The strength of big-spending domestic tourists has given Gold Coast company Artesian Hospitality the confidence to make a transformational $10 million investment in a forgotten corner of Surfers Paradise.
The company announced plans last week for Cali Beach Club, a concept that it says is new to Australia and inspired by the beach clubs of Europe and the US.
Set on the rooftop of the X Galaxy retail centre just a whisker away from the Gold Coast's nightclub precinct, the Cali Beach Club will feature luxe poolside cabanas, a world-class signature restaurant, ancillary dining outlets, and bars, with a beachfront theme that will incorporate a beach volleyball court, beach-edged saltwater pools and an outdoor cinema.
It's a big investment in an industry battered this year by the global pandemic.
While international tourism is some way from resuming, Artesian Hospitality has been buoyed by the resilience of local tourists supporting its existing businesses on the Glitter Strip.
The company owns nightclubs Sin City, The Bedroom and Havana and restaurant-bar White Rhino in Surfers Paradise. It employs 350 staff and entertains more than a million visitors a year.
According to Artesian's managing partner Matthew Keegan, trading at these venues over the past quarter either matched or exceeded last year's figures, and much of that trading occurred before interstate borders reopened.
"The drive market within Queensland has been huge," says Keegan.
Artesian Hospitality's decision to invest in the Cali Beach Club has been supported by data from Deloitte showing domestic tourists spend twice as much as inbound visitors.
"We actually benefit from the local market spending money domestically more than we do from internationals coming in, and that has fed into our decision-making process," says Keegan.
"With local tourism in bumper numbers, this is the perfect timing for this kind of product."
Like many entrepreneurs on the Gold Coast, Keegan has long sought to create a private club on the city's famed beaches where revellers can enjoy dining and entertainment in a club atmosphere. Local resistance to these proposals has been strong.
"It's always surprised me that in an area like the Gold Coast, Queensland or anywhere in Australia, that we don't have a large-scale venue that represents something similar these beach clubs overseas," Keegan says.
"It was always something we've wanted to do but we were looking at how to do it on the beach rather than a site like the one we've found."
Through his connections in the property industry, Keegan became aware last year that the space above X Galaxy could be available for lease and he secured it through an off-market deal.
The site offers an expansive 5,000sqm open-air space that formerly housed the poolside amenities of the adjacent Mantra on View hotel.
The site is big enough for Artesian Hospitality to create a new beach setting, complete with golden sand, well above the bustle of crowds on the streets of Surfers Paradise.
"The opportunity to find a footprint that big in Surfers Paradise to recreate the beach was one we couldn't miss," says Keegan.
"We're planning to bring the entire beachfront experience to that precinct without actually disturbing the beach itself. Our guests will get the best of all worlds up there because you have a view of Surfers Paradise and the beach, plenty of sun and all the fun."
Artesian Hospitality is spending between $6 million and $7 million in construction for the new venue, bringing its total investment in the facility to just under $10 million. The landlord is also investing in general refurbishments after rumours were quashed earlier this year that the centre could be home to a new cinema complex.
The retail centre, located on a prime site at the corner of Elkhorn Avenue and Surfers Paradise Boulevard, has a chequered history that has left the property wanting as a destination for many years.
It doesn't help that it has an identity crisis as it was originally known as the Galleria and then the Piazza, before the name change to X Galaxy.
The property was once earmarked by Gold Coast developer Jim Raptis for a 63-level high rise. Those plans were swept aside during the GFC when Raptis Group (ASX: RPG) overreached itself and the company was placed into administration in 2009.
Hong Kong owners took control of the property in 2017, after acquiring it from US-based investment group Goldman Sachs.
The new owner's upgrade of the centre will include a new elevator access on Elkhorn Avenue near Orchid Avenue leading to a skybridge linking visitors directly to the Cali Beach Club on the fourth level.
Artesian Hospitality is working towards an opening in early 2021, but according to Keegan the company is adopting the long view of its newest investment.
"This is the perfect time for a development like this because we're taking a long-term view of 20-plus years," says Keegan.
"We've seen a massive uptick in local tourism with people not able to go overseas and that's led to a huge rise in domestic tourism.
"So, if we can open something within Australia for Australians initially, once people can come from overseas then it's all the better."
While it is a big investment, Keegan says it has been made with confidence.
"We can see where the Gold Coast is headed and the resurgence of Surfers Paradise with the borders reopening.
"With the combined investment by the landlord and our company, we are creating a massive amenity for this part of the city to create a new entertainment and hospitality precinct.
"We expect to see more shops, restaurants and bars and that's already happening with a boutique brewery and whiskey bar opening next year.
"The whole area is being reactivated and that's great to see."
Business News Australia
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