March 20 (Bloomberg) -- Luxury resorts along Queensland’s coast, a destination for Great Barrier Reef visitors, are selling at a fraction of peak prices as a rising Australian dollar sends domestic vacationers overseas and hampers a recovery from last year’s hurricanes.
Properties on Dunk and Bedarra islands changed hands late last year for about 15 percent and 20 percent of their 2007 values. Club Mediterranee SA’s Lindeman Island resort is on the market with an asking price of about A$10 million ($10.5 million), a 10th of what the French company spent to buy and expand it in the early 1990s.
For-sale advertisements of hospitality properties in receivership jumped 47 percent to 85 in 2011, according to real estate company Colliers International. The decline in tourism to tropical North Queensland has led banks to push indebted resorts to declare insolvency or force them to sell, sending values to the lowest levels since 2000, said Wayne Bunz, senior director for hotels at property broker CBRE Group Inc.
“The sales are starting to gain momentum,” said Bunz, who is based in Brisbane and has handled the Dunk, Bedarra and Lindeman island deals.
Queensland’s tourism industry has been rocked by damage from Tropical Cyclones Anthony and Yasi last year, an Australian dollar near a record high, the rise of competing markets in Asia and aging properties in need of upgrades, Bunz said.
The storms, which hit the state’s north in January and February 2011, shut resorts in some of Australia’s most iconic tourist destinations and kept visitors away from even those that were unharmed. Damages and loss of visitors cost the state’s industry about A$400 million, Queensland’s Treasurer Andrew Fraser said in June.
After waiting in vain for a recovery in prices, the resorts’ lenders are now cutting their losses and turning the properties over to receivers, said David Sinn, a Melbourne-based commercial real estate partner at law firm Freehills. In Australia, receivers are appointed by secured creditors when the borrower can’t repay their loans, to sell assets to help pay back the debt owed.
“There’s a lot of pressure on banks now to realize some of the real estate, especially leisure assets, and put the money back into the general banking pool, so they can then lend it out,” Sinn said. “You can only wait so long.”
Loans by Australia’s four biggest banks to the commercial property industry, which includes hotels, account for 10 percent of lending, the International Monetary Fund said in a report in January. Luci Ellis, the Reserve Bank of Australia’s head of financial stability, said in a February speech that bank holdings of commercial real estate were a bigger threat to financial stability than the slumping housing market.
Far North Queensland’s leisure destinations are also seeing the negative impact of the nation’s two-speed economy, in which the mining industry is booming as manufacturing and tourism struggle, said Judy Hill, Brisbane-based accommodation division manager at the Queensland Hotels Association.
The number of visitors for both leisure and business to tropical north Queensland fell 7 percent in the year ended June 30, 2011, compared with a 9.2 percent rise in central Queensland -- which includes mining towns Moranbah, Gladstone and Emerald - - and a 16 percent jump in Brisbane, according to a January CBRE report.
The increase was fueled partly by airlines such as Jetstar Airways Pty and AirAsia BHD offering cheap flights to places such as Bali and Fiji, and Asian resorts offering comparable or lower rates to their Australian counterparts, Hill said.
One-way flights in May from Sydney to Nadi, Fiji, and from Sydney to Cairns on Jetstar both cost A$149, according to the carrier’s website. Group deal website iKoala.com.au offers seven nights for two at a beachfront resort in Nusa Dua, Bali, for A$199; a similar deal at Magnetic Island near the Great Barrier Reef costs A$299.
“There are some fantastic deals to resorts overseas, so people are taking advantage of an international holiday,” Hill said. “Because of what’s happening in the world, the average Australian is trying to save a bit more. And I don’t see the Australian dollar changing much in the next year.”
The Australian dollar reached $1.1081 on July 27, the highest level since it was freely floated in 1983, and traded around $1.0600 in Sydney yesterday.
Australia had about 5.9 million visitors in 2011, the same number as in 2010, according to government data. That compared with 7.8 million Australians traveling overseas in 2011, up from 7.1 million the previous year.
The average daily rate of hotel rooms in Port Douglas and Palm Cove in north Queensland fell more than 10 percent in 2011 and has dropped 8.9 percent this year, according to figures from hotel industry researcher STR Global.
Paula Westwood weighed up a vacation on a beach resort in Australia against one overseas when she was planning her 40th birthday celebrations last July. The clinical nurse specialist at Calvary Community Healthcare in Sydney settled on Yanuca Island in Fiji over her other options in Queensland, including resorts in the world-famous Great Barrier Reef.
“We didn’t go down the Queensland route because there was so much on offer in Fiji with a lot more variety, and more bargaining to be done,” the mother of two said. “The cost was definitely a big consideration. You might be looking for six months for a special to come on with Queensland. We didn’t see the Queensland resorts being pushed as hard.”
The first tourist resorts in the Great Barrier Reef, the world’s largest coral reef system, were built in the 1930s, according to the greatbarrierreef.org website.
The tourism industry there took off in the mid-1980s with the construction of the Cairns international airport in 1984, said Stevie King, a spokeswoman for Tourism Tropical North Queensland. Investment in tourism accommodations increased over the next five years, with the building of hotels including Sheraton Mirage Port Douglas resort and the Hilton Cairns hotel.
The region now has 12,500 rooms, ranging from five-star to caravan and camping sites and earns A$2.2 billion from 2 million visitors annually, according to TTNQ data.
Dunk Island, a granite slab in the Great Barrier Reef, has a resort with 160 rooms and waterfront suites. It began with one bungalow in 1934 and was last refurbished in 2006 following Tropical Cyclone Larry.
The first iteration of the resort on Bedarra Island was built in 1957, and its 16 beach and hillside villas were also last refurbished in 2006.
Both closed permanently last July after initially shutting for repairs after Cyclone Yasi. Mark Campbell, chief executive officer of Hideaway Resorts, said then the extent of the damage and further bad weather made refurbishment difficult, even with insurance, and subsequently put both resorts up for sale.
Hideaway agreed to sell Bedarra to Queensland-based Charlton Hotel Group for about A$5 million in November. That was followed by the sale of Dunk Island to Brisbane-based Linc Energy Ltd.’s Chief Executive Officer Peter Bond for A$7.5 million in December, CBRE’s Bunz said.
Sydney-based property trust GPT Group, which sold the islands to Hideaway in 2009, valued Dunk at A$51.8 million and Bedarra at A$24.8 million as of December 2007.
Bond plans to make the island a private getaway for his family, the Australian Financial Review quoted him as saying on Dec. 2. He declined to comment for this article.
Club Med closed Lindeman Island resort -- the first island resort built in the Whitsundays -- on Jan. 31, after failing to find investors to help fund its original plan to make it more upscale, Gold Coast-based spokeswoman Cynthia Dammerer said. The French company paid A$15 million for the resort in 1990, the Australian Financial Review said on Dec. 1. It spent A$85 million to expand it to 225 rooms, according to “The Whitsunday Islands: An Historical Dictionary” by Ray Blackwood.
CBRE has received more than 200 inquiries about the resort, and expects to complete a sale by the end of March, Bunz said.
Other Queensland resorts up for sale include Juniper Development Group’s Sea Temple Golf and Country Club in Port Douglas, an 18-hole course with a five-star resort and spa, along with its adjoining luxury housing estate, with a price tag of about A$12 million, being handled by CBRE.
Resort Corp.’s vacant oceanfront land in Townsville is being marketed by Colliers on behalf of receivers Ferrier Hodgson; and the Paradise Bay eco resort in the Whitsundays, with 10 private waterfront bungalows, is for sale by PRD Nationwide.
The listings follow the sales of the 194-room Mercure Port Douglas Treetops Resort to Wyndham Worldwide Corp. in August, which has renamed it Ramada Resort Port Douglas; the Sheraton Mirage resort to Melbourne investor David Marriner last April for A$35 million; and Orpheus Island in the Great Barrier Reef, a year ago to Computershare Ltd. Chairman Chris Morris for about A$6.25 million.
“The market was hurting last year,” said Paul Fraser, an agent in Jones Lang LaSalle’s hotels division in Brisbane. “There are astute buyers out there, looking at hotels and resorts. They’re saying this is the time to buy, this is the time when we need to get in on the ground floor again for the next cycle.”
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