IAG August 2014 - page 4

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August2014
4
EDITORIAL
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Oz:North toChina
M
ore than700,000ChinesevisitedAustralia last year, the largest inboundmarket
afterNewZealand. China passed theUK three or so years back to claim theNo.
2 spot on the strength of 10 consecutive years of growth averaging 13% a year.
Last year’s total exceeded that at +14.5%. Proportionately, the dollars are even
more impactful. Tourism Australia, the federal agency that vigorously markets the country in
mainlandChina andHongKong, puts theChinese at 11%of total visitors but their spending at
more like 18%, which ismore than the rest of the inboundmarket combined. In calendar 2013
it amounted toA$4.8 billion. TourismAustralia believes it has the potential to hit $9 billion by
2020, when forecasts are that Chinawill be sending 200million travelers into theworld.
As this amazing growth story unfolds, you have to think it augurs well for Down Under.
Yet, Australia’s part in it has been shrinking. More andmore Chinese are venturing overseas,
andAustralia’s desirability for them as adestination isn’t keepingpace. From 2001 to 2012 the
country’s percentage share of China outbound tourism fell by almost half. Tourism Australia
expectsChinawill account formore than40%of thecountry’sprojectedgrowth in international
travel by 2020. Their numberswill surpass 1million. Significant as this is, it reflects an average
annual growth rate that will have declined by about 60% from 2002-2012, a period that saw
Australia slip from theworld’sNo. 3 destination for luxury travelers toNo. 7, according to the
HurunReport
, theShanghai-basedbibleof Chinawealth-watchers.
Last year, Hong Kong-based China Reality Research, an arm of investment bank CLSA,
surveyed some 500 Chinese travelers who’d been abroad in the previous three years and
planned to go abroad in the next three. So people with above-average disposable incomes,
we may assume, and Australia was 17th on the list of places they’d visited. (Hong Kong and
Macau were nos. 1 and 2, respectively, Thailand was third, South Korea fourth, Taiwan fifth,
Singapore, Japan, theUS, VietnamandMalaysia completed the top 10.) Itwas 12thon their list
for future travel. Pointedly, when askedwhichdestination they’dmostwant to visit “ifmoney is
noobject,” only 16 choseAustralia.
The problem,many observers say, is product. That’s certainly the viewof the government of
Queensland, which is bidding out three new casino licenses to underpin billions in prospective
destination-scale investment the state hopeswillmaterialize to revive an ailing economy. But as
thismonth’s INFOCUSmakes clear (“Queensland’sBigGamble,”beginningonPage26), there
aresomeknowledgeablepeoplewhoquestionwhether thestatecansupport three resort casinos.
If The Star’s recent performance down in Sydney is any indication, theymay be right. Echo
Entertainment spent A$870 to remodel and expand New South Wales’ monopoly casino, a
project that was completed in January 2013, and VIP volume in the half-year that ended 31st
Decemberwas down 12.5% year on year.
In winning the state’s approval last year for a competing casino, James Packer was able
to sell the powers that be on the idea that Echo is bungling “the opportunities provided by
the growth in Chinese tourism, the massive Asian high-roller market and Sydney’s natural
attraction as a superior destination for high-end tourists andVIPplayers”.
The fact that The Star’s expansion brought to Sydney the only five-star hotel it has seen
since the 2000 Summer Olympics didn’t factor into his assessment, which also raises some
questions about Crown Resorts’ own results. VIP turnover in the latest half-year was down in
Melbourne andPerth a combined 25%.
Then again, Australia as a whole accounts for only about 3% of Asian high-end gaming
revenue, so there is something to be said for the thinking inQueensland—where Crown and
Echo have squared off for the license allotted the capital of Brisbane—and to Crown’s grand
plans for CrownSydney, theA$1.5 billion 350-room luxury casino itwill open in2019on the last
meaningfully developable acreageonDarlingHarbour.
One thingaboutMrPacker, his feel forwherehishomemarket isheadedhasbeen right on.
Sydney is in themidst of a boom in new hotel construction that will grow room supply by
20%by theendof thedecade,drivenby robust increases inoverseasarrivals (with travelers from
China representing the biggest contingent, their numbers up 13% year on year) and domestic
visitation, which is growing at rates not seen since before theOlympics. Corporate travel is up
27% through June.Occupancy rates are thehighest in the region afterHongKong andTokyo.
As a spokesman for commercial property giant CBRE noted recently, “There is a definite
sensenow that the timing is right for development.”
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