Tourism roll-up play could prove lucrative for private equity

An aerial shot of Ayers Rock Resort with Uluru in the background. Picture: Voyages Indigenous Tourism Australia

Journey Beyond’s private equity owner may be hoping that the number of tourism assets currently for sale could result in a major roll up play that would see it eventually bought out by a super fund or another private equity firm.

Australian-listed Kelsian is selling tourism businesses to drive down debt through Macquarie Capital and Gresham, as Voyages Indigenous Tourism Australia, which operates Ayers Rock Resort at Yulara, is also on offer through Greenhill.

Meanwhile, Hamilton Island has been for sale in recent years and could get placed back on the market if the price is right.

Journey Beyond, which operates The Ghan Railway experience through the red centre, is owned by of the private equity firm Crestview Partners.

While Crestview is presenting itself as a buyer of those assets, some believe that more realistically the group would like to find a new owner for Journey Beyond and is using the asset sales as a catalyst for a potential recapitalisation, sale or capital raising.

Journey Beyond was owned tourism company Hornblower that filed for Chapter 11 bankruptcy. It was cut loose by Crestview, but Journey Beyond was retained.

Yet sources say the fund needs more equity.

To buy Voyages, Journey Beyond is up against the super fund-owned Airport Development Group, which owns airports in Darwin, Tennant Creek and Alice Springs.

Included in the Voyages offering is the Ayers Rock Resort airport at Uluru, which has cut back on flights since the global pandemic – and by owning all four, ADG could improve performance and increase flights at all three assets, thus boosting the performance of the Ayers Rock Resort.

Industry experts treat ADG as the most likely buyer, because the government, which would have a say in the Voyages deal, may be uncomfortable with the resort and the long-term lease of the land to the Indigenous people falling into the hands of private equity.

The tourism industry was hit hard during the global pandemic, but assets on offer are considered iconic and could present a rare opportunity to buy together.

There would be head office synergies, although marketing platform data could be replicated.

NRMA could emerge as a shareholder with another party, given it has related assets like camp grounds and resorts, and would almost certainly explore a purchase of related assets being sold by Kelsian such as its Sydney Harbour ferries and Fraser Island resort.

Yet some market experts say while a tourism roll-up play may appear good on paper, the GPT Group previously owned resorts but ended up selling the assets for less than what they paid after they proved challenging to operate and capital intensive.

Sydney-based Quadrant went some way to building such a business, which was Journey Beyond, sold to the Crestview-controlled Hornblower Group for $600m in 2022.

Private equity firm KSL was eager to buy Hamilton Island but some owners of the Queensland resort did not want to sell for the $1bn price.

Groups like super fund investors and retail funds are looking for investment opportunities or company floats of scale, and Crestview could embark on the roll-up to target such a buyer or equities investors.

Other logical aggregators are Crown Resorts owner Blackstone, which has flagged entertainment as an investment area of interest, KSL or Pacific Equity Partners.

Journey Beyond has 13 brands operating in 60 destinations with 130 train carriages, 52 high-speed marine vessels, 51 touring vehicles, 10 luxury camps and lodges, eight aircraft and two high-speed lifts.

Before the pandemic, it was thought to be generating about $40m of annual earnings before interest, tax, depreciation and amortisation.

Meanwhile, Voyages reported total revenue of $186m in the 2024 financial year, up from $182.1m in 2023 – an increase of 2.1 per cent.

However, it reported a net loss before tax of $20.4m mainly due to higher operating costs and debt payments.

The Ayers Rock Resort asset was valued by directors at $380m at the end of June, down $55m from the prior year’s adopted value of $435m, and the plan is to sell the operating business but return the land back to the indigenous land holders.

Up for grabs are six sprawling accommodation hubs in the shadow of the rock, including a five-star resort, three and four-star ¬hotels and a campground.

The ILSC purchased the asset from property company GPT in 2011 in one of the largest sales in the hotel sector, in a deal worth about $300m.

In 2013, the owners of the Ayers Rock Resort wrote down the book value of the resort by $62m, after admitting that it faced serious financial challenges, and high-profile business figures departed the board.

Before the pandemic, about 300,000 people visited Uluru annually via 43 direct flights from major capital cities.