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2% growth trend for January and February
The 2016 leap year and change of month of Lunar New Year impacted the total monthly change performance in January and February. After normalising for these two factors, there was 2% passenger growth at Cairns for January and February combined.
Last years leap year and lunar phases were always likely to result in a negative month but was probably weaker than expected in February down 6.8% before any adjustment. If only the Airport had discovered the leap year last February when it actually was and boosted reported results at that time. Pro-rata leap year normalised data here at Cairnseconomy/Tourism/CairnsAirport over the last year and updated for these numbers indicates a decline around 4.7% this year compared to last February (ex transits and transfers).
Despite normalisation the growth rate has been trending down with the 3 month moving average now at a two year low. It is also the lowest growth rate for the combined Jan/Feb two month period covering the lunar new year since 2010.
It will be interesting to see the March numbers which will be coming off the back of double digit growth last year.
Rental data for the 2016 December quarter from the RTA shows the rental gap between Cairns and Townsville widened further. Rental data is for new bonds lodged during the quarter.
That is 3br houses. The gap for 4br houses is also $80 and 2br units $70. Meanwhile, there is some indication further south that the Mackay rollercoaster may be approaching the end of the ride.
The declines in y-o-y growth mostly appear to have worked through in Mackay. Despite the relative outperformance growth in Cairns has been anaemic in the most recent years.
Comparative data from RTA places Cairns well above regional centres outside SEQ. Gladstone here is a shocker with a median 3br rent of just $180 for new bonds during the quarter a decline of 40% over the last two years. However, Pete Wargent sees some positive signs: Gladdy nears a bottom.
RTA also provide data on total bonds held including this comparative regional data for general tenancies. Central West is meaningless as easily the smallest region and growth shown represents only about a hundred rental bonds. Brisbane comprises 48% of total rentals so is the dominant influence on Queensland growth of 3.6% for the year to 31 December 2016. More than double estimates of population growth.
The lowly Far North position here would overwhelmingly represent Cairns. May require further digging in the RTA data.
Round numbers are always a PR favourite and Cairns Airport obliged with its commentary for January:
The average daily passenger numbers at Cairns were 1,000 higher than last January.
For the more statistically minded that was an increase of 7.8% (ex transits) on the previous year.
Source: Cairns Airport
The Asian Lunar New Year was celebrated on January 28th, but last year it fell on February 8th. In Korea, the Lunar New Year is celebrated as Seollal. The demand for Seollal travel helped successfully fill Jin Air’s charter flights.
Adjusted for comparable dates around the fall of Lunar New Year, there were 18% more passengers on the Korean charters than last year’s charters from mainland China. Travel industry feedback from Korea indicates that most Jin Air travellers had a 4 or 6 night holiday and they only visited Tropical North Queensland when in Australia.
The monthly trends around this time can always be volatile with shifts in the timing of the lunar new year so probably best to wait for February numbers. This year February will also have a day less after the leap year last year.
Further graphs and BITRE data have been updated at the Tourism\Cairns Airport page.
Dransfield have posted a year end review of their 2016 Hotel Futures:
In FY2016, the Cairns & Port Douglas STA market was the highest growth Capital city market in the country, buoyed by resurgent international and domestic leisure visitors
• Significant RevPAR growth of 11.2% exceeded our already robust 9.2% expectations as Australian leisure markets continue to prosper
• Occupancy levels improved 3.3 points to 68.2%, facilitating rate movement. This is the highest level achieved in more than a decade
• Rates grew by a strong 5.8%, slightly above our expectations • The STR sample of generally higher quality hotels recorded similar RevPAR growth of 11.6%, with slightly higher occupancy growth than the ABS set
• Certainty surrounding the proposed Aquis development has not progressed, stalling prospective developers plans for additional development. It is unlikely that we will materially alter our low supply expectations
• Long term RevPAR expectations for 5.3% growth p.a are expected to be maintained in Hotel Futures 2017 off a slightly higher base.
While the accolade of Cairns as a capital city is appreciated the Dransfield review covers the top ten markets which also includes such as Gold Coast.
The comments on Aquis are consistent with previous comments in Dransfield reports that the uncertain bona fides of the proposal may have been a net negative for Cairns.
Reef Casino Trust (RCT) has announced the estimated distribution for 2H (2nd half year) 2016. Not an outstanding result anticipated:
With slightly more than 3 weeks’ trading to go before the end of the financial year, our current estimate of the distributable profit* for the full year 2016 is approximately $12.0 million, compared to 2015’s distributable profit of $14.96 million.
For the Reef Hotel Casino’s financial year to date, hotel operations have performed strongly. Table games performance was slightly up on last year. However, the disruptions caused by our major renovations on the ground floor of our complex, including the reduction in entertainment, combined with increased local competition have had a greater impact on electronic gaming than anticipated.
Our major renovations will be largely completed by the end of the year and we can look forward to our new facilities on the ground floor of our complex providing an even more competitive product to our local and international patrons and customers
I would be more confident in the explanation here if it didn’t follow a softer 1H result when none of these factors were apparently relevant. Also uncertain what the increased local competition is?
The disruptions as I understand almost entirely related to the entrance area and previous Vertigo Bar, now creatively renamed and reopened as Bar36, with no direct impact on gaming facilities? Must drop by for a look while awaiting release of full results and commentary in February.
RCT reports on a calendar financial year with the 2H tourism season generally outperforming 1H:
That’s the lowest annual result since 2012 when the upper casino level was closed most of H1 for renovations. It’s the lowest 2H result since 2010. Results here in the graph have been adjusted to strip out one-off costs from the failed Aquis takeover in 2014.
Five year candlestick history from the depths of what was the bottom for RCT in 2012 with the ‘Aquis bump’ prominent:
Lots happening in the gaming sector. Ken Chapman has departed board of Aquis Entertainment which has been prominently noted in Cairns. All the big Australian & NZ casino operators have been significantly discounted following arrest of Crown marketing team in China.
Key RCT stakeholder Casinos Austria is also subject to a takeover offer in Europe. Trading in RCT was more active than usual since the open of trade yesterday even before the RCT announcement.
*Wikipedia: vertigo is a sensation of spinning while stationary.
RTA rental data for the September quarter were generally consistent with the previous quarter. There may be some early signs that declines in Townsville and more so Mackay are stabilising. Mackay could be the earlier indicator to watch here after the extraordinary gains in coking coal (steel) prices over the last year.
However the Cairns premium gap remains in the largest sectors:
To graph that premium/discount directly for Cairns and Townsville in the mutually largest 3 bedroom sector:
Most of that gap in recent quarters has been the decline in Townsville. The median rent for a 3 bedroom house in Cairns has been flat since 2014. However in aggregate it amounts to a substantial sum diverted from alternative spending.
There are very significant differences between housing stock in Cairns and Townsville. The 1 bedroom unit sector is interesting. This has shown the highest rental growth of any sector over the last two years in Cairns. It is also a sector in Cairns which can be fluid between residential and tourism. The much smaller Townsville 1 bedroom rental sector is now at an equivalent median rental as Cairns. The only sector this happens and only a small discount to the Townsville 2br rental. I suspect this relates to more recent stock but a sector to watch.
Most recent building approvals commentary at Conus: Regional Building Approvals disappoint in Cairns but better in Townsville
While growth remains healthy the monthly passenger numbers for Cairns Airport have become almost boring in their recent consistency.
In September Domestic was +4.9%; international +9.1%. International growth rate has come back somewhat in recent months but that is to be expected given it is no longer coming off the previous very weak period.
Good numbers also continue to be reported this week by Sydney Airport: domestic +3.9%; international +8.6%. All charts and BITRE info
will be updated imminently have been updated for most recent data at the Cairns Airport page.
The most recent labour force numbers for September from the ABS were out yesterday. There is plenty of commentary and the usual political use and abuse of different statistics. There is also an interesting note from ABS at Insights from the original data.
The incoming rotation group in Queensland in September 2016 was noticeably different in its labour force characteristics to the group that it replaced, and to the rest of the Queensland sample rotation groups, with a greater level of influence on the current month’s estimate and movement estimate than usual.
Through the Composite Estimation process the ABS has temporarily reduced the influence of this rotation group for September estimates and this is reflected in original, seasonally adjusted and trend estimates. This means that the remaining 7/8 of the Queensland sample will have a higher influence and contribution to the September estimates, with a marginal increase in standard errors for the estimates for this month.
The ABS will review this when October data for this rotation group are available. In the meantime, the ABS encourages users of the GM1 data cube to exercise caution in interpreting incoming and outgoing rotation group changes for Queensland, and, to a lesser extent, Australia.
There has been critical comment on the jobs data from a number of economists, including what this may mean for the Queensland data: Economists have taken aim at the reliability of Australia’s jobs data. May be interesting to see if and how that plays out across the regions next week also.
A recent post on a topical issue: How much tax should backpackers pay?
This analysis is very much based on farm labour and the Seasonal Worker Program rather than hospitality.
Note: “The figures in the graph are from government statistics. Consistent with the data, it is assumed that 90% of those applying for a second-year visa have worked on a farm. Backpackers who have worked on a farm but not applied for a second-year visa are not included in the graph, which therefore underestimates the number of backpackers working on farms.”