Developers take stock in downturn

EXACTLY how much of the $1.3 billion worth of new tourism accommodation currently being planned for the state will come to fruition remains uncertain in the current economic climate.

But while some developers are adopting a cautious approach to their new projects, others more advanced in their plans are still charging ahead, confident that the right project on the right site will perform better than the base market conditions.

According to Tourism WA's most recent tourism accommodation development register to June 2008, about 84 projects are being planned around the state.

The South West has the highest number of projects in the planning stages, with 34 projects being planned at a value of $501 million.

The $62 million Aqua Resort in Busselton, being developed by Perth-based Ibex Capital, is the largest tourism development under construction in the region.

The $34 million strata-titled development includes 34 single storey villas and seven two-storey villas on 3.4 hectares of coastal land on the site of the former Acacia caravan park.

Construction started in October 2008 with completion of the project expected by mid-2010.

About 30 villas have been sold, with prices ranging from $900,000 to $2.8 million for the two-storey beachfront villas.

Ibex Capital managing director Charlie Robertson said the project was one of the most unique in the region in terms of its location and landscape.

"Since we started the project ... a policy has since come in to prevent further development of caravan parks, so that further enhances the uniqueness of the project and the site," he said.

"There are no more opportunities for other development to happen on that Geographe Bay stretch of coastline."

Ibex is also behind a proposal for a mixed-use resort, residential and retail project in Gnarabup, which is currently being considered by the Shire of Augusta-Margaret River.

That development will include a 98-room hotel, 56 villas, a village centre with 19 townhouses and apartments with cafe, gallery and retail space.

Other major developments in the south of the state to have received development approval include the $50 million Project Plaza in Albany, the $40 million Augusta resort, the $37 million Clairault Estate resort, and the $35 million Cowaramup Bay Resort.

Australia's South West regional manager Mark Exeter said developers were being more cautious about new projects in the region.

"We're seeing a full range of reactions. Some developers are a bit more cautious, they're looking to do a high percentage of presale before construction. Some developers are getting approvals in place ... going through that process then in 12 to 18 months' time they'll look to see if they'll proceed," he said.

"Those under construction are expected to go through to completion. Those in the planning stages will see what effect the global financial crisis will be."

Among the developers who have shelved plans for new hotels is Jon Jessop of Edge Resorts.

Edge has pulled plans for a new hotel in Exmouth, after obtaining development approval and builders licence and spending almost $200,000 on the project to date.

Mr Jessop, who recently opened Kalbarri's first new hotel in more than 20 years, said once-commercially sound projects were no longer viable in the current economic environment.

"People are being cautious but don't know how severe [the downturn] is going to be," he said.

"The mining and resources boom underpinned accommodation development up north; now that the mining boom has come off the boil ... it's not all doom and gloom, but it's a lot more modest than it was."

In Perth, plans for the city's next major new hotel development, the $90 million 180-room Frasers Suites hotel on Adelaide Terrace, are progressing, with the facility expected to come on-stream in late 2010-2011.

But many other Perth hotel projects have been put on hold, including the Parker Street Hotel Northbridge, the Seasons of Perth expansion, the Elan Riverside Pier Hotel, and the Goldsborough Hotel Fremantle.

Hotel analyst Alan Boys said while the hotel investment market would experience a downturn this year, Perth would still have a shortage of hotel rooms in the longer term.

"Hotel occupancies in Perth have been very high over the past two to three years, so even if they drop 10 per cent it's still at a very robust level," he said.

'The acid test will be February; if we're seeing discounting in February it will be a very worrying sign. It's generally a very busy month for the hotel market.

"If we start to see that happening in February, obviously that will be an issue of significant concern."

In the north, Broome has experienced an almost 40 per cent increase in supply during the past 18 months, while visitor numbers have remained fairly static.

New resorts recently opened, or about to open over the next couple of months, include the Marilynne Paspaley owned Pinctada Cable Beach, Eco Beach, The Pearle and the expanded Mercure Inn, with The Oaks hotel to unveil its new development in a few months' time.

But two major hotel developments located near Cable Beach - the redevelopment of the Palm Grove Caravan Park and a $25 million project on Cable Beach Road - have been put on hold.

Shire of Broome director of development services Darryl Butcher said many developers were choosing to sit back and wait.

"Everybody's still scratching their head about how it's going to affect them. A lot of developers are going back over their plans and looking at them more closely," he said.

According to the TWA register, 15 projects were completed in the six months to June 2008 with a combined value of $49 million, almost half that of the previous six months.

There are currently 52 projects under construction at a cost of $507 million, which, once completed, will add 2,006 lettable units across the state.