Interview with Kevin Skipworth, Agent General, Government of Western Australia, Europe

Perth and some parts of regional Western Australia are experiencing a serious shortage of hotel rooms. Despite favourable trading conditions and extraordinary revenue growth, hotel development has not been commercially viable in Perth because of construction rates, complexity of construction, land costs, labour costs and competing land uses.To help alleviate some of these issues, late last year the Western Australian Government agreed to introduce a suite of incentives to encourage the development of short-stay accommodation across the State. WA is currently the only State in Australia that offers hotel development incentives. In simple terms, the possible incentives, to be determined on a case by case basis, include the provision of Crown land at reduced market rates, flexible floor space bonuses and infrastructure grants.In addition to incentives, the Western Australian Government has been increasing its presence at hotel and investment seminars and conferences in key markets and is developing a Tourism Investment Opportunities List, which will identify key infrastructure projects that are in the pipeline and information for potential investors on how they can get involved in these projects.The WA Government is also working closely with Austrade and Tourism Australia to attract investment from the Asia Pacific, Europe and the Americas.In which segments do you see most growth potential for new developments over the coming years or what product types?The tourism infrastructure priorities for Western Australia include increasing the Perth hotel stock, developing and expanding aviation routes, airport redevelopment, redevelopment of the Scarborough and Cottesloe beachfront precincts, Indigenous tourism, developing the cruise industry and caravan and camping, which will provide opportunities for investment around the State which incorporates the Grey Nomads market. Perth Airport is the main aviation gateway to Western Australia. It is the fastest growing Australian capital city airport. In the year ending June 2012, Perth Airport experienced a 7 per cent growth in total international passenger numbers and 11.7 per cent increase in total domestic passengers. A $750 million airport redevelopment is under way to accommodate this growth in activity. The airport also works closely with the State Government, through its tourism agency, Tourism Western Australia to attract new international carriers into Perth. Recent route development achievements include China Southern Airlines (November 2011) and Qatar Airways (July 2012).Tourism Western Australia is committed to establishing secondary aviation gateways to the north and south of the State. Broome International Airport has been identified as a suitable international gateway to the north and work is under way to develop international services between Broome and Singapore, an established global hub that will allow one-stop international reach to a range of destinations.Busselton Regional Airport has also been identified as a suitable aviation gateway to the South-West because of its proximity to the Margaret River region. Work is under way to investigate commercial viability of redeveloping the airport to accommodate interstate air services in the short-medium term, and international air services in the longer term.Other priorities for developing tourism infrastructure is increasing the number of caravan parks around the State, developing the cruise market potential and redeveloping beachfront precincts such as Scarborough and Cottesloe.Exciting opportunities will also arise from the State Government’s push to encourage environmentally sensitive tourism development in national parks in collaboration with the Indigenous owners of the land, through a program called Naturebank.Naturebank aims to position WA as a premier ecotourism destination by releasing land for eco-friendly accommodation, mainly in national parks and reserves. The Government recently released the fourth site under this program. The site in Francois Peron National Park, located in the Shark Bay World Heritage Area, is about 10kms north of world-famous Monkey Mia and offers a unique opportunity for potential investors. Francois Peron is one of the truly extraordinary areas of WA with a scenic coastline featuring red cliffs, turquoise blue water, white beaches and abundant wildlife. Other Naturebank sites will be released in the future.All signs point to Western Australia and Perth as Australia’s ‘hottest’ market for new hotel developments with excellent performances in key indicators OR, ADR and RevPAR. Please explain why this part of Australia is outshining the rest, i.e. what is fuelling demand. Western Australia has a very strong economy and consistently achieves higher economic growth than Australia as a whole. Exports account for around half of Western Australia’s Gross State Product each year. The value of Western Australia’s exports rose 34 per cent in 2010-11 and it is expected to rise further as capacity expansions in the resources sector come on line over the next five years.The State’s economic performance has meant there is a very high demand for hotels from the business sector. Last year the number of people travelling to WA from other states of Australia for business grew by 15 per cent while the number of international business travellers to WA increased by 18.6 per cent. It is no surprise that Perth is the strongest performing capital city hotel market in Australia, leading the market in occupancy, average rate, room yield and RevPARgrowth, with this trend set to continue over the next five to 10 years.Through investment attraction initiatives in key markets and hosted site visits to the State, considerable interest has been generated for hotel development in Perth and regional WA. Investor confidence has been encouraged by strong market fundamentals, government commitment to hotel development, opportunities in key locations such as the Perth CBD as well as some regional areas demonstrating return on investment (e.g. Pilbara Cities where two international brands have committed to hotel developments with more than 200 rooms in Karratha and Port Hedland).The recent government incentives applied to Crown land will assist in making the hotel development model more cost effective; importantly the City of Perth is finalising the regulatory changes to allow for plot ratio bonuses to be applied to hotel development in the Perth CBD.How is the industry also diversifying for long term tourism growth and resilience outside this main driver? Tourism Western Australia works in cooperation with the tourism industry to promote the State as a place to visit and to develop Western Australia’s visitor economy, which is worth more than $6 billion and employs 73,000 people.One thing that is absolutely critical to attracting visitors to Western Australia is to have a unique and compelling marketing proposition for the State. About two years ago, Tourism WA launched a new brand positioning – Experience Extraordinary – which is about promoting the many experiences that one can have in Western Australia which cannot be found elsewhere in Australia or in some cases, the world. These experiences include swimming with the world's largest fish, the whale shark, on the Ningaloo Reef; exploring Lucky Bay in Esperance, which has the whitest sand in Australia; or viewing the extraordinary colour, when thousands of wildflowers that can't be found anywhere else on earth, spring into life.As well as promoting the extraordinary natural features visitors can experience, Tourism WA through its events division, Eventscorp, attracts and supports unique, world-class events that give people a reason to travel, as well as provide valuable exposure of WA in Australia and overseas.In the next few months, WA will host several new and exciting events including: Perth International - this is Australia’s richest golf tournament, offering a prize pool of US$2 million. It will be held from October 18-21, 2012 at the Lake Karrinyup Country Club. US golfer Jason Dufner, the current World No. 9, and South African Charl Schwartzel, the winner of the 2011 US Masters, are the first big signings for the inaugural Perth International.Margaret River Gourmet Escape - held in the world famous Margaret River wine region from November 22 to 25, this event will be one of Australia’s highest profile food and wine event. The celebrity line-up is unparalleled to any culinary event in Australia, and so far includes Heston Blumental, René Redzepi, Sat Bains, AA Gill, David Chang, Neil Perry, Tetsuya Wakuda, Peter Gilmore, Matt Moran, George Colambaris, Matt Stone and Peter Kuruvita.BHP Billiton Aquatic Super Series - will see the Australian swim team take on the Chinese and South African national teams in a world-class program of events that will thrill spectators and national and international television viewers alike. It will be the biggest international aquatic competition held in Western Australia since the 1998 FINA World Championships. The event will be held from January 18-20, 2013. Conferencing is also critical for long term tourism growth. It is the highest yielding tourism sector, with an international delegate spending five times more than a leisure tourist. Perth has a very strong conferencing market. The Perth Convention Bureau (PCB), which is responsible for marketing Perth and Western Australia as a premium conferencing destination, secured $101 million in convention delegate spend for WA in the 2011-12 financial year and continues to attract high quality conventions to the State.Where in Western Australia should investors be particularly looking at for the moment and which locations have longer-term potential? Perth is a key area of focus and the State Government is committed to developing quality hotel accommodation to cater for the growing business and leisure demand, thereby ensuring dispersal to regional WA.Major cities in the Pilbara region such as Karratha, Port Hedland and Newman are the other key locations with long term potential. Hotel investment opportunities are available to cater for the current high demand which is fuelled by the resources sector. However, the State Government has committed more than $1 billion to the Pilbara Cities project which will transform the region by building modern, vibrant cities and regional centres that can support and deliver a skilled workforce for major economic projects in the region. It is envisaged that this investment will mean demand for hotels and tourism infrastructure will remain high.What other major tourism infrastructure developments are planned (or recently completed) in the region that will support and boost growth? Perth has embarked on a golden era of development and is undergoing a major transformation. Projects that will transform the city over the next few years include: Elizabeth Quay precinct – This $2.6 billion project will reconnect the Perth CBD with the Swan River foreshore and create a fantastic new tourism precinct. Preliminary work began in April and the precinct is expected to open to the public by mid-2015. Riverside project – Located at the eastern end of city, this project includes a mixture of tourism, retail, commercial and residential development. It is expected to attract $2 billion in investment and bring 7,000 residents and 6,000 workers to the area. Perth City Link - On the CBD’s northern boundary, the Perth City Link will see the Northbridge entertainment precinct reconnected to the city for first time in 100 years with the sinking of the railway line.Perth Arena – This state-of-the-art 15,000 seat stadium with a retractable roof opens later this year. It will be home to Perth’s international tennis event, Hopman Cup, plus a range of concerts and activities. New outdoor stadium – The State Government has announced plans to build a 60,000 seat stadium on the Burswood peninsula. It is expected to be completed by 2018.New museum – The State Government has announced funding for a new museum which is expected to open in 2020. The State’s only casino at Crown Perth is undergoing a $750 million transformation which will see the complex reinvigorated and rebuilt to include more restaurants, bars and an expanded gaming floor. Crown also recently announced plans to build a new 500-room, six-star hotel on the site.As mentioned before, Perth Airport is also undergoing a $750 million redevelopment.Outside of Perth, Hilton Worldwide is building a hotel in Karratha under its Double Tree brand. The eight-storey hotel is expected to open in mid-2014 with 144 rooms, 20 apartments, a restaurant, bar facilities, a fitness centre, outdoor pool area and three function rooms.Although recognised as one of the easiest country to conduct business, what are some of the most important challenges hotel investors should be aware of?The strong Australian dollar, high construction costs, labour and skills shortages and potentially long approval processes can affect development in Western Australia. However, the hotel incentives package agreed to by the State Government late last year will address many of these issues.Part of Australia’s resilience – in tourism and hotel performances – over the recent downturns has been backed by much better results from emerging markets in Asia. How will the industry continue to target these vital markets and boost overall demand in light of lower activity from Europe and North America? There is still a key presence in the UK and Europe with offices and representation flying the flag for Western Australia. Tourism WA will also continue to be active in these markets. The agency has recently entered into a $1.2 million cooperative marketing agreement with Qatar Airways, which recently commenced flights to Perth. Perth is only the second Australian city to become part of Qatar Airways’ global network. This presents an excellent opportunity for promotion of WA in key markets of UK and Germany.Last year, WA celebrated a huge success – the first ever commercial direct flights to Perth from Beijing and Guangzhou by China Southern Airlines. This was supported by an initial $2.6 million cooperative marketing campaign between Tourism WA, China Southern Airlines and Tourism Australia to raise awareness of WA in the massive Chinese market.The campaign has produced promising results, with Chinese visitation steadily climbing. Importantly WA’s share of Chinese visitors to Australia is slowly but surely rising – from just three per cent a few years ago to up to five per cent in the last survey.Tourism WA, China Southern Airlines and Tourism Australia also recently entered into another cooperative marketing campaign in China – worth $4 million. It aims to promote WA as an extraordinary destination and boost load factors on China Southern Airlines.Tourism WA is also working to develop direct routes into other key markets such as Japan and increase aviation access to others such as Jakarta. What role will the domestic market continue to play for Western Australia?The domestic market is vital to WA’s visitor economy. In 2011, 18.9 million interstate, intrastate and day trip visitors travelled to or within Western Australia and contributed $4.3 billion to the economy. Tourism WA just completed a $7.6 million domestic marketing campaign which included brand marketing to inspire prospective visitors to travel to WA, cooperative marketing to promote product offers and event marketing to encourage people to lock in plans to travel.Key Facts on Western Australia - Population 2.35 million
- Area 2.3 million square kilometres
- Time Zone GMT +7 hours in UK Summer
- Closest Australian city to India and China
- Flying time to Singapore 5 hours (same as Perth to Brisbane)
- 2010-2011 Exports AUD$112 billion
- One of the gas projects (Gorgon) is a AUD$43 billion dollar project
- Export 46% of Australian ExportsHotel/Tourism Specific Facts - Highest average hotel room price in Australia (Capital Cities) over $AUD180 per night
- Occupancy siting over 85% all year round (Mainly Corporate)
- Occupancy in the Pilbara area over 95% all year round (Mainly Corporate)
- The Hilton just announced a 154 room hotel development in the Pilbara region
- The largest hotel of over 400 rooms, 5* hotel has just been announced for development in Perth City
- The EOI (expression of interest) for the Elizabeth Quay hotel development has opened
- The EOI for a unique regional World Heritage Site in Shark Bay is open for an eco-tourism opportunityPerth Airport - Main aviation gateway for Western Australia
- Fastest growing Australian capital city airport based on CY 07 -11, averaging 8.5% in CAGR (Compound Annual Growth Rate).
- Strong growth is continuing. YTD (June’12) YOY growth of 7% on total international passengers and 11.7% on total domestic passengers – YTD YOY growth on 10.3%
- Account for 97% of total Western Australian interstate travels, and 99% of international travels
- A$750 million airport redevelopment underway to accommodate growth in aviation activities
- Works closely with Tourism WA to attract new international carriers into Perth. Recent route development achievements include China Southern Airlines (Nov’11) and Qatar Airways (July’12)