Amid Queensland tourism’s tales of woe and despair stands one stand-out performer in the middle of Queensland’s Great Barrier Reef – Hamilton Island. While many of its competitors are struggling to remain afloat in the current economic environment, Hamilton Island’s owners’ -- BRW Rich list family, the Oatleys - says the island remains profitable.
Since buying the island a decade ago for $150 million, the billionaire wine making family have spent upwards of $350 million re-inventing the island. More than $110 million of that investment was used to build the lavish boutique resort, Qualia, which has attracted the likes of US talk show queen, Oprah Winfrey, and last year won Conde Nast Traveller’s prestigious Best Resort in the World title.
“Sandi Oatley, who is the chairman of the board and Bob Oatley’s son, says, ‘we are masters at defying gravity’,” Hamilton Island chief executive Glenn Bourke says. “It’s true, and it really comes off the back of the investment.”
Making a profit in far north Queensland’s struggling tourism industry is notoriously tough. The number of interstate travellers to Queensland dropped three per cent in the 12 months to September 2012 while international tourists is impacted by the high Australian dollar.
Hamilton Island’s Bourke admits: “Tropical islands are a hard business to make money in”. While he declined to disclose the profits of the island, he says it costs $18 million a year to run and it is currently profitable.
Other surrounding islands have not been so fortunate. Club Med’s Lindeman Island was closed last year while nearby Hook Island’s budget resort has changed hands several times in the past two years. Other islands such as Bedarra Island Resort and Dunk Island were sold after being ravaged by cyclone Yasi and resorts in previously popular Queensland tourism destinations, such as Port Douglas, have been criticised for being tired, out of date, and lacking in customer service.
Before the Oatley’s purchased it in 2003, Hamilton Island fell into a similar trap. Its original owner, Keith Williams, had a grand vision for the tropical island, but he ran into financial trouble trying to maintain the island and the island was eventually went into receivership. The banks then focused on reducing their debts rather than the health and prosperity of the island.By the time the Oatley family purchased the island it was in a poor state.
“Keith Williams had a magnificent dream, but he didn’t have the resources to full pursue it. That dream is being realised today,” Bourke says. “Bob came here when he was a much younger man with his children and he just grew to absolutely love it. He operates on pride. He wants his friends and guests to come here and say, ‘wow isn’t this wonderful and isn’t it so much better than what it was’, and he puts his money where his ideas are.”
From the beginning The Oatley’s have set out to make Hamilton Island a holiday destination for all people - from budget conscious families to honeymooners, retirees, chief executives and celebrities.
In addition to its $110 million spend on Qualia - an internationally recognised world-class resort -- the family invested $30 million in refurbishing the 19-storey Reef View Hotel and its 3 star Palm Bungalows. The family also spent around $100 million building the architecurally designed yacht club with 35 accommodation villas, and $50 million on an 18 hole golf course on a neighbouring island designed by golfer Peter Thompson.
But securing a return on investment is not a simple task, with state and local governments offering no assistance to the island. Everything from power cables to roads, sewerage to making water and maintaining the airport is a cost to the island. The main under-sea cable that brings the power to the island from the mainland was replaced at a cost of $15 million seven years ago and power generators were recently installed at a cost of about $20 million.
“When you run an island you have to be fiscally prudent in every single area. The main thing is having too many staff. Staffing costs account for about one third of our total cost base, so you need to watch that carefully.”
Staffing is one thing that Hamilton Island does differently to its tourism competitors. It recently built its own, accredited training college. That, in part, has reduced the island’s turnover from about 150 per cent per year to about 90 per cent per year, Bourke says. “It’s always going to be high, because the nature of our industry and the fact that we’re a small tropical island in far north Queensland, but I believe it’s at the lower end of the spectrum.”
Qualia has had to modify its strategy due to the changing tourism market. Currently 60 per cent of its guests are Australians and 40 per cent are from overseas. Management initially predicted the opposite but the high Australian dollar has dissuaded oversees travellers from coming to Australia.
“We are yet to see what the true international guest profile capacity has been. At 10 years we might be able to see that more clearly,” Qualia general manager, Michael Shah, saysWhile Hamilton Island does not believe in formal advertising, its marketing strategy has attracted world wide headlines. In November 2012 the island used social media and photo sharing site, Instagram, to market the island. It invited a group of 30 people, including brand ambassadors and high-profile Instagrammers to a weekend “Instameet” event to showcase the island with thousands of followers.
“We estimated we directly reached over one million people in a weekend – based on the 30 people who were part of our event,” Bourke says.
“Gone are the days where you would invite friends and family to view slides and photos of your trip. People are now using sites like Instagram and Flickr to view photos immediately in real-time.
The idea for the campaign came from a group of American university students who call themselves “Instagram pilgrimmers”. They spent their summer holidays exploring different areas together then documenting their travels. In a photography competition entrants were asked to post a photo of their idea of paradise. Four people were then selected and brought to the island, including one American winner. Each had tens of thousands of followers.
“It’s about going back to basics and evoking a real sense of community among followers. We think that community today is often forgotten, but it is also very powerful.”
In the meantime, the Oately family continues to move towards its goal of having a world-class island.
While Sandy Oatley is chairman and manages the family business, 84-year-old patriarch, Bob Oatley, is still very much involved in the “big picture” elements of the business. At least four third-generation members of the family (Bob’s grandchildren) are involved in the business and most have had front-line roles on the island.
“At Hamilton Island we are lucky to have the substance of the Oatley’s behind us. They have a very long term vision and we move towards that vision consistently...it gives us consistency,” Shah says.
Disclaimer: the writer, Jane Lindhe, was a guest at Hamilton Island in December 2012