Tourism Planning Taskforce Report - Western Australian Planning ...

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Chapter 4Term of Reference 14 Term of Reference 1Undertake an examination of the merits ofthe justifications used by proponents insupport of their applications to provideresidential development on land zoned fortourism purposes and consider criteria forthe assessment of such claims.4.1 BackgroundIn establishing the taskforce, the Minister wasconcerned with trends in thedevelopment/tourism industry to seek to mixtourist and permanent residentialaccommodation on tourist zoned land.Investigations by the taskforce andsubmissions received have confirmed that thistrend is significant.Over recent years, there has been a steadyincrease in the number of applicationsreceived by local government and the WAPCfor rezonings and scheme amendments toprovide for a mix of tourist and permanentresidential accommodation on tourist zonedland.The applications reviewed by the taskforcetook two basic forms:• Applications for an amendment or rezoningto a town planning scheme to delete userestrictions associated with length ofoccupancy, of the whole or a portion ofsites or units within a development that isproposed as tourism, and argued toprimarily still function as such.• Applications to rezone the whole or part ofa site to accommodate a use other thantourism (usually residential). In such cases,the rationale usually is linked to a lack ofdemand for tourism development and thereis no contention that the site will continueto serve a tourism function.This term of reference examines thejustifications used by proponents in seekingapproval to develop a tourism zoned siteunder both of these scenarios. Thejustifications identified generally fit into threecategories: financial, social-management andsite specific.4.2 Financial justificationsThe primary justifications put forward byproponents were financial. These generallywere based on:• Accommodation units in a tourismdevelopment without a short-stay userestriction sell for a premium and are morereadily saleable, generating early income toa project.• Development viability depends on apermanent residential component due tolack of tourism demand/market.• Financial institutions have refused tofinance tourist accommodation-onlyprojects, particularly in regional areas, withtourism units not considered adequatesecurity.The taskforce invited presentations from MrJeff Cohenca, Director Commercial Finance,Ashe Morgan Winthrop, and Mr GrahamO’Neill, Manager Property Finance, BankWestto explain the position of financial institutionsin respect to the funding of tourismdevelopments. The taskforce alsocommissioned a summary paper on the issuesfrom Mr Cohenca. (See Appendix 1).The taskforce was advised by representativesof the development industry that financialinstitutions take a conservative position whenconsidering finance for tourism developments,justified by them from their previous significantlosses in this sector. The developmentindustry has responded with the use of strataschemes for tourism projects and theincorporation of a permanent residentialcomponent, with pre-sales providing thesecurity required by the financial institutions.Review of development trends shows that theuse of strata schemes for tourismdevelopments now is common practice, andhas been the primary mechanism for fundingsuch developments in Australia over the past15 years. The inclusion of a permanentresidential component in tourismdevelopments to achieve project finance is amore recent trend. It also was determined thatthis is of lesser importance than the ability tostrata, with a number of recentdeveloper/operator tourism developmentsachieving development finance without theTourism Planning Taskforce Report29
Chapter 4Term of Reference 1inclusion of a permanent residentialcomponent.In the current market, an accommodation unitin a tourism development with no short-stayuse restriction is easier to sell than one with ause restriction. It thereby provides a higherlevel of security to a financial institution, andcorrespondingly will reduce the level ofdeveloper equity required in the project.The Taskforce was told the increasedsaleability of such a unit was related to:• the position of the financial institutions inmaking access to finance for residentialunits easier than for tourism units;• the ability to sell a lifestyle factor, based oninvestors being willing to accept a low rateof return on the investment where thepurchased unit is considered a holidayhome; and• the increased income security associatedwith a residential investment property.The inclusion of a residential component in atourism development therefore can havesignificant financial benefits for the developerin enabling preferential lending arrangementsto be established with financiers, relative to atourism-only development. It also can facilitatea quicker return on capital invested in thedevelopment through improved sales, and inreducing the time frame for development. Italso is argued that potentially it facilitates ahigher quality of development with a higherlevel of servicing and infrastructure provisiondue to earlier and higher returns.While the issue of a residential component isconsidered secondary to the ability to stratatitle in funding such developments, itpotentially can be critical to the establishmentof a project at a particular time, and theinfrastructure provided as part of a project.The inclusion of a residential component alsomay be considered a further move by thedevelopment industry to address a lack ofresponsiveness by financial institutions tocircumstances of increasing demand for touristaccommodation development.The history of tourism development on theEast coast of Australia would appear toindicate that where the opportunity existsmixed residential/tourism development willoccur, with the real estate market, as opposedto the tourism market, a the main driver. Theresult is the continued provision of touristaccommodation units, ahead of marketdemand, but which have accommodatedindustry growth over time. It has; however alsogiven rise to concerns expressed by sectors ofthe tourism industry about the quality of theresultant tourism product, negative impacts onthe tourism experience from resulting useconflicts, and the sustainability of theapproach, with high-value sites lost toresidential use.This latter concern is based on the high levelof competition and low returns generated inthe tourism condominium market, and theinability of operators to provide adequatetourism services, marketing, refurbishmentand maintenance under such conditions. Theresult is a general decline across the board inthe quality of accommodation and serviceprovided. Warnken et al (2003) considers thatthe South-East Queensland tourism industrylargely has been buffered from this effect todate as the majority of such development isrelatively new, and is in an expanding market.Serious concern is; however expressed for thefuture of the tourism industry when largenumbers of apartments from earlierconstruction booms mature simultaneously,and continuous low returns mean that fundingfor refurbishment and retention of theproperties for tourism use are not available.The consequence of this, in addition to adetrimental impact on the tourism market, isviewed as a loss of prime tourism sites toresidential use. In an analysis of the history ofSpanish tourism, Priestly (1995) similarlyidentified that a government approach ofexpansion at all costs and price regulation, toachieve numerical growth in tourism numbers,resulted in low returns, a predominance oflow-quality facilities, and a resultant collapsein foreign income from tourism.The taskforce also noted that in facilitatingdevelopment through enabling a residentialcomponent, as opposed to a developmentbeing held until adequate tourism demand isachieved, this may have negative implicationsfor existing operators and may not result in anoverall tourism benefit. However, it concludedthat subject to the introduction of a residentialcomponent being limited to specific sites andthe application of guidelines and conditions as30 Tourism Planning Taskforce Report
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ReferencesReferencesAustralian Bure
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Further readingGetz, Donald (1993)
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Further readingWilliams, P., Penros
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Appendix 1In the second option, the
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Appendix 2Appendix 2List of submitt
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Appendix 2Executive Officer*(4) REI
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Appendix 33 Responsibility forprepa
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Appendix 38 Proposed criteria for t
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Appendix 311 Residential componento
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Appendix 315 Use of tiered system f
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Appendix 319 Managementarrangements
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Appendix 322 Land Tax. 7 Support fo
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Appendix 327 Review period fortaskf
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Appendix 4Bradley Woods,Karen Conne
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Appendix 5Unit owners are not able
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