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Sink or swim – Chinese tourists the key

The Age, 19 May 2012

The GFC, the high dollar and natural disasters have created a perfect storm in Cairns.

Stroll along The Esplanade in Cairns – where scores of tourism outlets tussle grimly for passing trade – and you can start to feel like a banknote on legs. "Hello!" cry attendants to passing strangers from the doorways of cafes and restaurants, their hopeful smiles fading as each potential dollar moves on. All along the tourist strip, tour companies and their agencies display racks of brochures for countless struggling attractions spread across Far North Queensland, each one a survivor of the longest, most comprehensive slump ever to strike the region.

At night, while rival coach operators vie for backpackers to take on pub crawls, restaurants with prices already pared to the bone hire young women in short dresses to stand on the pavement spruiking their menus and feigning interest in the doings of tourists.

It's tough up here.

More than 400 small businesses and several large development companies have gone to the wall since the slump began to bite about five years ago. Compounded by the closure of the Cairns-based Australian Airlines in 2007, as well as the global financial crisis, the Asian financial crisis, the high Australian dollar, and the natural disasters of 2010-11, the downturn became a locally focused recession affecting not just tourism but almost every aspect of the economy.

Tourism, which returned $2.6 billion across the region in 2005-06, is now down by about $300 million, and Cairns (population 160,000) has an unemployment rate of 9.8 per cent – among the nation's highest, and double the state average. And despite promising signs of a recovery led by Chinese tourists, the European, UK and US markets – once the bread and butter of local tourism – remain mired in their own economic woes.

"China is the only growing market at the moment," says Steve Davies, operations manager of Big Cat Green Island Cruises, one of the city's largest and longest-running reef cruise companies. "Everything else is stagnant, shrinking, dead or going nowhere."

Bigger businesses such as that run by Davies have hung on by cutting costs, reducing staff, delaying equipment upgrades, and (to the horror of their marketing teams) sharing boat space with rival operators on days when there aren't enough passengers to make two cruises viable. Other major companies have been forced to diversify, merge or chase government tenders to get by.

But small retailers have been left with nowhere to hide. For veteran publican Gayle Scowcroft the crunch came last month, when she was forced to call in a liquidator, cut her losses and close the doors of the 114-year-old Cape York Hotel.

Scowcroft's six-year battle to make a go of it seems to bear testament to the reigning wisdom among local hard heads. ("Tourism in Cairns has changed forever," asserts one real estate agent. "Forget sentiment; from now on only the lean and mean will survive.") But the popular and easy-going ex-publican, while admitting she made mistakes, has a different take on the circumstances that left her "on the bones of my bum" and $100,000 in debt.

"The whole thing made me realise just how much our country is based on greed," says the one-time Toowoomba school teacher who, with her late husband, Doug, had operated three other pubs before she and her son Ben took over the historic Cape York Hotel in 2006. But by 2010, she says, three new supermarket-owned liquor outlets (two Dan Murphys and a First Choice) had opened in Cairns, and her drive-through bottle shop couldn't compete.

"Like lots of other publicans, I resorted to getting my bottled beer from the First Choice because it was cheaper than the breweries," she says. "Which isn't my idea of a level playing field."

The worsening tourism slump, rising rents, electricity and insurance costs added to her dilemma.

"I saw the writing on the wall, but I was pigheaded and a bit proud and I just wouldn't give up. My landlord wouldn't negotiate on the rent, despite the hard times. Then my insurance went from $16,000 to $30,000, and they demanded the whole lot or I'd be uninsured … that's when I knew I'd have to get out." Scowcroft says she'll stay in Cairns and try to find other work – "Perhaps on the political side of things. I'd like to do something to help the place recover." Her former landlord, Hanh Huu Hoang, says he'll reopen the pub as soon as possible.

Over the past few years, the slump has also claimed three of Cairns' largest construction/development tycoons: one-time plumber Tom Hedley (whose Hedley Leisure and Gaming Property Fund was valued at $1.2 billion in 2008); Roy Lavis (whose CEC Group collapsed last year with debts of almost $135 million); and Glencorp and Glenwood Homes owner, Udo Jattke, who shut his 30-year-old business last year owing $30 million.

During his time as a journalist with The Cairns Post, Gavin King wrote about these closures being part of a domino effect triggered by the tourism slump. Now, as the new Liberal National Party state member for Cairns (the first conservative elected to the seat in more than a century), he says locals hadn't realised how inexorably their fortunes were linked to tourism until the "big three" went under.

"In past slumps, like the pilots' strike [in 1989], and the lull after 9/11, the big operators were able to hang on with ancillary businesses," King told the Herald. "But this is much worse … these last four to six years have been a really prolonged period of pain. A lot of businesses are still on their knees. But there is an air of hope, particularly in the situation with China, and the push for Cairns to get direct [tourism] flights from that country."

The Chinese market in Australia is potentially so big tourism operators haven't enough adjectives for the wonders they believe it will unleash. In Cairns – long vexed by the geographic isolation that separates it from major tourism air routes – the word they invariably use is "salvation".

The much-pondered obstacle in establishing direct flights from China is that FNQ doesn't have the population to sustain return flights. But Gavin King, flush with an $8 million "attracting aviation fund" from the new state government, reckons he'll make direct flights a reality within 12 months: "The great example for how this could happen is Cathay Pacific, which has been bringing Chinese tourists to Cairns from Hong Kong for years … We're confident we can achieve the same thing with direct flights from China, returning with cargoes of seafood or agricultural products."

Charles Woodward's CaPTA Group has been marketing its local tourist attractions in China since 1997. Raised on a cane farm in what is now part of Cairns's inner suburbs, Woodward was among a handful of entrepreneurs who helped open the region to international tourism. With Jim Wallace, founder and former owner of the Quicksilver Group (and now owner of Big Cat Green Island Reef Cruises), and a few others, Woodward formed a "marketing mafia" and toured the world promoting his birthplace and the Great Barrier Reef.

He opened his famous Rainforeststation Nature Park at Kuranda in 1976, since bolstered by other nature-based attractions, including the Cairns Wildlife Dome atop the Cairns Casino. "Most of our tourists were domestic until the Cairns International Airport opened in 1984," Woodward says above the screech of free-flying parrots in the nearby Dome.

"After that, we had the real boom phase when all the airlines used to run into Cairns [which ended after the pilots' strike] … then the Christopher Skase white shoe wankers phase. Next came the Japanese market boom in the early '90s, which is when Daikyo came into Cairns and developed a lot of the major hotel infrastructure." (With economic problems of their own, even before last year's earthquake/tsunami, the Japanese no longer have a corporate presence in FNQ.)

After another boom period in 2004/05, the lean times set in and Woodward has since reduced his staff of 300 by about a third. "We're now heading into the Chinese phase," he says confidently. "The moment we get direct flights, the Chinese market here will take off like it did in the Japanese boom." Even without direct flights, 70,000 tourists from mainland China are visiting Cairns annually, mostly via Melbourne, Sydney or Brisbane.

Thanks to his marketing legwork in China, 90 per cent of these arrivals dutifully turn up at Woodward's Rainforeststation in Kuranda. "When they started coming about 12 years ago it was all government-sponsored tours, so a lot of them were factory managers and the like in Mao suits," he says. "But they're such a diverse and quick-learning race, and they've changed so quickly. Now, as the country opens up, we're getting the whole range – from very sophisticated to very unsophisticated."

Which sounds a bit like customer service in Cairns, where larger tourism operations are already schooling their staffs in to be "China-ready".

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