is focused on attracting primarily Victorian residents to the property and to a lesser extent inter-state or overseas guests. A one-hour drive time from the Melbourne CBD makes the property easily accessible for the conference market, which generates mid-week demand for the hotel. The leisure/short-stay market is the major demand source for weekend hotel use, with the hotel expected to benefit from its accessibility to a major capital city and also its location in a well-known tourism/leisure destination. The HGCC resort is focussed on two special interest themes, being golf (primary) and health/spa (secondary). The resort is also widening its appeal by sourcing and packaging alternative activities which are specific to the region and that are available in the immediate area. These include experiential activities such as bushwalking, ballooning, cycling, wine tasting and gourmet food experiences. The selection of the Yarra Valley as the resort location is important for this reason. The resort provides activities which are new and complementary to the region (Golf and Spa) whilst also acknowledging the activities which are already provided and can be packaged with the resort product. The HGCC however has an additional challenge of attracting demand to a facility that has an outdoor activity as its primary feature. In a seasonal climate which exists in Victoria, with much cooler temperatures experienced throughout the winter months, generating constant demand for outdoor activities, particularly golf is challenging. It is for this reason that marketing collateral is focussed on the wider product offering of the broader Yarra Valley destination. This illustrates the importance of alternate complementary destination activities or indoor facilities in resorts or destinations impacted by weather patterns. Almost all demand for HGCC is sourced from the domestic market. International guests are considered a bonus for the resort but are not being heavily targeted as a market segment. Relative to overseas guests, domestic travellers are significantly more price sensitive. Competition from other accommodation establishments and a near exclusive reliance on domestic demand restricts the ability of HGCC to achieve room rates in-line with similar international resorts of this quality of development, as pricing is largely dictated by the perceived positioning of the resort against rival domestic destinations.
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The HGCC adds another feature to the wider Yarra Valley destination. Product development by the HGCC has encompassed the wider destination and its features in its marketing, allowing a more complete product to be presented to the consumer. Marketing of the destination by regional tourism organisations (RTO's) needs to encompass all the features of the region. While this is yet to eventuate, the HGCC is hoping that the resort will create a reciprocal level of interest from the RTO and that there will be scope for collaborative marketing initiatives. Resort Development Top 3 Development issues Compliance with state and two local government authorities for a range of approvals and the community consultation process. Lengthy approvals period resulting in higher opportunity cost. Creation of a world class golf resort in an area with inappropriate soil.
The development of the HGCC in the Yarra Valley met with initial resistance from the local community, stemming from concerns about environmental disturbances, noise, and increased traffic flow. The proposed development also contravened a regional development rule that denied all new sub-division of land for residential purposes. It is for this reason that a special planning scheme amendment emphasising tourism was necessary, and was delivered by the State government. This authoritative planning scheme amendment issued by the State government ensured that the local approval processes was not cumbersome, however, this overlay of the state government planning scheme resulted in a somewhat strained community consultation process and elicited many minor objections. Justified community concerns were written into the planning scheme amendment and the developer has attempted to appease local concerns. The developers held several meetings during which they made themselves available to the community to explain the development and its objectives. The level of acceptance is now significantly higher than first encountered; however, the challenges encountered in the development process highlight the additional costs and resources involved in developing a resort in a politically and socially sensitive environment. Development of the HGCC was initially made more difficult due the proposed site actually crossing the local government boundary of the previously known Lilydale (now Yarra Ranges) and Healesville (now Nillumbick) Shires, separated by the Yarra River. This required initial and continuing simultaneous approvals from two local shires. Such approvals were often dependant on the impact they had on other parts of the development. In addition there were up to 20 referring authorities involved in obtaining shire approvals.
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As with developments of this magnitude, there are significant holding costs incurred in the timeframe required to develop the property. The time taken for council receipt, documentation and presentation of planning requests to the community has been slow, evidenced in the more than 1-year of elapsed time between the submission of the development plan for the 2nd golf course and its expected approval. Such lengthy approval periods frustrate programmes, impact project returns and further pressure returns from the investment. In this case, seven years of development (and cost) was required before any cashflow was received. World class golf courses are often distinguished from others by the quality/type of soil on which the course is constructed. The type of soil and the course base were therefore two important features to consider when planning a facility such as the HGCC. The Yarra Valley is known for its clay based soil, which for the quality of golf courses being considered, combined with the regional weather patterns, was not appropriate. The poor drainage quality of clay and its impact on the general playing surfaces necessitated the laying of an extensive and very expensive sand base for fairway construction. A sand base of 300mm was required, at an approximate cost of $1.5 million, for the course to be of world class standard and in fitting with the Nicklaus signature design brand. This illustrates the significant additional cost required in developing built attractions which are often integral to a resort's appeal. Resort Operations Top 3 Operational issues Staff recruitment and training Workplace agreement negotiation Golf course drainage
At the time of writing, the HGCC (including accommodation facilities) had only been open for five months. The Health/Recreation club was scheduled for an imminent opening, with the golf club being open for approximately two and a half years. To date, the operating issues faced by the resort have been minimal. For example, recruitment of skilled staff was easier due to the proximity of the resort to a major metropolitan area. Opening a resort property involves co-ordination of a number of resources, people and information technology systems and challenges were also encountered in these areas, including timely delivery of furnishings, foods and other hotel fixtures, furniture & equipment.
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A workplace agreement has been negotiated for the entire resort, allowing a great deal of flexibility in workplace requirements. Under the agreement, a minimum of seven hours a week is guaranteed, with up to a maximum of 36 hours per week able to be rostered per employee. With this built in level of flexibility, there is little need for casual staff. The Enterprise Bargaining Agreement was considered necessary to give the resort flexibility in its operation, particularly during start-up and the formative months of operation. This employment condition was made clear in the recruitment process. HGCC is satisfied with the year to date performance of the resort, given the opening of the accommodation immediately preceding the cooler and wetter winter months. Conferencing demand has exceeded expectations thus far, with demand existing over a seven-day a week period, not the five-day demand period originally envisaged. This success of the resort highlights the importance of access to the conference market. The domestic weekend leisure market is taking longer to establish than anticipated, highlighting the competitive nature of this segment and the extensive marketing resources required. The opening of the health club in October 2002 has added another feature to the resort and resort management have very positive expectations for this segment. One of the initial issues encountered with the golf course operation centred on golf course drainage. The first winter season saw the addition of sub-surface drainage as drainage patterns emerged. This resulted in the additional cost of re-grassing of some fairways as the course settled after the growing-in period. Key success factors The factors that contributed to the successful development and operation of the Heritage Golf and Country Club are: Proximate location to a major urban centre (Melbourne), optimising access to a large visitor and staff population. Suitable product 'fit' with the regional food, wine and activity experiences within the Yarra Valley region. Minimisation of debt funding. Development finance was primarily sourced through strata-titling the hotel component of the resort, the sale of residential lots and private interests. Staged development, which facilitated gradual, organic demand growth. Early recognition of the importance of the domestic market in making the resort successful. Selection of an experienced and well-known Australian hotel operator to operate and manage the hotel component of the resort. Persistence on behalf of the developer, who had the patience and tenacity to move through all barriers and obstacles to achieve the vision of the resort.
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Kingfisher Bay Resort Case Study
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This case-study of Kingfisher Bay Resort illustrates several of the issues common to other secluded island resorts in Australia. Location: Unique Attractions: Fraser Island, Queensland Located within a World Heritage listed area, unique flora distinct to the island, diverse nature-based tourism opportunities, allAustralian materials and advanced architectural design utilised for resort structure Access: By catamaran or boat from Hervey Bay Wharf. (45 minutes)Closest regional airport in Hervey Bay (4 hours drive from Brisbane). Closest international airport in Brisbane Start of operation: Capacity: July 1992 152 hotel rooms, 109 villas and 200 backpacker beds
Description of site
Kingfisher Bay Resort is an integrated resort development located in South East Queensland on the Western side of Fraser Island, adjoining a World Heritage listed area. The resort is spread over a heavily wooded 65 hectare site at North White Cliffs and zoned as a multi-use site, including commercial, tourism, residential and recreation precincts. Resort accommodation consists of low-rise building, designed to integrate with the natural environment in an unobtrusive design below the tree canopy. Building design is based on the nature of Fraser Island itself, with indigenous materials and colour schemes utilised throughout.
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Central facilities for the resort adjoin the hotel accommodation wing, including the restaurants and entertainment areas, with an additional facility for day-tripper visitors located away from the main complex. A series of shops, car park and service station are located behind the hotel accommodation complex in a retail village style configuration. Beyond the resort village and hotel accommodation, the resort hill face extends steeply inland from the Western perimeter of the property to a ridge line. Additional accommodation facilities dedicated to the backpacker market are located in this area, separate from the main resort facilities. Supporting facilities are also sited beyond the ridge, including extensive plant, water, sewerage and recycling depots. Facilities and activities Accommodation stock at Kingfisher Bay is separated into three distinct styles, a hotel wing, villas and backpacker accommodation.
Kingfisher Bay Resort & Village - Overview of Accommodation Accommodation Hotel wing No. of rooms 152 Style Deluxe4.5-star Description Standard hotel room accommodation. The Hotel wing complex includes 2 restaurants, conference facilities, Bush Rangers office and swimming pool. Self-contained 2 and 3-bedroom villa accommodation. Budget style dormitory accommodation. Facilities include the Dingo Bar and sports facilities
Villas Backpacker Lodge
109 200 beds
Deluxe4.5-star Backpacker
Total rooms (excluding beds) 341
Kingfisher Bay Resort and Village amenities include three restaurants, four bars, a caf/bakery, a convenience store, beautician, nightclub and swimming pool. The fine dining and standard restaurants are located within the main complex. An additional food and beverage outlet, the Sand Bar, is geared to service both day trippers and guests, located close to the ferry terminal. The resort operates a range of activities on Fraser Island including 4WD ecotours, 4WD hire, range guided walks, tennis, bushwalking, birdwatching, wildflower walks, watersports, fishing and a children's club. In more recent years, additional activities and interpretation facilities have been introduced to Kingfisher Bay to improve the educational and interpretational opportunities for resort visitors. These include tours of the plant and recycling facilities of the resort and flora and fauna interaction opportunities. History Kingfisher Bay resort was conceptualised a Queensland-based public company, Queensland Tourism Industries Limited, as a nature-based tourism destination during the late 1980's. Developed under an Act of State Parliament on 19 January 1989, development of Kingfisher Bay Resort was funded through an initial capital raising and a partnership with Cosmos Australia P/L, a subsidiary of a Japanese public company, R**** Cosmos.
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The idea of a nature- based resort, utilising best practice construction techniques and local materials to provide a structure in sympathy with the environment, was visionary at that time and has continued to provide the resort with a competitive advantage. Development commenced prior to 1989 with construction of the pier facility, followed by construction of the resort component. At the commencement of operations in July 1992, the resort included the main complex, day visitor pavilion, 152 hotel rooms, 25 villas, the retail village and associated plant and equipment. Since 1992, an additional 84 villas have been constructed in two phases and a 120-bed backpacker style wilderness lodge and ancillary bar and dining facilities were developed. The size and layout of the resort has allowed for the development of a multi-use facility and the separation of potentially non-compatible user groups. This in turn has created a diversified demand base for the resort, reducing its exposure to market risk. Ownership structure Kingfisher Bay and Resort is owned and operated by Kingfisher Bay Resort Village P/L, a Queensland-based private company and subsidiary of Tourism Leisure Corporation. Land for the resort was purchased freehold and zoned into precincts. Villa accommodation is strata titled and income from strata sales has been used to fund expansion and development of the resort in a staged process. Additional land parcels are currently being offered for residential development, with strict covenants on development style and form. The sale of strata units and land has provided resort owners with an additional source of capital, which has been used to fund further development and upgrade existing facilities. Resort Demand Top 3 Demand issues: Price sensitivity of the domestic market. Limited ability to effectively leverage marketing opportunities using the resorts Hervey Bay/Fraser Island tourism destination context. Limited access to regional marketing funding/ high costs of effective promotion in the increasingly 'noisy' marketplace.
Approximately 70% of demand for Kingfisher Bay Resort is sourced from the domestic market, with the remaining 30% from international visitors. International guests are most likely to be from Germany, Europe and America. Relative to inbound visitors, domestic travellers show higher price sensitivity to room rates and package offerings.
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Competition from other regional resorts and a high reliance on domestic demand places pressure on Kingfisher Bay to keep room rates in line with rival destinations to ensure occupancies are maintained. The ability of the resort to increase its exposure to the less price sensitive international market is constrained by the high cost of overseas marketing and relatively poor air access into the region, not serviced by jet aircraft or major airlines. This illustrates the importance of the Export Marketing and Development Grant (EMDG) scheme to independent resort operators in remote locations. Kingfisher Bay Resort exists in the context of two distinct regional environments, the natural environment of Fraser Island and the built tourism environment of Hervey Bay. Relative to the size of more mainstream Queensland resort tourism destinations such as the Gold Coast and Sunshine Coast, Hervey Bay lacks enough critical mass to rank as a high profile destination in its own right. As such, Kingfisher Bay Resort is unable to gain significant marketing leverage through cooperative marketing with the destination as a whole, since the resort and its associated World Heritage Area has a higher profile than Hervey Bay as a destination. This has limited Kingfisher Bay Resort's access to the regional marketing funding pool, which benefits competitor properties within rival precincts or destinations. As a result, Kingfisher Bay must spend more on independent promotional activity to achieve the same level of promotional profile as other south east Queensland resort properties. Strong association with the World Heritage Area of Fraser Island has also delivered some managerial challenges for the resort. The stronger profile of Fraser Island has resulted in increased visitation; however, there has been a lack of corresponding Government investment in the provision of infrastructure and amenities to cope with rising demand. Kingfisher Bay Resort has had to invest significant funds beyond the boundaries of the resort to ensure the elements of guests' out-of-resort experience is of the highest calibre. This includes road maintenance close to the resort to ensure guest safety and prevent excessive vehicular damage. Hervey Bay Council has proposed raising funds for cooperative marketing through a tourism levy on local businesses with an aim to substantially boost the profile of the destination as a whole and grow the economic performance of the region through tourism. For Kingfisher Bay, growth in the profile of the destination may also stimulate improved access infrastructure, both road and air. The growing popularity of shorter, more frequent holidays drives the need for remote destinations to ensure they are accessible. Existing air transport to Hervey Bay is limited and requires guests to transfer in Brisbane. There is no direct air link from Cairns, Sydney or Melbourne due to lack of sufficient demand, which in turn acts as a deterrent to airline operating to Hervey Bay from major centres.
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Resort Development Top 3 Development issues Underestimated scale of capital expenditure in start up period. Multiple Government entry points for approvals/ navigating the regulatory and licensing minefield. Difficulty in securing community and environmental group support.
The cost of capital investment on Kingfisher Bay Resort was underestimated across the initial five year operational period due to the longer than expected lead-time to profitability. Significant outlays on the bus fleet ($2.5 million), Sewerage plant ($600,000) and passenger boat ($1.5 million) extended the timeframe for the resort to generate a profit. This was originally estimated to occur within 3 years of operation but instead took 5 years. The capital-intensive nature of the resort operation and the absence of short-term profits highlight the necessity for financiers to adopt a long-term view on investment return expectations. In gaining approval for various development components as they related to compliance and planning frameworks, the process of dealing with multiple Government agencies was cumbersome and not well streamlined. Development approvals and licensing for the range of plant and infrastructure facilities crossed Local, State and Federal Government jurisdictions, proved long-winded and complex and were exacerbated by poor communication between the various tiers of authority. Resultant construction time delays amplified development costs. Given the scale of capital expenditure required for an integrated resort development such as Kingfisher Bay and the length of time required to achieve operating profit is significant, a requirement exists for Governments to clearly articulate the cost, time and likely outcome of the approvals process and create a greater level of certainty. Community consultation prior to the development of Kingfisher Bay Resort was of paramount importance for resort owners, who wanted to reassure the community that the resort was designed to integrate with the environment rather than impose on it. Despite efforts by developers to maintain transparency in the resort development planning process and engage with local community, National Parks Authorities, environmentalists and local Government (Maryborough Shire Council), Kingfisher Bay Resort owners were involved in a 10-day court case with local environmentalists. The plaintiffs were not required to provide security for costs of the case and the onus of payment of all legal, preparatory and court expenses were borne by Kingfisher Bay Resort, despite the case being ruled in their favour. Opposition by local environmentalists delayed initial construction phase of the development, compounding construction time delays and creating escalating costs.
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Resort Operations Top 3 Operational Issues Compliance with a broad a range of regulatory authorities. Fringe Benefits Tax (FBT) liability of staff accommodation. Uncertainty relating to charges imposed by the National Parks and Wildlife Service.
A broad range of regulatory authorities dictate standards and procedures relating to specific plant, equipment and occupational health and safety processes for Kingfisher Bay Resort. The main ones include Queensland Waterways, Workplace Health and Safety Authority, Maryborough Shire Council, Queensland Department of Main Roads, the Environmental Protection Authority, Queensland Parks and Wildlife Service (QPWS) and Queensland State Government. The relationship between Kingfisher Bay Resort and each authority is based on a necessary level of compliance of the operational aspect of the resort that falls under the jurisdiction of a specific authority. In some instances, compliance regulations are duplicated by similar authorities or the same authority at a different Government tier. When this is the case, the resort must ensure it complies with the most comprehensive of the compliance codes to ensure it meets the requirements at each level. For example, Residual Current compliance as it relates to electricity falls under the jurisdiction of both Workplace Health and Safety Authority and Electrical Standards of Australia. By complying with the more rigorous standards set by Electrical Standards of Australia, then the resort automatically meets the secondary compliance goal. Although the same compliance measure must be met to satisfy both authorities, the process of identifying and ensuring all aspects are covered is the responsibility of the resort itself, creating additional operating costs. As new technologies improve the efficiency of specific plant and operations, compliance measures are upgraded and the resort forced to introduce new best practice procedures to meet new standards within a specific timeframe. Due to the scale of investment in plant and equipment, forced compliance over a short term can impact profitability significantly. For example, recent changes by Food Standards Australia necessitate an upgrade in both food transportation processes/facilities and food vending facilities at the point of purchase. New standards relate to ensuring food is tested more frequently, handled more hygienically and displayed (in all circumstances) under a protective fabric/material. The costs of re-engineering the buffet food service areas of the restaurants, ensuring the resort is compliant in all outdoor food presentation and adhering to new food testing regimes in food transport from the mainland are expected to be significant.
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Fringe Benefits Tax (FBT) on staff housing remains a significant issue for remote and island resorts like Kingfisher Bay Resort, since it imposes a tax on both the Resort operator and the employee for the 'fringe benefit' of on-site accommodation. In relation to housing, the fringe benefit granted to employees is taxed at the highest marginal income rate and paid by the employer, who then gains an income tax deduction based on the taxable value of the fringe benefit. In effect, the resort owner/operator is taxed for providing the benefit. For an employee on anything less than the highest income tax rate, there if no incentive to take fringe benefit style remuneration. Given the necessity for resorts located in remote location to provide employee housing and transportation, the FBT is an additional burden and barrier to profitability. As interest in more experiential nature based tourism has grown, Kingfisher Bay Resort has extended its activity base. The Resort provides 4WD recreation opportunities, Ranger Guided tours, and various other activities within the World Heritage Area demanding an effective relationship with the National Parks and Wildlife Service to facilitate appropriate touring opportunities for resort guests. Permits and associated levies are required for access to the World Heritage Area. As funding for the QPWS moves from consolidated reserve towards a user pays system, uncertainty relating to the likely escalation of charges is of concern to the resort, since such fees add to the resort's activity pricing. It is also unclear whether funds collected from tours are directly reinvested into the management and upkeep of the Fraser Island infrastructure, like roads and toilet amenities. This highlights the importance of a strategic partnership approach between resorts and national parks authorities to ensure adequate funding and upkeep of natural assets, which are integral to the success of the destination.
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Key success factors The factors that contributed to the successful development and operation of Kingfisher Bay Resort are: Exclusive location in a World Heritage attraction, with established visitation patterns and barriers to entry from competition. Development of a mixed-use product, comprising hotel, villa and backpacker accommodation, which creates additional sources of demand and reduces the exposure to market risk. Development under an Act of State Parliament, facilitating future development. Staged development and access to capital through strata titling and land sales. Financing partner with a long-term commitment to the project, willing to withstand the long start up period. Creation of a visionary product, reflecting principles of eco-tourism and adventure tourism. Integration of resort operations, creating additional source of revenue from tour operations, 4WD hire and barge operations. Active promotion of environmental, cultural; and conservation principles. Creation of a professional management company, with a management team skilled in operations and finance.
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Alpine Tourist Resorts Case Study
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This case-study of Alpine resorts illustrates many of the issues common to other secluded resorts in Australia. This case-study examines the top five Australian alpine resorts - Thredbo, Perisher, Mount Buller, Mount Hotham, and Falls Creek - as a group, and highlights issues and opportunities for Alpine resort tourism as a niche tourism sector. The five resorts are all located in Alpine regions near the border between NSW and Victoria. A summary table comparing their size, altitude, terrain (etc) is provided in Appendix 1. History Alpine tourism in the Snowy Mountains and the Victorian Alps first emerged in the 1940s and 50s. The first chairlift was built at Falls Creek in 1957 and ski-tourism became a popular winter adventure tourism activity. There was rapid expansion of ski tourism throughout the 1960s, 1970s and into the 1980s. Two styles of tourism accommodation emerged; non-profit club lodges, and commercial accommodation including hotels, resorts, B&B's and apartments. Over the last decade or so there has been a shift away from clubs and the bunk-style share accommodation of lodges in favour of self contained apartment accommodation. Over the last few years there has also been a push to go beyond the traditional winter market and to attract year-round visitation to alpine resorts with the key non-winter attractions being ecotourism, sightseeing, bushwalking, mountain biking and as an escape from the summer heat of the cities. Alpine Resort Demand Top 3 Demand Issues: A mature market - no new growth observed Seasonality - winter highs and summer lows Strong competition from other leisure activities
There are two main markets for the Alpine tourist resorts; winter and non-winter. In the winter, the resorts attract a preponderance of 18-35 year-olds seeking adventure and adrenalin, as well as a secondary family market. There is a general community perception that ski tourism is an expensive leisure activity and the alpine resort sector has to compete with a range of other leisure pursuits such as sports events, theatre and city-break tourism. Winter tourists to the alpine resorts have very high expectations of quality - both in terms of professional service and in terms of the standard of facilities provided. Many have visited overseas alpine destinations and demand a similar high quality experience. Increasingly these customers are demanding fully-inclusive deals with customised itineraries. Despite the introduction of snowboarding over the last decade, there has been little or no growth in demand for winter alpine tourism. Some resorts have however had considerable success in capturing the non-winter market.
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Winter Market (around 100 days) 19-35 year olds families positioned as an aspirational holiday destination Snowboarding as a new activity 'keeping the industry alive' Very high expectations of quality, high prices. Demanding customised 'packages' Shorter stays Mature market - low growth
Non-Winter Market (around 265 days) Seniors Conference, meetings and eventsShort break market Positioned as a value for money destination Soft adventure activities: ecotourism, guided walks, scenic drives, etc.Hard adventure: bushwalking, Mt climbing, rock climbing, mountain biking, etc. Seeking value for money Events and festivals Luxury health and spa facilities Growing market but very competitive
Over the last decade or so, many of the resorts have been trying to diversify their markets in order to address the problem of seasonality. The winter market is still the main source of revenue and has the highest room rates and highest occupancy rates, but some resorts have had considerable success attracting visitors for the non-winter season, especially the Christmas and Easter holiday periods. The non-winter market is very different to the traditional winter market, soft adventure activities such as ecotourism, heritage interpretation and education are important. Visitors want to learn and be touched by nature, the resorts are investing in walking tracks, and interpretive trails either jointly with National Parks Management agencies or on their own land (for example, Mt Buller is developing interpretative trails within the resort). Thredbo is generally acknowledged as leading the field in respect of non-winter visitation and has attracted a series of events including the National mountain bike championships, and a National Shakespeare Festival. Recent research by Canberra University shows these participatory events have a very high positive impact on the regional economy. Markets that look to hold potential for filling in the gaps between the holiday periods are the growing baby-boomer market, and MICE (Meetings, Incentives, Conferences and Events) market, and education tourism. Some of the resorts have also developed strong crossindustry synergies that assist to address the seasonal imbalance, for example, Thredbo has the Australian Institute of Sport's altitude training base and Mt Buller has a campus of LaTrobe University where Tourism and Hospitality courses are offered. The extra facilities provided by these campuses also serve as attractions for tourists and widen the product available. Alpine Resort Development Providing certainty for investors over land tenure and development approvals processes Responding to the threat of global warming - uptake and investment in new technologies for snow-making Regional support structures and infrastructure (including transport and communications)
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It is very unlikely that any new alpine resorts will be developed in Australia in the coming years as suitable alpine land is protected within National Parks and there has been little growth in demand over the last few years to warrant new 'greenfield' developments. There is, however, some scope for the expansion and redevelopment of existing resorts and Consolidated Press Holdings has approval for a $100 million upgrade of Perisher Blue resort and plans a further $240 million expansion subject to approvals. Alpine resorts exist under a complex system of land tenure and management that comes mainly under State Government responsibility. In Victoria the alpine resorts are all located on crown land often surrounded by (or adjacent to) National Parks. They are administered by Statutory Authorities (Alpine Resort Management Boards) that come under the Alpine Resorts Co-ordinating Council (ARCC) under the Victorian Department of Natural Resources and Environment. The ARCC is currently preparing an Alpine resorts 2020 strategy to address the strategic planning of the resorts. In NSW the situation is even more complex. Planning NSW has this year taken over the responsibility of development approvals in the Kosciuszko region from NSW National Parks and Wildlife Service (NPWS). Key features of the new (SEPP 73) planning policy for Kosciuszko are: - Improved public consultation - Stronger emphasis on visual impacts - Rigorous environmental impact assessments, - A requirement that geotechnical and land stability issues be stringently assessed. The Resorts Division of NPWS oversees the Local Government functions for the area including the provision of municipal services for the Perisher Range. Thredbo resort has a 'headlease' arrangement with NPWS whereas Perisher Blue operators have individual leases with NPWS. In the past there have been considerable delays and difficulties encountered at the planning stage of new accommodation developments, but it is hoped that the new SEPP 73 planning guidelines will provide more certainty for developers and investors by removing the local interpretation and influence over the approvals process. Both NSW and Victoria are currently involved in strategic planning exercises for the Alpine resort areas which are partly in response to the industry-wide threat of global warming. 'The greenhouse effect' is likely to have significant implications for Australia's alpine resorts with increasing temperatures and reducing precipitation. Global warming is expected to cause the 'snowline' to shift further up the mountain making ski resorts at lower altitudes more marginal. The higher altitude resorts of NSW have a competitive advantage in that they have greater capacity to increase their snowmaking to offset lower natural snow falls.
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Each of the five large resorts has already invested heavily in new technologies for snowmaking and Australian resorts are world leaders in this field, making snow at far more marginal temperatures than resorts in colder areas of the world. Access to water is crucial for snowmaking and the cost of pumping water up the mountain slopes to be turned into snow is significant, as are the energy costs involved. Alpine Resort Operations Top 3 Operational Issues Keeping the beds 'hot' Access issues - not being penalized for being in a remote location Reducing operational costs - tax Alpine resorts operate in a very high cost business environment. The remoteness of Alpine resorts from the major cities - Victorian resorts are about 3 hours drive from Melbourne and New South Wales resorts are about 5 hours from Sydney - means that inputs such as building materials and basic goods and services have to be transported long distances for use. Access is particularly difficult and expensive in winter periods when space is at a premium and road conditions can be poor. Improving access to alpine resorts is a key issue that can improve their performance. All of the Alpine Resorts in Australia rely on roadbased access, and despite significant recent private investments to improve air access to Mt Hotham and Falls Creek, alpine tourism remains a road-transport-based industry. One of the key success factors identified in managing the operation of Alpine resorts is to 'keep the beds hot', that is, to use every possible accommodation unit (or bed) for as much of the time as possible. If the beds are empty (and cold!) then there are fewer visitors on hand to use the other resort facilities - the ski lifts, caf's, restaurants, golf courses etc. The successful resort operators have a number of mechanisms that assist to keep the beds 'hot': - Tiered pricing during peak and shoulder periods. - Providing tailored packages for different niche markets. - Working in close co-operation with the accommodation booking service providers. - Ensuring there is a wide range of accommodation types and prices to suit different market segments.
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As with other resort types, most alpine resort staff are bound by an Industrial Award wage and there are significant add-on costs for human resources. The resorts have evolved quite complex systems of staffing over the years to ensure that they can attract and retain staff for the peak visitor periods. They rely on having a willing pool of young, enthusiastic staff attracted by the 'lifestyle' rather than the money. Some further success factors identified for successful Alpine resort operations are: - Managing the seasonal fluctuations in staffing requirements. - Managing the occupancy rates for the resorts to spread the visitor load over the seasons. - Diversification of product and activities. - Integration between the ski-lift operations and accommodation and food and beverage side of operations. - Managing the 'build-up' to peak season so that infrastructure (especially waste treatment plant) can adjust and operate cleanly and efficiently. Land taxes are an expensive aspect of resort operation and one resort operator suggested the possibility of reducing the rates of land tax paid annually. Another area where tax policies could be reviewed is in the context of the Alpine resorts industry being very dependent on seasonal weather conditions. It was suggested that seasonal resorts be allowed access to 'income equalisation' taxation adjustments similar to those allowed for farmers and others who may have large variations in incomes from year to year.
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Comparison of the Five Major Alpine Resorts
Resort
Thredbo
Perisher Blue
Mount Buller
Mount Hotham
Falls Creek
Established Land tenure
1962 National Park
1952 National Park NSW NPWS is 'landlord'
1946 Crown Land Adjacent to National park Crown Land surrounded by National park
1948 Crown Land surrounded by National park
Relationship to National parks Headlease arrangement with NSW NPWS Ownership Management Amalgamated Holdings Ltd KosciuskoThredbo Co. 16% 67% 17% 2037 m 1365 m 2200 4200 1365 m 6 km 480 ha 5.9 km Yes Jindabyne 30 km 487 km Sydney
Consolidated Press Holdings Perisher Blue Pty Ltd 22% 60% 18% 2034 m 1605 m 6980 3114 1680 m 104 km 1250 ha 3 km Yes Jindabyne 30 km 487 km Sydney
Mt Buller Resort Management Board 20% 40% 40% 1850 m 1450 m 1500 3500 1750 m 35 km 245 ha 2.5 km Yes Harietville 34 km 250 km Melbourne 400,000 350,000 50,000
BCR Asset Management Mt Hotham Resort Management Board 25% 45% 30% 1790 m 1390 m 2000 7000 1600 m 9 km 180 ha 2.5 km Yes Mansfield 47 km 357 km Melbourne
BCR Asset Management Falls Creek Resort ManagementBoard 17% 60% 23% 1780 m 1600 m 2000+ 4200 1650 m 20 km 450 ha 3 km Yes Mt Beauty 30km km 356 km Melbourne 300,000 270,000 30,000
Beginner Intermediate Advance Highest elevation Base elevation On-Mtn Car spaces No. Beds Village Height XC Trails Downhill skiable area Downhill longest run Snowboard Park Nearest Town Distance From Distance to a major city Apx. Visitor days per year -winter days -summer days Lifts Staff in Peak season
13 850
50
25
12
19 950
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Appendices
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Appendix 1- Bibliography ABS (2002) Australian National Accounts: Tourism Satellite Account 2000-01, Catalogue Number 5249.0, Commonwealth of Australia, Canberra. ABS (2000) Population Projections Australia 1999 to 2101, Catalogue Number 3222.0, Commonwealth of Australia, Canberra. ABS (2002) Tourist Accommodation Australia: December Quarter 2001, Catalogue Number 8653.0, Commonwealth of Australia, Canberra. ABS (1999) Tourist Accommodation Australia: December Quarter 1998, Catalogue Number 8653.0, Commonwealth of Australia, Canberra. Austrade (2002) How the Export Market Development grants Scheme Helps Tourism Exports, Australian Trade Commission, Canberra. Australian Heritage Commission and DITR (2001) Successful Tourism at Heritage Places, Commonwealth of Australia, Canberra. Blamey, R.K. (1995) The Nature of Ecotourism, Occasional Paper No 21, Bureau of Tourism Research, Canberra. BTR (2002) Travel by Australians 2001: Annual Results of the National Visitor Survey 2001, Bureau of Tourism Research, Canberra. BTR (2000) Travel by Australians 1999: Annual Results of the National Visitor Survey 1999, Bureau of Tourism Research, Canberra. BTR (2003) Travel by Australians: December 2002 Quarterly Results of the National Visitor Survey, Bureau of Tourism Research, Canberra. BTR (2003) International Visitors in Australia: September 2002 Quarterly Results of the International Visitor Survey, Bureau of Tourism Research, Canberra. BTR (2000) International Visitors in Australia: June 2000 Quarterly Results of the International Visitor Survey, Bureau of Tourism Research, Canberra. BTR (2000) International Visitors in Australia: Annual Results of the International Visitor Survey 1999, Bureau of Tourism Research, Canberra. CRC for Sustainable Tourism (2002) Our Gold Coast: The Preferred Tourism Future. Davidson, J. & Spearritt, P. (2000) Holiday Business: Tourism in Australian Since 1870, Melbourne University Press, Victoria. DITR (2002) Forecast December 2002, Tourism Forecasting Council, Canberra. DITR (2003) Forecast May 2003, Tourism Forecasting Council, Canberra. DITR (2002) The Ten Year Plan for Tourism: A Discussion Paper, Commonwealth Department of Industry, Tourism, and Resources, Canberra.
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Horwath (2002) Hotel Industry Survey of Operations, Horwath Asia Pacific Pty Limited, Sydney. Inskeep, E. (1991) Tourism Planning: An Integrated and Sustainable Development Approach, Van Nostrand Reinhold, New York. Inskeep, E. & Kallenberger, M. (1992) An Integrated Approach to Resort Development, World Tourism Organisation, Madrid. Inskeep, E. (1998) Guide for Local Authorities on Developing Sustainable Tourism, World Tourism Organisation, Madrid. Jones Lang LaSalle Hotels (2002) Public and Private Hotel Investment, Jones Lang LaSalle, Sydney. National Roads & Motorist's Association (2002) Accommodation Guide 2001-2002, Australian Automobile Association, Canberra. Roy Morgan Research (2002) Results of the Holiday Tracking Survey, Roy Morgan Research, Melbourne. The Australian Pocket Oxford Dictionary 4th Edition. (1996) Oxford University Press, Australia. Tourism New South Wales (2002) Impact of Geo-Tourism Development Values on Destination Choice in Coastal New South Wales, 2002 Ecotourism Association of Australia International Conference, 21-25 October 2002, Cairns. TTF (2002) Keeping the Bush in the Game: New Approaches to Making Regional Tourism More Competitive, Tourism Task Force, Sydney. TTF (1997) Developing Viable Regional Tourist Accommodation - Part 1 - the reform agenda for governments A joint study conducted for the Tourism Task Force by Arthur Anderson & Planning Workshop Australia. Sydney: Tourism Task Force. TTF (1997) Developing Viable Regional Tourist Accommodation - Part 2 A joint study conducted for the Tourism Task Force by Arthur Anderson & Planning Workshop Australia. Sydney, Tourism Task Force. Seniors Card Tourism Scheme (2000) Not Over the Hill, Just Enjoying the View Andersen (2002) Andersen Hotel Industry Benchmark Survey 2002, Andersen, United Kingdom. Andersen (2001) Andersen Hotel Industry Benchmark Survey 2001, Andersen, United Kingdom. Andersen (2000) Andersen Hotel Industry Benchmark Survey 2000, Andersen, United Kingdom.
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Appendix 2: List of respondents

Mr Mr Mr Mr Mr Mr Mr David Robert Geoffrey Ben Selliah Bruce Peter Gibson McIntosh Lee Dillon Kalyanakumar Porter Naas Managing Director Managing Director Director Tourism Head of Property Fund Manager Director - Property Senior Manager Commercial Real Estate Mr Ms Tony LingYin Karp Tang Vice President General Manager Macquarie Leisure Trust Mr Mr Mr Mr Mr Mr Mr Mr Mr Mr Mr Mr Mark Joe Phil Tim Todd Ric David Michael Simon John John Stephen Campbell Sita Kasselis Di Mattina Wynne Parry Cameron Lawrence O'Connor Reed Hagley Morris Holliday Managing Director Director of Development Director of Development Executive Director Director of Development Chief Executive Vice President Managing Director Managing Director Managing Director Managing Director Hospitality and Leisure Sector Manager Mr Mr Mr Mr Ms Mr Mr Steve David Jeff David Louise Richard Jeff Pink Kobritz Kuhne McMann Murray Buxton Beeston Development Manager Managing Director Senior Vice President Managing Director - Asia Pacific Senior Manager Managing Director Team Leader Regional and Niche Tourism Mr Michael Shiels Team Leader Tourism Business and Investment Analysis Mr Bob Peglar Group General Manager Tourism Business Development Mr David Crinion General Manager, Policy and Planning Group Mr Ms Prof Mr Graham Julie Bruce Keith Perry Conlon Thom Maxted Chair Executive Officer Chair General Manager See Australia Coastal Council of NSW Coastal Council of NSW Invest Australia SATC DITR DITR Consolidated Properties Deal Corporation Troon Golf Australia ClubCorp Holdings Australia Pty Ltd Medallist Developments Buxton Property Group DITR P&O Resorts Radisson Hotels and Resorts Six Continents Hotels Travelodge Hotels & Resorts Medina Mirage Resorts Management Pty Ltd Outrigger Hotels - Resorts Peppers Hotel Group Robert Luxmore CRI Limited Port Douglas Reef Resorts Bovis Lend Lease BT Funds Management Macquarie Bank Jones Lang LaSalle Hotels Colliers International Woodhead International Pty Ltd Westpac Institutional Bank Commonwealth Property Babcock & Brown Pty Limited ANZ Banking Group Limited
Attraction, Strategies and Partnerships Mr Ms Graeme Meg Crough Switzer Tertiary Industries Unit Manager Director of Tourism and Sustainable Heritage Mr Mr Mr Ms Mr Tony Brock Stewart Jan Peter Fleming Crambourne Moore Bimrose Keage Director of Southern Directorate Director, CRC Turism Managing Director Director - Tourism Development General Manager - Investment & Aviation NPWS Canberra University Sustainable Tourism Services Tourism Queensland Tourism Victoria - Infrastructure FIRB Department of the Treasury Environment Australia
TDevelopment & Aviation
125
Mr Mr Mr Mr Ms Ms
David Daniel Tony Stephen Cathy Rosemary
Tarr Gschwind Ryan Albin Parsons Hollow
Manager - Development General Manager Partner Deputy Chief Executive Executive Director Assistant Director Tourism and Sustainable Heritage
Tourism NSW QTIC Blake Dawson Waldron Tourism Task Force Green Globe Australia Australian Heritage Commission
Mr Mr Mr
Andrew Sandie Gil
Cocks Jeffcoat Marshall
Chief Executive Chief Executive GM Planning and Policy
Australian Ski Areas Association Mt Buller Resort Victroia DNRE
Appendix 3: Roy Morgan Value Segments Appendix 4: Properties included in Andersen Benchmark Survey Report sample Australian Resort Sample 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. Alice Springs Resort Royal Pines Resort All Seasons Mermaid Resort Geographe Bayview Resort Cairns Oasis Resort Matson Resort Cairns Outrigger Cairns Resort Rydges Oasis Resort All Seasons Pacific Bay Resort Centra Pelican Beach Outrigger Coolangatta Beach Hyatt Regency Coolum Orient Express Lilianfels Kings Canyon Resort Peppers Fairmont Outrigger Mooloolaba Sheraton Noosa Resort Marriott Courtyard Great Barrier Reef Novotel Cairns Palm Cove Sheraton Mirage Gold Coast Peppers Manor House Southern Highlands Outrigger Sun City Resort Pacific International Waterfront Resort Rydges Capricorn Resort Desert Garden Hotel Radisson Resort Palm Meadows Burswood International Resort Peppers Convent Hunter Valley Peppers Guest House Hunter Valley
126
30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49.
Radisson Port Douglas Treetops Sebel Resort & Spa Hawkesbury Peppers Hidden Vale Lockyer Valley Kingfisher Bay Resort Radisson Beach Resort Dunsborough Rendezvous Golden Beach Resort Rydges Reef Resort Port Douglas Rydges Reef Villas Port Douglas Sheraton Mirage Port Douglas Peppers Anchorage Port Stephens Peppers Delgany Mornington Peninsular Outback Pioneer Hotel Sails in the Desert Jupiters Townsville Hotel & Casino Sebel Resort Noosa Hyatt Regency Sanctuary Cove Conrad Jupiters Hotel & Casino Marriott Courtyard Surfers Paradise Resort Marriott Surfers Paradise Resort Mercure Surfers Paradise Resort
NSW Resort Sample 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. All Seasons Pacific Bay Resort Centra Pelican Beach Coffs Harbour Orient Express Lilianfels Peppers Fairmont Blue Mountains Peppers Convent Hunter Valley Peppers Guest House Hunter Valley Peppers Anchorage Port Stephens Peppers Manor House Southern Highlands Pacific International Waterfront Resort The Entrance Crowne Plaza Terrigal Grand Mercure Bowral Nautilus Coffs Harbour Novotel Northbeach Wollongong Novotel Opal Cove Coffs Harbour Sebel Resort & Spa Hawkesbury
127
Appendix 5: Operating department and undistributed expenses explanation Rooms Department All revenue and expenses associated with the sale and operation of guest rooms. Expenses include payroll and related benefits as well as other operating costs. Payroll and related benefits include salaries, wages and related expenses for front desk, reservations and housekeeping personnel. Other operating expenses consist of travel agent commissions, Frequent Flyer commissions, guest supplies, cleaning supplies, uniforms, laundry, linen, and other items for maintaining guest rooms and the lobby area. Food and Beverage Department All revenue and expenses associated with the sale and operation of food and beverage outlets in the hotel or resort. Major expenses include the cost of goods sold, payroll and related benefits, as well as other operating costs. Cost of goods sold represents the cost of all food and beverage inventory used in the preparation of items served to guests plus transportation, storage, and delivery charges. Other operating costs include china, linen, glassware, silver, entertainment, menus and printing, restaurant and cleaning supplies, contract cleaning, paper supplies, licences, and miscellaneous operating supplies associated with the food and beverage department. Telephone Department All revenue and expenses associated with the usage of telecommunications by hotel guests, such as telephone, internet and facsimile. Telephone expenses include the cost of local and long distance calls, payroll and related benefits for operators as well as other operating costs. Administrative and General Included in this category are the payroll and related benefits for the general manager, human resources personnel, administrative staff, and financial staff. These payroll and related benefits are relatively fixed and do not materially vary with occupancy fluctuations. Other administrative and general expenses include the cost of office supplies, computer services, accounting and legal fees, credit card commissions, liability insurance, printing, stationery, postage costs, cash shortages, credit and collection charges, dues, publications, donations, and other miscellaneous administrative expenses. Marketing Marketing expense includes payroll and related benefits for the sales and marketing staff, direct sales expense, advertising and promotion and travel expenses for marketing staff.
128
Utility Costs These costs represent expenditures for electricity, fuel, water, sewage, and other miscellaneous utility costs. Property Operation and Maintenance Property Operations and Maintenance expenses include payroll and related benefits for maintenance personnel, maintenance supplies, landscape and grounds maintenance, contract services such as waste removal, as well as the cost of repairs and maintenance for the building, furniture, and equipment. FF&E Reserve This is an amount set aside for the replacement of furniture, fixtures and equipment (FF&E). These items are exposed to heavy use and must be replaced at regular intervals to maintain quality, image and income potential for a property. Fixed Costs Fixed costs usually include property taxes and insurance. Property taxes typically include taxes on real estate, business and occupation, personal property, utilities and other municipal taxes. Appendix 6: Bibliography
Appendix 7: Statement of limiting conditions and assumptions
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Resorting to Profitability
MAKING RESORTS WORK IN AUSTRALIA
Sponsors Federal Department of Industry Tourism & Resources Tourism NSW Tourism Victoria Tourism Queensland
Key findings
The future stability and development of the resorts sector is an important issue for both industry and Government to consider, given the expected long-term growth in tourism in Australia and the potential for resorts to act as catalysts for regional development.
General Property Trust Australian Ski Areas Association Acknowledgments Andrew Sudholz Monika Dubaj Paula Drayton Jeffrey Blunden Kristy Rodwell Olivia Jenkins Karl Flowers
The resorts sector has performed poorly over the last few decades when compared to city hotels, but has adapted to the Australian context and environment. New resort development has been characterised by smaller, niche style resorts including golf resorts, eco-resorts, safari resorts and health and spa retreats. The resort industry has experienced a period of consolidation in the last decade, following the 'hype' of the 1980s. A better understanding of demand and supply fundamentals, stronger management expertise and stringent financial requirements create a healthier platform for future resort operations and development in Australia. In the next 5-10 years the resorts sector should focus on refurbishment and re-positioning opportunities for existing resorts rather than on new developments.
The full report and this summary are available free of charge on the website: www.ttf.org.au
While every care has been taken in preparing this Report, TTF Australia Limited, the project Steering Committee (including its constituent organisations), and Ernst & Young (including its related entities, partners, staff and agents) each disclaims all liability however arising to the maximum extent permitted by law for any loss or damage (whether direct or indirect) incurred as a result of any person, company or other entity acting or relying on information in this Report. This report is general in nature and readers of this report should obtain independent advice specific to their own situation.
TTF Australia Ltd Level 10, Westfield Towers, 100 William Street, Sydney NSW 2011 Tel 02 9368 1500 Fax 02 9368 0933 Email contact@ttf.org.au www.ttf.org.au
TTF Australia is the peak industry group developing tourism and infrastructure. It represents chief executives of the 200 most prestigious investors, operators, regulators and developers in Australia's tourism, transport and infrastructure industries.

Resort Tourism in Australia

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Resort Tourism in Australia

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Resorting to Profitability

MAKING TOURIST RESORTS WORK IN AUSTRALIA

Resorting to Profitability - Making Tourist Resorts work in Australia

Foreword from the Minister

HON JOE HOCKEY MP Minister for Small Business and Tourism

Ayers Rock Resort

Resorting to Profitability - Making tourist resorts work in Australia

Resorting to Profitability - Making tourist resorts work in Australia

Resorting to Profitability - Making tourist resorts work in Australia

Why has the profitability of resorts in Australia fallen behind?

Why are resorts an important part of the Australian tourism landscape?

Resorting to Profitability - Making tourist resorts work in Australia

Methodology The findings of this report were achieved through:

Evolution of resorts in Australia

Resorting to Profitability - Making tourist resorts work in Australia

Resort destination visitation

Resort accommodation usage

Resorting to Profitability - Making tourist resorts work in Australia

Composition of resorts in Australia

Resort development and investment

Resorting to Profitability - Making tourist resorts work in Australia

Resorting to Profitability - Making tourist resorts work in Australia

Average Daily Room Occupancy %

Hotels & Serviced Apartments

Total Resorts, Hotels & Serviced Apartments

Source: Andersen Hotel Industry Benchmark Survey 2002

Resorting to Profitability - Making tourist resorts work in Australia

Average Daily Room Yield $

Average Achieved Room Rate $

Marginal and volatile operational profitability, requiring investors to

Resorting to Profitability - Making tourist resorts work in Australia

take a long-term investment view.

Key success factors and opportunities

Resorting to Profitability - Making tourist resorts work in Australia

Sounds of silence experience at Ayers Rock Resort

Resorting to Profitability - Making tourist resorts work in Australia

Resorting to Profitability - Making tourist resorts work in Australia

Working in close co-operation with the accommodation booking service providers.

Resorting to Profitability - Making tourist resorts work in Australia

Demand and the Government response

Couran Cove Island Resort

Resorting to Profitability - Making tourist resorts work in Australia

Ayers Rock Resort, NT

Role of government in resort operations

Resorting to Profitability - Making tourist resorts work in Australia

Reduction of uncertainty of cashflow from operations

Reduction of property operations and maintenance costs by:

Reduction of resort administration costs by:

Resorting to Profitability - Making tourist resorts work in Australia

Kingfisher Bay Resort

Resorting to Profitability - Making tourist resorts work in Australia

Role of Government in resort development

Heritage Golf & Country Club

Resorting to Profitability - Making tourist resorts work in Australia

Resorting to Profitability Making Tourist Resorts Work in Australia

Resorting to Profitability - Making Tourist Resorts Work in Australia

Resorting to Profitability - Making Tourist Resorts Work in Australia

Resorting to Profitability - Making Tourist Resorts Work in Australia

Resorting to Profitability - Making Tourist Resorts Work in Australia

Secluded Outback Inland Island Coastal Acce ssib le

Golf tourism; Food and Wine tourism; Cultural tourism;

Resorting to Profitability - Making Tourist Resorts Work in Australia

Resorting to Profitability - Making Tourist Resorts Work in Australia

Resorting to Profitability - Making Tourist Resorts Work in Australia