Cairns Airport: fasten seatbelts

Cairns Airport passenger numbers for December deteriorated further. Domestic -3.3%, International -6.9%, Total -3.9% on last year.

airport 1218 1airport 1218 2airport 1218 3

 

That sends annual growth numbers into negative for the first time since 2010. The annual peak in passenger numbers was actually back in March assisted by the lunar data havoc. The declines since August have been quite abrupt and not inconsistent with the recent overseas arrivals data for Queensland.

Sydney Airport bellwether also posted numbers last week with domestic down -2.6% for December. The impact of storm and weather was cited again as it was the previous month. International was also below trend at +3.7 with Chinese nationals (inc Hong Kong) +4.2%. The expectation should be that the earlier Chinese new year in February should boost the January numbers somewhat.

Source: Cairns Airport

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Concerns in arrivals data

November overseas arrivals data from ABS has flagged a few concerns. Much interest in the Chinese numbers where growth has stalled.

arrivals november 1

I deliberately post this with the original data as I don’t think any analysis can be valid without reference to the extreme seasonal volatility. ABS applies a specific seasonal adjustment around the lunar Chinese new year. However you can still pick out that diversions in the seasonally adjusted series from the trend will typically be around the spikes. Note also that the secondary peak in Chinese visitation appears in July which is also a peak in education arrivals. This had quite an impact in 2017.

Chinese new year shifts this year from February 16th to the 5th. So we should see increased activity in January but a less volatile data period than the extremes of last year.

While everybody has been looking at the Chinese data almost nobody has been looking at the holiday visitor data which has been flaccid as a not too impolite description for almost two years now.

arrivals november 2

Perhaps someone should ask the proliferation of tourism marketing bodies we have in Australia “where the bloody hell are ya?” However this is also where we run into the curious problem of why TRA has been unable to provide purpose of visitor data for the IVS since December quarter 2017 attributed to problems with benchmarking this to the ABS data.

arrivals november 3

The ABS have referenced in commentary issues with data around VFR (visiting friends and relatives) since changes in data collection from July 2017. Not sure what the problem is given that ABS provide a linked page with the relevant arrival form which is just tick the box.

This brings us to Queensland where promising data earlier in the year have crashed in the last two months.

arrivals november 4

I have gone back to the original data here looking for the source of why there was previously an apparent trend change in Queensland relative entirely to the reverse trend in NSW approximately following a change in data collection methodology from July 2017.

The surprisingly symmetrical head and shoulders type volatility in early 2018 is almost entirely related to lunar shifts around Chinese new year and Easter. This is where you need the ABS seasonal adjustment special sauce. However the shift downwards in NSW is most significant.

The methodology around this changed from July 2017. It was previously departure data based on state of longest stay. The ABS boffins have done their thing to backdate the new series with a warning beyond ten years. To overlap the series back ten years.

arrivals november 5

 

Some variation going back but it looks fine? When you go back and look at the arrival form at ABS it’s difficult though to avoid the suspicion that this may be lower quality data with the relevant questions framed as intended address or contact details?

Commentary and trend analysis at Conus: Disappointing Short Term Arrivals data for Queensland

Pokies lumps and bumps

Exuberant growth in Cairns SA4 player tolerance for pokie losses moderated somewhat in December. However still outperformed/underperformed the Queensland average. December monthly y-o-y growth:

Cairns SA4                                   +2.6%

Queensland                                 +1.2%

Cairns City SA2                         +17.6%

Cairns LGA – City SA2               +3.1%

Cairns SA4 – Cairns LGA           -5.6%

Innisfail SA2                              -15.4%

 

These are statutory reported numbers, not a survey. Not being a player I am intrigued by the volatility that sometimes appears. My perception has been of a steady regular trade, probably including gambling addicts, otherwise reflecting discretionary spending. Some numbers challenge that perception.

The Queensland gaming statistics don’t report any area with less than six venues to protect precious commercial confidences despite being derived from a public licence. This is why Cairns City SA2 is the only area within Cairns LGA with data available (ex casino).

Some of the numbers above are so derived for the area based on the available data. Until last year the numbers for Tableland Shire were withheld but could be derived from the other council areas within the Cairns SA4 area data. Mareeba has since fallen below the threshold so numbers can only be derived for the combined area even though they are withheld for both.

A curiosity is that on the Cassowary Coast they do have two SA2 areas above the threshold with six venues each:

egm december2018 1

Well they look reasonable and well correlated except for December 2017 when there was an extraordinary 19.7% jump in the Innisfail SA2 from the previous year. Must have been a good year for Christmas parties in Innisfail. It even usurped the traditional July/August peak everywhere else in FNQ. That is why the number for Innisfail fell again by  -15.4% in December this year.

Now is where it gets stupid because while data for Johnstone SA2 between these is withheld with only two small venues with ten machines each it can be derived from the other data:

egm december2018 2

 

Well at least one or both of them had a good tourism season last year.

Update Note: Just to clarify given that there has been an unusual amount of traffic on this Johnstone SA2 = Cassowary Coast Regional Council – Innisfail SA2 -Tully SA2

 

TRA: lipstick on a data pig

I struggle increasingly with how to deal with the National Visitor Survey (NVS and International Visitor Survey (IVS) from Tourism Research Australia (TRA). After further delays and confused communication the latest the latest results for both year to September 2018 were released last week.

Most disappointing was that there is still no purpose of visit data for the IVS. That is now a year where this has not been able to be provided despite ABS posting the relevant benchmark data with qualifying comment in the monthly overseas arrivals and departures series. I don’t see much point to the data without it.

As always the error margins when we get down to regional level always go missing in commentary. Here are NVS domestic visitor numbers for TTNQ with a  +/- 7.7% excel error bar based on information from TRA and on the most recent visitor numbers. this is a 95% confidence interval or 19 in 20 that it is within the range. Also domestic numbers from Cairns Airport.

nvs q3_18_1

I really didn’t expect the excel trend correlation here to be so close. I went for 7 years because data before that includes some extreme conniptions around the GFC and also some anomalous airport data around then.

These are not the same series and not meant to be the same. Domestic airport includes locals and also the greatest source of international arrivals. The trend though should correlate and it does, or at lease not be uncorrelated. Should be looked at in the context of growth which is what matters.

nvs q3_18_2

This is annual growth for TTNQ and dang isn’t it going gangbusters up double digits. That’s fine and usually the way we should look at stuff. However recent growth has obviously been significantly volatile compared to airport domestic. A problem with growth with volatile data like this is that it amplifies the statistical volatility.  So lets include annual growth compared to the previous quarter.

nvs q3_18_3

This is annual growth for the year to the current quarter compared with annual growth to the previous quarter rather than to the corresponding previous year. Meanwhile annual passenger growth at Cairns Airport while remaining just positive compared to the previous corresponding year have been declining on a rolling annual numbers basis (monthly or quarterly) since March for both domestic and international.

That hasn’t happened since the GFC aftermath in 2009/2010 albeit a lesser magnitude. December numbers from the airport shouldn’t be far away.

 

Post this week in AFR also of interest: Sydney Airport risks hit from Chinese tourism slowdown

 

Rental Data Returns

Qld Residential Tenancy Authority rental and bond data has been posted for the December quarter. There were some delays on this last year and September quarter data is still missing but it’s good to see this valuable data return.

The narrative hasn’t changed much in our tropical metropoles:

rentals december 1
rentals december 2
rentals december 3

Well at least the Cairns rental premium over Townsville has stopped rising but can the gap close? Does the Mackay recovery have legs?

Comparison of 3 bedroom house rentals for larger councils:

rentals december 4

3 bedroom houses have been used for comparison as the largest overlapping segment between regions. Cairns has a relatively higher proportion of units more comparable with metropolitan SEQ than other regional centres.

rentals december 5

Mackay and Gladstone at opposite ends reflects different timing of the coal and LNG development rollercoasters.

rentals december 6

Gladstone tops the table on growth over one year but still remains the cheapest rentals. I may check out Gladstone on my imminent annual southern sojourn. Accommodation rates remain dirt cheap for high quality locations. Menu prices on my last visit at the Gladstone Yacht Club (aka Port Curtis Sailing Club) had failed to adjust from boom levels. Worth a stop just to check this. I have given up hope that the spaghetti bolognese with chips on my initial visit many years ago will ever return to the menu.

Council de-amalgamation five years on

It is now five years since Noosa, Livingstone, Mareeba and Douglas Shires officially de-amalgamated in January 2014. Douglas was the most marginal on the QTC analysis at the time of the poll rated very weak (negative) with an estimated $403.92 in annual recurring costs to Douglas ratepayers.

I’m no expert on council budgets and residential ratepayers is an imperfect indicator but the Queensland Treasury Corporation (QTC) analysis doesn’t seem too far out based on the most recent 2018/2019 budget:

Cairns               Douglas           Premium ($)           Premium (%)
Minimum General Rate           $886.70        $1,005.00             $118.30                          13.3%
Cleansing (garbage)                  $375.64           $457.98               $82.34                          21.9%
Sewerage                                    $784.16           $888.50              $104.34                          13.3%
Water Access                             $264.98           $327.15                $62.17                          23.5%
Water /KL                                       $1.19                $1.45                  $0.26                         21.8%

Total (ex water usage)          $2,311.48         $2,678.63              $367.15                        15.9%

Water usage is discretionary but when an assumption is included the QTC number looks surprisingly good. Relevant rates and charges here were previously standardised across the Cairns Regional Council as far as I am aware. Of course rates in Cairns could be higher if the amalgamated council still had to carry Douglas. Differences also may reflect differences in policy and priority.

Further reading: De-Amalgamation in Action: The Queensland experienceQld Councils & the 80/20 rule – 81% of Queenslanders live in just 12 out of 78 LGAsCouncil mergers: Did they actually save us money?BUDGET: Council to spend big on new projects as rates rise by 3.9 per centSmall business being crippled by price hikes, says former Douglas Shire CEO

Note: there was a land revaluation in Douglas for the current budget while Cairns was deferred to this year. This makes comparison at different land valuations difficult and Douglas is a 2-tier split in median valuations between Port Douglas (inc Craiglie) and the rest of the shire. Will await updated Cairns land valuations in March but doubt this will help any comparison for the residents of Port Douglas.

Douglas shire sees increase in land valuations; Douglas de-amalgamation information

 

 

Cairns Airport engine loses thrust

November numbers today from Cairns Airport posted the third consecutive monthly fall in domestic passengers down -2.6%. Have to go back to the post GFC period in 2010 for the previous occurrence. Domestic capacity expansion from Qantas in to Cairns is scheduled from March 2019.

Airport November 1

Airport November 2
Airport November 3

 

Yet again there is no commentary from the Airport which would be useful, particularly international which was down -12.9% for November.

Numbers today also from Sydney Airport which was also negative -1.1% in November. This was attributed to a strong previous period and weather disruptions. The Sydney storms at the end of November did cause widespread delays and cancellations but without commentary it isn’t clear what impact this may have had in Cairns.

A positive in the Sydney numbers was an improvement in Chinese nationals (inc. Hong Kong) +7.6%. Hopefully that wasn’t all departures.

ACCC insurance proposals for NQ

ACCC inquiry has released the first interim report: Northern Australian insurance needs immediate action

Extreme weather in northern Australia, and the cost of servicing this area, are partly to blame for the high premiums that many consumers are facing. But other factors have contributed, including moves by insurers to assess risk and set premiums at an individual address level, rather than pool risks across regions.

The ACCC’s analysis revealed an unusual competitive dynamic. The inquiry found insurers are not actively trying to win market share in some high risk areas, but are instead seeking to deter customers and limit their exposure by raising premiums, leading to soft competition. Markets at the regional level are also highly concentrated.

However …..

The ACCC did not find evidence that insurers were making high or excessive profits in northern Australia, or that they were using profits in northern Australia to subsidise premiums in other parts of the country. Rather, high claims and costs have resulted in the majority of insurers operating at a loss in northern Australia during the past decade, while those that were profitable had lower returns than in the rest of the country.

I haven’t yet looked through the full report but it was pleasing to see issues related to stamp duty addressed as the first priority.

The interim report found that stamp duty paid on home, contents and strata insurance in northern Australia rose from $22 million in 2007-08 to $79 million in 2017-19, and GST revenue rose from $25 million to $78 million over the same period.
The ACCC recommends stamp duties be removed from home, contents and strata insurance. If agreement to do this cannot be reached, then it recommends state and territory governments base stamp duty on the sum insured, rather than the premium, and that some of the revenue collected is allocated to improving insurance affordability and funding mitigation work.

This is something I have been on about for a while (including a dismissive response from then Treasurer Nichols) with stamp duty representing a regional fiscal transfer. The recommendation to at least shift the duty basis to sum insured rather than premium should be easily implemented by the State. A modest but simple proposal. The ignorance and failure on this by the local representatives of all persuasions over a period of years does not reflect well on them.

There are 13 draft recommendations for feedback. Responses should be of interest with an election not far away and will add the report to my Christmas reading list and try to keep developments and links on the saga updated at the insurance page.

 

 

Rising airfares and flights

Alan Kohler was shocked last night that discount airfares had risen 38.9% in December.

Kohler 1

Note that the 38.9% is an increase on the previous month and not on the previous year. The BITRE data presented here appears to have come via CommSec who are possessed of sound clickbait skills. So to refer to BITRE:

Indexes are constructed from BITRE’s monthly survey of airline internet booking sites. Fares are recorded only when they are available on the nominated day of travel (the last Thursday of the month). The series is a price index of the lowest available fare in each fare class, weighted over selected routes.

Occasionally, the index may record an unusual result when the nominated day of travel falls on, or adjacent to, a public holiday:

The travel date fell the day after a public holiday in April 2018 and December 2018.

To return to the above chart note the initial point which is the Christmas spike in December 2012. Keen dayologists will recognise that 6 years ago was the last time the Thursday survey date fell immediately after Boxing Day. The discount airfare index increased 53.2% that year compared to the prior month. A similar spike can also be found in March this year when the early Easter shifted Good Friday to the day after the survey date. So no, not unusual.

However, airfare trends are rising in line with airline profits and Alan Joyce’s bonus as capacity discipline has been maintained. In positive news though, Qantas has just announced increased capacity:

Qantas is ramping up its flights to Queensland with more domestic services to Cairns, the Sunshine Coast, Townsville and Mount Isa, along with new business class options for travellers jetting from Sydney and Melbourne to Far North Queensland.

On the Brisbane-Cairns route, Qantas currently provides up to four daily return flights, but from late March, 11 additional weekly return services will be added to the schedule.

That should provide a welcome boost to the recent weak trend at the airport.

Also, I hadn’t looked through the BITRE airfare data before but it includes a neat interactive feature where you can explore data by route such as BNE-CNS:

Kohler 2

 

Hard grind at Reef

Reef Casino (ASX:RCT) has posted estimated distribution and guidance for 2018:

In the second half, hotel operations have continued to perform strongly. Casino operations have been lower because of strong local slots competition, a softer Chinese tourist market and lower spending by patrons generally. The recently completed Casino Refresh Project resulted in some disruptions however the casino now has a more competitive product.

RCT reports on a calendar financial year. The estimated profit of approximately $10 million is the lowest result since 2010. The second half result in particular is a concern:

RCT 2H2018

  1. The commentary on China is consistent with flat ABS arrivals data despite direct flights to Cairns throughout the 2H period.
  2. The commentary on lower slots (pokies) is in contrast to booming numbers at pubs & clubs in Cairns including other venues in the City SA2. Should be an imminent update on that data for November.

All interesting in the context of a new casino proposal for the “global tourism hub”.