Hotel development regulation compared around Aus

beachhotelbyronbay

TTN: Please be aware that the following report was prepared for May 2015, 5 months before its official release in October 2015.

Immediately here are a fairly cynical group of observations surrounding the timing of the government’s release of the report. For a summary of the report, please scroll down, or to download the full report, please see the link at the bottom of the page.

The report ‘Hotel Development regulations in Australia’ was prepared by Urbis for AusTrade. Note that the conspicuous name Urbis also has multiple construction and consulting businesses attached to it, including businesses based in Queensland and Victoria, which feature heavily in the report.

The report was apparently timed by the federal Liberal government to coincide with (justify) the NSW Liberal government’s transfer of major Sydney Harbour hotels from public hands to private. Of course governments really aren’t in the hotel business, so the disposal is reasonable.

What is not reasonable is a new pitched remodelling of the Sydney Harbour ferry terminals – abstract designs brought in in a hurry, weather the public likes it or not (and they don’t) – purportedly being paid for by the sale of the hotels.

The problem is the Sydney Harbour ferry terminal development – not a fair tender, not a popular design, arguably the most valuable property in Australia – does not publicly disclose whose company it is that is reaping the $200m contract for the project.

The below report, strategically timed as it is, could be cited in pro-development changes in legislation and by-laws.

To create more rules instead of removing redundant ones is a corruption of democracy – the legislation and by-laws become so difficult and expensive to navigate that only an inner circle are granted access to key aspects of every town.

The solution is a dynamic business case done by the local council, including relevant community support and concerns, weighing the costs and benefits to all stakeholder groups, including costs and benefits to the council and local economy. We already have Environmental Impact Statements and local this and state that, and the report finds those constant interactions with various agencies a hinderance to even legitimate, fair and popular developments.

Councils would argue that business cases are a major cost, green groups could argue that power shouldn’t be streamlined, but the tourism industry argues that it just needs to be done, one way or another.

Firm Tourism Community Business Cases, managed by an agency like Tourism Australia – could actually form the basis of democratically constructed projects.

Veronica Hope

Hotel Development regulations in Australia

Commissioned for Austrade, May 2015

Summary by The Tourism News – Veronica Hope

See bottom for a summary of recommendations

  • ‘To enable accurate comparisons the study excluded issues that often complicate developments (e.g. heritage) which would add further time and costs to the report findings’
  • 51 weeks for a streamlined stage one process in Sydney  ‘Site holding costs’ e.g. rates in the meantime, are very costly.
  • “There is a tendency among some authorities, in attempting to mitigate a range of development risks, to implement complex processes, which in turn adds to timeframes and provides greater scope for ‘issues’ to arise requiring responses by both proponents and agencies.” The Tourism News feature story on 6th Oct was about how Tasmanians lost $125000 to auditing process in regards to casino licence that was applied for and then withdrawn. 
  • “The main regulatory cost driver is development contributions (payments towards the provision of infrastructure).  The Tourism News notes that this could, by most reasonable people, be considered corruption. These are large, single-item costs which are not applied across all jurisdictions. For example, developer contributions for a four star CBD hotel project were estimated to be in the order of $1 million in Sydney and $2.9 million in Brisbane”
  • “As a result of large developer contributions and infrastructure charges levied on hotel developers, regulatory costs are highest in Brisbane, Sydney and Canberra. Conversely, due to the absence of a development charge, regulatory costs applying to Melbourne hotel developments are appreciably lower than other large capital cities.”
  • “In an overall sense, the planning approach used in Adelaide provides a good example of how planning processes can be used effectively. It provides a framework based on formal pre-lodgement for large development proposals (over $10 million), allows formal design panel review and involves relatively low direct regulatory costs (less than 0.5% of total estimated development costs). Adelaide’s estimated timeframe of around 29 weeks is much more front-loaded, which provides a platform for managing issues earlier, potentially minimising costs such as specialist consultant reports. As a ‘mid-tier’ city, Adelaide can provide a useful performance benchmark for the larger cities such as Sydney and Brisbane.”
  • The report finds that higher-end accommodation in ‘regional areas of natural attraction’ to satisfy a significant tourist demand for such facilities. (TTN Opinion: The report quotes that a timeframe for ‘securing approvals for a large integrated resort development on the Great Barrier Reef was estimated at 136 weeks’. As if this is a problem, of course no development should take place ON the Great Barrier Reef.) TTN Opinion: In respect to regional development, the report doesn’t cite the example of Aquis – a monstrosity of a casino development currently in an approval process by a famously dodgy Hong Kong developer on precious wetlands near the Great Barrier Reef, but one could deduce that AusTrade commissioned the report to include this example purposely to complement complaints from the Aquis developer and argue for reform.
  • The executive summary concludes: “Governments have the ability to fundamentally change the balance of planning frameworks. The policy goal should be to ensure that planning approvals are as simple, transparent and predictable as possible, while ensuring community interests are appropriately safeguarded.”

The report suggests that reducing/ eliminating development cases where timeframes have been materially protracted, including ‘recurrent extensions on Ministerial determinations’, because this heightens uncertainty for proponents.

Whilst the report says that protracted uncertainties provide the examples for ‘perceptions of poor regulatory governance’, it should be pointed out that ministerial intervention is frequently incurred when the process has proven so poor that a Minister feels he/she must intervene lest her/his head roll, being that the development is so deeply unpopular. A reasonable development should never make it to that stage.

The Tourism News notes that the EPA is the most frequently cited hinderance to development. Are state EPAs functioning efficiently? They may well be – but if their decisions are not final (e.g. No, you can not build a casino on the Great Barrier Reef, der) and the agency is then tied up in a year of litigation because the developer does not want to give up, then nobody wins. Looking at the powers and workings of EPAs may be key to ensuring good, healthy, sustainable developments get through and bad ones don’t.

The Austrade report into Hotel Development regulation in Australia also finds the EPAs critical - Recommendation 8 is ‘One-stop shop reforms for environmental approval processes’, including “a ‘one project, one assessment, one decision’ framework as recommended by the Productivity Commission and agreed by COAG” (Council of Australian Governments, i.e. states and territories).

A summary of the recommendations: 

Recommendation 1 — Greater emphasis on pre-approval engagement and case management Formal pre approval engagement and a case managed DA process should be given greater emphasis across jurisdictions, where these are not available or not fully utilised.

Recommendation 2 — Better guidance information for new and international investors All governments should review the form and nature of guidance material on planning and approval processes.

Recommendation 3 — ‘Fast tracked’ DA processes should be available for low risk projects Where projects are clearly identified as lower risk developments, an expedited approval pathway should be clearly available.

Recommendation 4 — Fewer regulators are essential for timely and well-functioning approval processes Governments should examine the scope for reducing the number of agencies involved in the approvals processes.

Recommendation 5 — Streamline liquor licensing approvals Liquor licensing requirements should be streamlined in most states to reflect the inherent risk.

Recommendation 6 — Adopt a more flexible approach to design requirements To the fullest extent possible, prescriptive design requirements, especially on more ancillary issues, should be minimised or removed.

Recommendation 7 — Floor space ratio (FSR) bonuses and use of government owned sites have a major role in encouraging CBD hotel developments States and territories should explore, as part of ongoing planning reform initiatives, whether FSR bonuses and earmarking of publicly owned land can be viably used to encourage new tourism accommodation developments.

Recommendation 8 — One-stop shop reforms for environmental approval processes Bed down Australian Government-State one-stop shop reforms for environmental approval processes.

Recommendation 9 — Streamlining approval processes for developments in national parks and other high natural amenity areas Governments should explore opportunities to streamline approval processes for tourism development in National Parks and other high natural amenity areas, while retaining their conservation focus.

You can view the complete version of the report here.