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Aquis’ Mantra: ‘Build It and They Will Come’

Tony Fung (l.) looks across Australia’s northern tropics and sees a resort mecca with the potential to rival Macau. Plans for his massive A$8 billion Aquis Resort complex near the Great Barrier Reef include 7,500 hotel rooms, a golf course, a lagoon and water park, and more, in its first phase alone.

Tony Fung sees sleepy Cairns on Australia’s far northern coast as a gambling mecca that one day will rival Macau.

“We are extremely confident that Cairns can be a global destination,” Justin Fung, the Hong Kong developer’s son and chief executive officer of Aquis Resort at the Great Barrier Reef, the company behind a planned A$8.15 billion mixed-use resort on the coast that will feature 7,500 hotel rooms, a golf course, a lagoon and water park and a massive casinos in its first phase, along with shops, restaurants and 1,800 homes for staff.

“This is the closest Western city to China,” he said.

Aquis has won tentative approval from the government of Queensland to move ahead with the project. The state is awarding three new casino licenses—the other two targeted for Gold Coast and the state capital of Brisbane—in hopes of boosting its sagging economy with a piece of Asia’s boom in outbound tourism, and China’s big-spending gamblers in particular.

With A$4.8 billion of expenditure by Chinese tourists in 2013, Australia is currently capturing less than 4 percent of China’s tourism exports. At the same time, casino revenues nationwide account for only 18 percent of the country’s gambling industry, which is dominated by non-casino machine games, betting and lotteries, and revenue growth is forecast to slow from 3.6 percent over the last five years to 2.9 percent in the  next five.

Queensland is looking to the new licenses to bring the same benefits that Genting Singapore’s Resorts World Sentosa and Las Vegas Sands’ Marina Bay Sands brought to Singapore, which experienced a 20 percent jump in tourist numbers to the city-state after they opened in 2010.

“Everyone’s seen the success of Singapore, which is just being used as a blueprint elsewhere,” said Killian Murphy, an analyst at CIMB Group Holdings in Sydney. “Potentially, Australia as a whole becomes a better sell into the Chinese market”.

Cairns is well placed to exploit that market, said Fung.

“We’re sitting on the doorstep of the Great Barrier Reef,” he said. “As the Chinese middle-class and wealthy travel, one of the first things they’re going to embrace is the natural environment. Cairns has that in spades.”

In the past, floods, cyclones, a strong Australian dollar and the rise of competing markets in Asia have stymied resort along the Great Barrier Reef. Properties on Dunk and Bedarra islands sold in late 2011 for about 15 percent and 20 percent of their 2007 values, respectively. Chinese-Australian billionaire William Han paid A$12 million for Lindeman Island in 2012, one-tenth of what Club Mediterranee had spent to buy and expand it in the early 1990s.

The region is home currently only around 3,900 hotel rooms that run at occupancy rates of 68 percent at average room about 25 percent below the national average. Instead it has thrived mainly as a playground for divers and backpackers. It’s home to more than 10 scuba-diving schools and 40 backpacker hostels—“a perfect place to meet other travelers,” says Lonely Planet, “more board shorts than briefcases”.

Not surprisingly, not everyone welcomes Aquis. Many locals fear it will destroy the charms of the area’s laid-back tropical lifestyle, and environmentalists warn of irreparable damage to the delicate eco-system of the reefs. An online petition opposing the development has attracted 1,753 signatures at the website communityrun.org.

In a different vein, CIMB’s Murphy questions the viability in Queensland of such a sharp increase in gambling tourism.

“I just think three new integrated resorts is stretching it,” he said. “Trying to convince a gambler to come here can be difficult. You’re talking a nine- or 10-hour flight” from cities in China.

That’s not deterring the Fungs.

“We’re on the doorstep of Macau and we’ve seen the incredible growth of that market. We’re close to Singapore and we’ve seen what just two properties there are capable of doing,” Justin Fung said. “There is that aspect of ‘If you build it, they will come.’”