Inclement forecast for South West

IN years gone by a trip ‘down south’ was a must-do for any visitor to Western Australia.

Even for locals, visiting the forests and beaches, farmland and wineries is a rejuvenating and refreshing experience.

But many accommodation businesses in the region have indicated that the traditionally strong Christmas period has been down on previous years, including comparisons to the 2008-09 summer season, which was heavily affected by the global financial crisis.

More troubling for some businesses are suggestions that the dramatic reduction in forward bookings, which heavily affect businesses’ short- and long-term planning, is now a permanent fixture thanks largely to the increasing popularity of last-minute internet-based holiday purchases.

And it appears the more established operators in the region have been suffering more over summer than their recently opened counterparts.

Seashells Hospitality Group managing director and owner, Paul King, has a strong presence in the South West with popular lodgings, Seashells Yallingup and Caves House Hotel, part of the group.

While Mr King admits trading conditions in the South West have been more difficult lately, he knows he is not alone.

“Overall, everyone is battening down and doing their best to stay alive,” Mr King told Business Class.

“And some are doing it tougher than us in accommodation.

“There’s not a lot of money is being made in the tourism industry in the South West at the moment.”

Yallingup’s Cape Lodge, owned by Peter Larsen and located adjacent to the Margaret River wine region, has long been a popular retreat, as indicated by the numerous awards it has received, including being voted Luxury Travel Magazine’s ‘best boutique hotel in Australia 2009’ and listed as one of the ‘world’s best 100 hotels’ 2010.

Despite this recognition, Cape Lodge general manager Drew Bernhardt says he and his top-end competitors have experienced a pronounced downturn lately.

“Business levels have been similar to last year where we experience approximately a 10 per cent downturn,” he says.

“From what I hear, the top end of the accommodation market is finding things a little tough.”

However, one of the newest luxury five-star boutique hotels in Yallingup, Windmills Break (which opened in November 2007 as the result of a multi-million dollar redevelopment of the old Laughing Clown Lodge by its owner, Geoff Larsen) hasn’t really been hit.

Windmills general manager and son of the owner, Dave Larsen, says he has been lucky, especially after receiving a silver medal in the 2009 WA tourism award’s luxury category.

“The second half of 2009 was fantastic,” he says.

“We’re up 25 per cent, so we’re very happy.

“But with 13 rooms for a maximum of 26 people we cater for higher end of market, the likes of $100,000 per annum professionals, so I would imagine if I was running a 60-70 room hotel it wouldn’t be the case.”

Margaret River’s Riverglen Chalets general manager, Vicki Etchells, has been overseeing the business, which has 14 chalets for up to 60 guests, for about four of the hotel’s 18 years.

Owned by the state’s Workman and Wagner families, and recently awarded a gold medal in the deluxe accommodation category at the 2009 WA tourism awards, the company has also experienced a downturn, albeit a less pronounced reduction.

“It hasn’t been as busy in previous years but the drop has been minimal,” she says.

“It’s probably come off about 5 per cent.”

Ms Etchells says the company’s high retention rate (about 60 per cent of customers return) means the drop in activity and the impact of the economic downturn has exposed her business to a new market.

“People are spending less but still taking holidays and taking it at a lower end, so we’re seeing a slightly different market who are the same age but have more money and are choosing to spend less.

“So if my theory is right that people are dropping to a lower price point, then those small businesses are doing better and it’s the larger resorts that are probably doing worse.”

These challenging conditions are prevalent despite Australia's South West being the only Australian location named as one of the top destinations around the world to visit in 2010 by international travel guide, Lonely Planet in its latest book, Best in Travel 2010.

Australia's South West chairman and Motive Tours general manager, Clive Nelthorpe, believes the tough conditions are largely due to Australians travelling overseas on the back of great deals from low-cost carriers.

"Fundamentally there is a downturn, and it hasn't turned around much," Mr Nelthorpe says.
"In the last 18 months there's been a 20 per cent increase in Australians travelling overseas, which is quite spectacular, with the prices of travel with low-cost airlines.

"It's been hard to compete on the interstate market with dollar value for airfares.
"The $400 flight to Bali and $200 for accommodation is pretty compelling ... it's pretty attractive stuff."

While Mr Larsen suggests people will always visit the South West regardless of deals to Bali or Kuala Lumpur, Ms Etchells is offering incentives to attract business.
"We have to be competitive and make sure we have a viable business, but we won't cut our rates,'' she says.

"But what we do is upgrade them, give them a two-bed chalet instead of two-person chalet."
Mr King understands the attraction of international travel.

"If people are flying overseas for a trip to Bali for a week for what it costs to go down south for two or three days, why wouldn't you?," he says.

"But the concern going forward is: are we going to suffer another tough year like 2009?"
Mr Nelthorpe says the forward booking situation in November was "disastrous", with the trend towards late bookings becoming more popular.

Mr King says forward bookings are down on last season and the season before.
"I think people are being more cautious ... and leaving their holiday decisions to a lot later, closer to when they are actually going on holiday, which makes it hard for us to plan," he says.
"We've even got accommodation (available) for the Leeuwin weekend, which is very unusual."
Ms Etchells doesn't think it's cautious customers driving the reduction in forward bookings.

"It's about accessibility online, so anytime you can find accommodation anywhere," she says.
"In 2006 the average lead time was five weeks, now it's just a few days because of websites like lastminute.com."

It's a sentiment echoed by Mr Berndhart, although he has noticed a jump in corporate bookings.
"We have noticed an increase in the amount of conference and executive meeting enquiries for this year which was a market that dropped away in 2009," he says.
But this doesn't correlate with Mr King's operations.

"The corporate market is still soft compared to previous years," Mr King says.
"Against 2007-08, it's probably down about 40 per cent."