When I drink tequila

As FY2019 closes it may be a good time to look back at the performance of the two ASX stocks with material exposure to FNQ.

Experience Co:

FY19_2

Well it could be just weather but maybe not just that.

Reef Casino:

FY19_3

Well it could be just weather but maybe there are other things.

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Airport cat don’t bounce

Airport numbers for May rather late this month.

Airport May 1

The Easter infused April bounce faded somewhat. Domestic is the one to look at here negative -2.2% for the month. While that is better than some of the more negative wet season numbers it isn’t great and needs to be remembered that Qantas was increasing capacity again from March 31. BITRE route numbers for April indicate that increased capacity in that month mostly went into lower load factors on the BNE – CNS route.

Sydney Airport bellwether reported modest domestic growth of 0.3% in May while international growth remained solid at 6.3%.

Election 2019: Communities of interest in North Qld

In a pre-election post I looked at some aspects around the redistribution for Leichhardt and Kennedy which excised the southern suburb of Bentley Park into Kennedy: The changing demographics of Kennedy

Katter is chuffed at his 2.3% 2PP swing. The LNP (and associated lobby groups) are smug about their performance in Herbert, Flynn and Dawson where the appalling George Christensen increased his margin significantly. However the themes in that previous post remain intact. Let’s look at Kennedy first with Katter first preferences:

Election 2016 1

A bit confusing in the division with the second largest number of polling booths in Australia. It should be noted though that the red bar which represents the entire electorate is not in the centre. Let’s look at it this way:

Election 2016 3Election 2016 2

The geographical divide is distinct.  Every polling place in the Cairns urban area was in the bottom 15. Every polling place in the top 15 is located west from Charters Towers out to Mt Isa and the gulf. The LNP candidate was a previous mayor of Charters Towers. It didn’t help. The deal Katter did to ensure survival of the Morrison government in the previous parliament was to support dam projects around Hughenden and Upper Burdekin. I’m not aware of anything specific closer to Cairns?

Communities of interest are frequently quoted in AEC redistributions. So related to Cairns let’s look at Leichhardt and the ABC vote compass survey:

Election 2016 4

Leichhardt fits nowhere near any other ‘North Queensland’ electorate. Which is a theme I have been following a while now for Cairns. This is replicated in aspects of the election result with  measures such as the aggregated vote of populist fringe groups (ON, KAP, Palmer et al) are significantly lower in Leichhardt while the Greens vote increased into double digits. In any comparison with Townsville we have to  remember that Herbert is the only entirely urban electorate in regional Qld outside SEQ.

This is also a reason I have qualms about any push for a North Queensland state which would leave Cairns politically isolated and marginalised in a deeply conservative bastion.

Note: PPVC = Pre Poll Voting Centre

 

 

Reef Casino Distribution

Reef Casino (RCT) have updated on their distribution for the June half:

Reef Casino Trust (RCT) today announced that the estimated distribution for the six months 1 January 2019 to 30 June 2019 is 2.61 cents per unit.
With another week before the end of the first half year our current estimate of the distributable profit* for the six months ended 30 June 2019 is approximately $1.3 million consistent with the update made ahead of the annual general meeting on 24 May 2019.

That brings the result in near the bottom of the previous downgraded guidance range of $1.2 – $1.7 million. The graph in the previous post showed the top of the guidance range for the June half: Reef Casino Sinking

Dransfield Hotel Futures 2019

Dransfield Hotel Futures are always worth a look with some interesting and sensible commentary related to Cairns and Port Douglas. There is a lot in there this year and much to come back to:

Conclusion
A moderate long term RevPAR outlook, slightly below inflation targets. The market will continue to be pinned to weather outcomes, with demand sentiment, particularly internationals hypersensitive to this. High quality new supply will generate interest and an exciting backdrop for visitors, including those who may not have chosen to holiday in Cairns previously
The Cairns and Port Douglas forecast represents a small downgrade to prior expectations, dragged by short term underperformance. Some of the gap is closed as development activity softens over the forecast period, albeit does not fully catch up • There is a large gap in performance metrics between large branded hotels and smaller independent stock in this market, with key indicators trading at considerably higher levels for branded stock who are typically members of the STR sample. This is likely to manifest in stronger rate growth as occupancy levels are constrained in high season, however will be offset by higher occupancy growth in the smaller independents as price elasticity comes into effect • Port Douglas hotels which typically outperform Cairns in terms of Rate whilst underperforming in occupancy, may feel some pressure from the new resort type stock coming into the Cairns market, competing for traditional luxury leisure guests • Over the period of the forecast, average occupancy levels of 75% are expected for this dataset which is 5 percentage points behind prior expectations. The reduction is a result of short term underperformance which carries through the life of the forecast. The occupancy position of the entire market, which includes a high number of smaller, unbranded and less regulated rooms sits approximately 10 points below this level
– Occupancy levels are forecast to fall 5 points in FY2019 as a combination of reduced wet season demand and new hotel rooms arriving in the low season
– Over the following two years to FY2021, we anticipate occupancy levels will largely stagnate in an environment of moderate supply arrivals
– Demand growth is expected to outstrip supply arrivals over the back half of the forecast with occupancy levels pushing above 76% in the latter years

Annual average rate growth of 2.6% is expected over the life of the forecast dragged by medium term underperformance
– Alternative destination opportunities tend to cap leisure market travellers capacity to increase price despite improved occupancy. This is more of an effect in Cairns as opposed to Port Douglas, although does limit the combined market from recording high rate growth in many instances • The arrival of new quality product may alleviate some of this historical effect in Cairns, however, perhaps existing market participants will discount to maintain occupancy • Our forecast is for a 3.5% decrease in average long-term real RevPAR compared to our previous forecast. The short term decrease, slowly catches up through the course of the forecast • RevPAR growth for the comparable period to FY2026 is inline with prior expectations, albeit from a lower base, and with a softer front end
– In FY2019 we expect 2.2% RevPAR decline as weather impacts demand – In the medium term to FY2021, average RevPAR growth of 0.7% p.a. is expected as moderate new supply enters
– Long-term expectations are for growth to accelerate over the back half of the forecast as new supply is absorbed and new development activity plateaus
– Full forecast expectations to FY2027 are for 2.6% growth p.a.

Apart from the conclusion there are aspects related to weather and tourism trends which relate to previous posts: Why does nobody look at this graph and the latest International Visitor Survey: International Visitor Survey shows TNQ continues to underperform

A bit hard to outperform when your key holiday sector is underperforming. Maybe someone should inform our tourism overlords because they don’t seem to know.

Previous Post: Hotel Futures 2019 Report; Source: Dransfield Hotels