22 Oct 2018
Words Kelli Crouch

Investment sets SA on growth path

South Australia’s abolition of stamp duty on commercial property transactions sent a powerful signal that the state is serious about supporting investment. With major projects worth billions of dollars committed, and a renewed focus on growing regional economies, this is a rising market loaded with opportunity.

There’s so much going on in South Australia, it’s difficult to know where to begin in describing the extent of positive activity. Not all of it is related directly to the tourism industry, of course. But all of it certainly supports our thriving visitor economy, adding to the appeal of this vibrant and diverse state, and underlining confidence in its future.

South Australia is attracting more visitors than ever before, just notching up a record $6.7 billion in visitor spending for the year. Tourism is big business here. Latest figures show we attracted 6.9 million visitors for the year, fuelling the economy and putting tourism dollars into the pockets of our operators.

EVENTFUL

So it’s not surprising major projects in our State capital have focussed heavily on the tourism, hospitality and events sector, and the vital infrastructure needed to drive it. Momentum has built on the back of initiatives including the upgraded Adelaide Oval, redeveloped Adelaide Convention Centre, and the renewed energy of city laneways lined with bars and restaurants.

Adelaide does events so well. Adelaide Fringe is Australia’s biggest festival, second only to Edinburgh on the global fringe circuit. Recently, The Art Gallery of SA attracted record numbers with its amazing Colours of Impressionism: Masterpieces from the Musée d’Orsayexhibition.

The Clipsal 500 is the nation’s largest domestic motorsport event. Newly opened, The Bend Motorsport Park at Tailem Bend spreads the excitement to the regions, delivering a world-class motorsport facility, including a 100-room Rydges Pit Lane Hotel.

Meanwhile on two wheels, the Tour Down Under Festival of Cycling provides a massive boost for not only Adelaide city, but many surrounding regions.

INFRASTRUCTURE

Significant growth in infrastructure is vital to cater for all this activity. In terms of capacity, Adelaide Airport has been one of the country’s fastest growing for some time. Now a $165 million project is underway to expand the terminal, significantly upgrading international arrivals and departures facilities and providing more retail and dining options for both domestic and international travellers. Completion is due by 2021.

Which brings me to the next big ticket infrastructure investment. A proposed $500 million light rail line linking the airport to the city has been hailed as a ‘must do now’ project to further boost tourism. Providing an easily accessible, world-class short commute to the city’s premier business, retail, tourism, accommodation and dining precinct is important, particularly given the impressive pipeline of hotel investment now on our books.

Something like 1,000 new hotel rooms have been added in the last three years, and many more are on the way, particularly targeting high spending travellers. New 5-star offerings include Marriott’s Westin 285-room hotel on Victoria Square, the 165-room Atura Adelaide Airport Hotel (opening this month), plus the 257-room Sofitel Hotel on Currie Street and new 326-key Crowne Plaza Adelaide hotel on Frome Street, both expected to be finished in 2020.

Work has also started on a $330 million redevelopment of Adelaide Casino, including new gaming areas, a rooftop bar and luxury hotel (also due to complete by 2020). And the final stage of Accor’s redevelopment of the famed Sofitel Mount Lofty Estate is underway, including the addition of a 15-villa luxury boutique hotel, for total completion by mid-2019.

REGIONAL FOCUS

Visitors come to South Australia for its diverse experiences – unspoilt nature and premium food and wine in particular. The SA Tourism Plan 2020 aims to lift the value of our tourism industry to $8 billion by 2020.

The newly elected (Mar 2018) Liberal government came to power on a platform of reinvigorating the regions. Among their key policies was a regional growth fund, a 10-year, $150 million program to support projects that unlock new economic activity.

They also pledged to provide dedicated roads and infrastructure funding to regional communities using 30 per cent of mining royalties, estimated at about $750 million over 10 years.

The regions generate 40% of South Australia’s visitor revenue, so SA Tourism’s Regional Visitor Strategy will play a large role in achieving our 2020 goals.

The strategy has a target to lift visitor expenditure in 11 tourism regions from $2.6 billion to $3.55 billion. It’s all about seizing opportunities, particularly in the areas of accommodation and tourism experience development, events, and visitor infrastructure.

ROOM FOR IMPROVEMENT

Accommodation operators and developers will be integral, given an astounding 87% of visitors to our regions self-drive. Quality accommodation propels visitor satisfaction and repeat visitation, and overnight stays deliver significantly more revenue than daytrips.

An extensive regional audit of accommodation found new rooms are required across the state, and many existing properties are in need of an upgrade. Many older properties have been held in the same hands for a long time.

A focus on upgrading and developing new accommodation will help lift regional room rates, occupancy levels and total visitor spend. This presents terrific opportunities for investors in the accommodation sector, and Resort Brokers is already seeing a surge in demand.

Large numbers of South Australia’s accommodation properties are Freehold Going Concerns (far fewer leaseholds than in eastern states), and these are particularly favoured by operators and investors. Demand for a higher standard of accommodation in the regions means buyers stand to be rewarded for upgrading and innovating.

When I recently sold a $2.5 million Freehold Going Concern, demand from within SA and from interstate was such that we could have sold it 10 times over. Demand currently outstrips supply, so when quality properties enter the market, they are quickly met with strong enquiry.

Caravan parks too are in a phase of growth and renewal, and SA boasts many wonderful parks that take advantage of our strong nature-based tourism.

TIME TO INVEST

For all these reasons, adequate and well-maintained infrastructure is critical for regional growth, so the government has pledged investment in roads, air access, telecommunications, particularly WiFi, and assets such jetties, wharves, hiking and cycling paths and National Parks.

Increasing airline capacity and hotel stock in Adelaide will have a knock-on effect, generating more visitors to the regions.

At the same time, huge projects outside the tourism sector will fuel further economic strength and ongoing business opportunity. These include the $9.1 billion Air Warfare Destroyer project at Osborne Naval Shipyard, and the development of the Health Hub in Adelaide’s West End, the biggest health and biomedical research precinct in the Southern Hemisphere.

My feeling is that we will see investment flowing in from other states, particularly from Victoria and NSW, as accommodation developers, owners, investors and operators are drawn by the exciting new opportunities unfolding in South Australia.