27 Sep 2019
Words Blair Macdonald Informer Issue 95

WESTERN AUSTRALIA: The Only Way Is Up

For the past five years, it seems the same the old words have been attached to Western Australia’s economy: downturn, doldrums, boom and bust and even the “R” word has been uttered by the State Opposition Leader.

As politicians argue over whether WA is in recession, or not, let’s be honest - it’s not been the best of times in WA in the past few years. 

When the music stopped after the recent mining boom around 2014, there has been a lot of businesses go bust and the hotel and motel market was not immune from that.

House prices have fallen 17 to 18 percent since 2014 and unemployment has risen. It’s been pretty rough for a lot of people.

In the 20 years or so that I’ve been living here in WA, one of the big things I’ve learned is that this is an economy that runs through cycles. It is dominated by its resources and services sector and largely driven by the export of iron ore, gold, liquefied natural gas and agricultural commodities such as wheat.

Tourism and the accommodation sector on the surface appear totally disconnected with these industries but the reality is that WA tourism is heavily reliant on intrastate visitation, or locals, who themselves rely on these core industries to provide their wages which they can spend on leisure activities.

So, after this rough period of five to six years, are we out of the woods yet? I believe not quite, but I really do think we’re getting set for an upturn. One of the compelling reasons I took on this role with ResortBrokers is that we are either at, or approaching, the bottom of the market about now.

I know that sounds counterintuitive but Western Australia has always been subject to boom and bust cycles and, if the economists and analysts are right, we’re due for the next leg up.

According to state government figures, our economy actually grew by 1.9 per cent in 2017/18, following six years of declining growth that ended in a contraction of 1.8 per cent in 2016/17.

The slowdown in the economy was mainly due to the completion of major LNG projects, halving the value of business investment. This led to total employment falling in both 2015/16 and 2016/17.

The Department of Jobs, Tourism, Science and Innovation noted a small increase in business investment in 2017/18 and an improved investment outlook is now supporting jobs growth.

These big picture numbers are the first positive signs we’ve had out here for quite some time. We may not get back to the previous crazy boom times but I definitely think we’re looking at much better days ahead.

MINING COMEBACK

All the signs are there that the west is beginning its resurgence and there are mine projects which are now expanding which indicates that the companies involved are becoming more optimistic.

One of the biggest is Fortescue Metals Group’s $1.7 billion Eliwana mine and rail project which has just turned the first sod. The Eliwana project, located 90km west-north-west of Tom Price, is expected to create up to 1,900 jobs during construction and 500 full time operational jobs over its more than 20 years of operation.

This type of capital investment, resulting employment and general confidence will eventually flow through to the economy. And from experience, when that does happen, it will also eventually flow through to the tourism and accommodation industry.

According to Dransfield’s Hotel Futures 2019 report, RevPAR (revenue per available room) is expected to grow 3.8 percent per annum through to 2027 even though three quarters of the remaining pipeline is under construction. 

Only Brisbane has a higher forecast long term RevPAR at 4.9 percent. However, that same report indicates they are expecting some short term volatility followed by consolidation.

This is Dransfield’s summary for Perth: “Market decline of 6% in FY2018, consistent with expectations, as supply is introduced. Two more years of pressure remaining. The long term outlook, however, remains positive as we move into the next cycle, with improved room stock and infrastructure driving demand in a small market being repositioned.” Given what’s been going on in recent years, we’ll take that.

Tourism statistics show that visitation and hotel nights are strongly driven by intrastate people. So once the economy starts moving again, the locals will start moving again too. 

TOURISM PUSH

Tourism infrastructure has always been strong in Western Australia and that is a good foundation for the accommodation industry.

The WA government has launched what it describes as “the biggest international tourism marketing push the state has seen” which is designed to boost Asian visitation. The marketing push, which will include advertising in train carriages in Singapore and joint campaigns with Singapore Airlines and AirAsia X, is expected to bring in up to 50,000 extra visitors each year.

When they see images of Australia’s sunniest capital city, Perth, and its 19 fantastic beaches including the iconic Cottesloe Beach, I have no doubt that they’ll be booking flights to get out here and enjoy all that WA has to offer.

And think about it, there’s also Rottnest Island which is a short ferry ride from the city, then further afield you have one of the world’s greatest dolphin watching opportunities at Monkey Mia, the World Heritage listed Ningaloo Reef and its famous whale sharks, Australia’s ‘whitest beach’ at Esperance, and some of the most surreal landscapes at Karijini National Park, the Bungle Bungles and the Pinnacles.

CORPORATE TRAVELLER

Foodies and wine lovers also head this way for the Swan Valley wineries, which are an easy day trip from Perth, and Margaret River which has built an international reputation as the home of fine wine in Australia.

Importantly, I also believe the corporate travel market is strong out here as well and that comes down to the fact that many major companies have their head office on the eastern seaboard but need to be out here in the west as well.

I’ve been fortunate enough to have travelled the world, and I’ve lived in some great places, and I genuinely believe very few places can match what we have here in Perth and WA.

Also, this is a part of the world which has always got back up on its feet after being knocked down. It’s no different this time and we’re getting back up now.