Scone Regional Aviation Visitor Centre

EXECUTIVE SUMMARY ...... 1

1.1. Key Findings ...... 1 1.2. Summary ...... 4

INTRODUCTION ...... 7

2.1. Overview ...... 7 2.2. Methodology ...... 7

COMPARATIVE ANALYSIS ...... 9

3.1. Context ...... 9 3.2. Plans for an Aviation Visitor Attraction ...... 9 3.3. Comparative Aviation Museums ...... 9

OPERATING MODELS ...... 19

4.1. Comparative Operating and Funding Models ...... 19 4.2. Operating Model Options ...... 20

MARKET DEMAND ...... 23

5.1. Market Demand Summary ...... 23 5.2. Visitation to Hunter Tourism Region ...... 24 5.3. Visitation to Upper Hunter Shire ...... 27 5.4. Visitation to Scone ...... 30 5.5. Demand Forecasts for Scone Aviation Visitor Attraction ...... 33

COST BENEFIT ASSESSMENT ...... 36

6.1. Capital Expenditure ...... 36 6.2. Cost Benefit Findings ...... 39

SUMMARY ...... 44

Figure 1: Visitation Summary ...... 2 Figure 2: Demand Forecasts for Scone Aviation Visitor Attraction, 2019-2028 ...... 3 Figure 3: Visitation Summary ...... 23 Figure 4: Visitation to Hunter Tourism Region, YE Sept 2007-2016 ...... 24 Figure 5: Visitor Nights for the Hunter Tourism Region, YE Sept 2007-2016...... 25 Figure 6: Average Length of Stay for the Hunter Tourism Region, YE Sept 2007-2016 ...... 25 Figure 7: Visitor Expenditure for the Hunter Tourism Region, YE Sept 2007-2016 ...... 27 Figure 8: Spend Per Visitor Per Day for the Hunter Tourism Region, YE Sept 2007-2016 ...... 27 Figure 9: Visitation to Upper Hunter Shire by Visitor Type, 2012/13 - 2015/16 ...... 28 Figure 10: Visitor Nights for Upper Hunter Shire, 2012/13 - 2014/15 ...... 28 Figure 11: Average Length of Stay for Upper Hunter Shire, 2012/13 - 2015/16 ...... 29 Figure 12: Purpose of Visit for Upper Hunter Shire, 2015/16 ...... 29 Figure 13: Referrals by Visitor Centre Staff for Upper Hunter Shire, 2015/16 ...... 30 Figure 14: Visitation to Scone by Visitor Type, 2013/14 - 2015/16 ...... 31 Figure 15: Visitor Nights for Scone, 2013/14 - 2015/16 ...... 31 Figure 16: Average Length of Stay for Scone, 2013/14 - 2015/16 ...... 32 Figure 17: Scone Purpose of Visit, 2015/16 ...... 32 Figure 18: Referrals by Visitor Centre Staff for Scone, 2015/16 ...... 33 Figure 19: Demand Forecasts for Scone Aviation Visitor Attraction, 2019-2028 ...... 34 Figure 20: Concept Only Example Façade ...... 37 Figure 21: Potential Scone Aviation Attraction (Concept Only Site Plan) ...... 38

Table 1: Cost Benefit Results Summary...... 4 Table 2: Comparative Aviation Museums ...... 11 Table 3: Operating and Funding Models for Comparative Museums ...... 19 Table 4: Hunter Tourism Region Purpose of Visit, YE Sept 2012 and 2016 ...... 26 Table 5: Upper Hunter Shire Visitor Expenditure, 2012/13 – 2015/16...... 30 Table 6: Scone Visitor Expenditure, 2013/14 – 2015/16...... 33 Table 7: Capital Expenditure ...... 36 Table 8: Cost Benefit Results Summary...... 39 Table 9: Cost Benefit Assessment ...... 41

The Stafford Group (The Group) was commissioned by Upper Hunter Shire Council (Council) to undertake a Feasibility Study to assess the demand and viability for an aviation visitor attraction in Scone and any implications such a development may have on the Master Plan for the site. This involved identification of the economic, financial impact and related benefits, infrastructure impacts on the airport, its likely revenue and expenditure streams and overall market appeal.

1.1. Key Findings

The following sections reflect the key findings from a social, cultural and community based benefits, along with the economic benefits associated from the attraction.

1.1.1. Comparative Aviation Museums

To help determine best practice examples and to offer a base for assessing potential visitor demand, a comparative analysis was undertaken of other aviation museums throughout Australia and New Zealand and with some USA examples. The key findings from this exercise indicated the following.

▪ Visitation ranged from 10k per annum for the Hinkler Hall of Aviation, to 40k per annum for the Temora Air Museum, to 160k for the Hill Aerospace Museum. Reasons for high visitation include having larger local population bases, free entry, and running interactive flying displays on a regular basis. ▪ Several of the museums require regular funding contributions (over and above revenue generated) to remain financially viable. These included the Qantas Founders Outback Museum, Omaka (NZ) Aviation Heritage Centre, Fleet Air Museum and RAAF Museum Point Cook. ▪ There is evidence of two museums recently recording a net profit (Glenn L. Martin Maryland Aviation Museum (2014) and Aviation Heritage Museum (2014/15)).1 The ability to achieve this, however, is considered difficult. ▪ At best, most aviation museums achieve at or near a break-even position and operate as not for profit entities.

1.1.2. Potential Operating Models

The various comparative aviation museums have different operating systems and governance models, with no model necessarily being preferred. Based on the current understanding of possibilities and any potential relationship between aviation collection owners and Council, there would appear to be the following primary2 options:

1 Note: The Aviation Heritage Museum also received a Commonwealth grant of $81k and it is not known whether this figure was included in the financial summary for July 2014 – January 2015. 2 It could be possible that a hybrid version of any of these model options could be developed but legal and tax advice would need to be obtained to determine the various implications of the models.

Scone Aviation Attraction Feasibility Study 1

▪ the Council (with grant funding assistance and other contributions from sponsors etc.) fund the development and either operate it themselves, or lease it to the collection owner to perform this task (excluding the airport terminal operation which remains with Council); or ▪ a public private partnership arrangement is formed between Council, the collection owner and potential third party donors, to jointly fund the development and to co-jointly operate the facility.

Whether the preferred governance model is constituted as a trust, company limited by guarantee, a benevolent society or other legal entity, needs to be determined after advice is received on the legal, accounting and tax implications to all stakeholder parties contributing.

1.1.3. Market Demand

The following offers an indication of projected visitation to the proposed aviation attraction and relies on current visitation data to the region, coupled with an assessment of visitation to other comparable aviation museums. Figure 1 therefore, provides an overview of visitation to the Hunter Tourism Region, Upper Hunter Shire, Scone, and projected visitation for a new aviation visitor attraction in Scone. The figure demonstrates the following:

▪ visitors to Upper Hunter Shire account for 0.2% of total visitation to the Hunter Tourism Region; ▪ Scone captures an estimated 46% of total visitation to Upper Hunter Shire; and ▪ the proposed Scone Aviation Visitor Attraction is forecast to initially attract 24k visitors in 2019, which is likely to more than double current visitation to Scone and is expected to offer constant and sustainable growth over a ten-year forecasted period.

Figure 1: Visitation Summary

This should be viewed as realistic but conservative, noting that by year 10 (2028), the aviation attraction should be achieving 46k visitors annually. Importantly, trying to predict user numbers out beyond a ten-year period is often problematic and inaccurate. This is due to the inability to gauge:

▪ the introduction of new experiences which are competitors and which may often restrict growth to the region; ▪ the longer term operating costs which may change and lead to higher maintenance or compliance requirements; and ▪ longer term changes in market demand to the broader hunter region.

However, it needs to be noted that the lifecycle of the aviation attraction should extend way beyond the 10-year period assessed.

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1.1.4. Demand Forecasts for Scone Aviation Visitor Attraction

The following figure illustrates the demand forecasts for the proposed Scone Aviation Visitor Attraction, reflecting a ten-year period (2019-2028). The forecasts are based on visitation to Upper Hunter Shire along with comparative analysis from other aviation museums.

Average annual visitation from all the aviation museums with visitor data was 57k, though the Hill Aerospace Museum figure (160k) is significantly higher than others and skews the results. If it is removed from the visitation comparison, the average annual figure becomes 36k. We have applied this figure as we consider it more realistic and applicable to reflect the range for what the proposed Scone aviation attraction could generate. Figure 2 below illustrates a range which commences at 10k below the average for the other aviation museums, but grows to 10k above the average by year 10.

In 2019 (year 1), it is projected that visitation would commence at 24k, which is more than double the current visitation figure to Scone. By 2028 (year 10), demand for the attraction is forecasted to reach 46k, representing 90% growth over the ten-year period. It is important to note that whilst growth is forecast to continue over the 10- year period, like nearly all attractions, it plateaus after 5-6 years and grows at a slower rate. Its ability to hold at these growth levels is dependent on a number of factors including its ability to refresh the experience and add new elements.

Figure 2: Demand Forecasts for Scone Aviation Visitor Attraction, 2019-2028

44k 45k 46k 42k 43k 38k 40k 35k 29k 24k

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

1.1.5. Cost Benefit Assessment

The Group utilised visitation estimates based on trends to the Upper Hunter Shire, as the aviation visitor attraction could be expected to have a very positive impact not only on visitation to Scone, but also for the wider region. The cost benefit analysis includes a 10-year cash flow model with the likely return on investment as expressed through the net present value and internal rate of return able to be generated.

Table 1 provides a summary of the cost benefit results. Points to note include the following.

▪ A discount rate of 6.8% was applied reflecting the current cost of capital. ▪ The required yield was set at 7%. If the yield were to be set higher, this results in a negative NPV being generated. ▪ Revenue ranges from $533k in year 1 to $1.25m by year 10. ▪ Aviation events and shows account for the largest share of this revenue, comprising 23% of all revenue generated and reflecting the importance of coordinating these. ▪ Expenditure ranges from $407k in year 1 to $561k in year 10.

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▪ Expenditure associated with staff salaries accounts for the largest percentage of expenditure (ranging from 44% in year 1 and 42% in year 10), followed by marketing expenditure (ranging from 30% in year 1 and 28% in year 10). Keeping staff related costs tight and avoiding staffing blowouts is critical to maintaining a positive cash flow result. ▪ The estimated CAPEX of $7.4m has not been adjusted for inflation though may need to be increased if there is delay in developing the project as figures quoted are 2017. ▪ The EBITDA ranges from $126k in year 1 to $687k in year 10, which indicates a positive cash flow position and reflecting the ability of revenue to exceed estimated operating costs year on year. ▪ The cost benefit indicates a positive but modest IRR and NPV achievable based on the assumptions and forecasts made.

Table 1: Cost Benefit Results Summary

Cost Benefit Results Summary Required Yield 7.0% Discount Rate 6.8% Year 1 Revenue $533k Year 10 Revenue $1.25m Year 1 Expenditure $407k Year 10 Expenditure $561k Year 1 EBITDA $126k Year 10 EBITDA $687k CAPEX $7.4m IRR 7.7% NPV $531k

1.2. Summary

The cost benefit analysis for the development of the aviation attraction indicates that:

▪ the market demand forecasts are conservative but realistic, based on historic visitation trends to other aviation museums and visitation to the Upper Hunter Shire; ▪ by 2028 (year 10), the aviation visitor attraction should be attracting 46k visitors; ▪ future visitor growth in Scone is likely to be partly predicated on the development of the aviation attraction and current visitation levels could more than double in 2019 (year 1 of the attraction opening); ▪ a positive cash flow would appear to be consistently generated from the revenue generated after expenses are deducted; ▪ over the ten-year forecast period, a positive economic result should be generated via a positive NPV and IRR result; ▪ the aviation attraction will add to the attractiveness of Scone and should stimulate longer length of stay, along with higher visitor spend levels and offering new employment opportunities; ▪ the attraction will also help to position Scone and Upper Hunter Shire as a stronger visitor hub which offers a variety of visitor attractions and facilities including the aviation focus and the strong existing equine industry; and ▪ the local community will also benefit through having important aviation heritage and artefacts properly displayed and presented which will invoke greater community pride.

Based on the analysis undertaken, and the various assumptions made, the project would appear economically viable and will also offer a variety of social and cultural benefits to the wider region as well as the local community.

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Based on the various components proposed for the development, it will also offer various ancillary benefits to support commercial and private functions, a variety of rural fire service and related support facilities, and a new attractive airport terminal. This project should therefore be seen within a wider context of the various benefits it can help generate, and not merely as a unique and attractive new aviation visitor experience.

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2.1. Overview

2.2. Methodology

The following methodology was applied:

▪ Discussions were undertaken with Council to refine the brief, the project scope and to confirm the overall methodology for the Study. ▪ A site visit was undertaken to Scone to visit the potential site, to see the current aviation collection, to discuss specific needs from the collection owner and Council, should this collection be accommodated. ▪ A comparative analysis was undertaken for aviation museums throughout Australia and New Zealand, as well as selected museums in the US based on data sourced via desktop research. ▪ Ownership and operating models for the museum were also evaluated. ▪ A detailed Market Demand Assessment was undertaken with updated visitation data being applied from all available sources to drill down from Hunter Tourism Region visitation data, to Upper Hunter Shire and to Scone, and then assessments made of likely visitation to the proposed attraction. ▪ Ongoing discussions were held with the collection owner to determine likely construction and development costs, the size required to allow for future proofing, and to determine acceptable operating and governance models, should this collection be accommodated. ▪ A Cost Benefit Assessment was undertaken which included a ten-year cash flow model to determine likely annual revenue and expenditure along with the internal rate of return and net present value able to be generated. ▪ Completion and forwarding of this draft Assessment to Council for review and feedback. ▪ After feedback is received from Council and the airport committee, any additions or changes will be completed and the study finalised.

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3.1. Context

Scone and the Upper Hunter Airport, established in 1958, is a general aviation airport located 300km north of Sydney.3 At present, there are no Regular Passenger Transport (RPT) operations at the airport, however it is understood that investigations have been made to evaluate whether RPT could operate in the future.

Upper Hunter Shire Council owns and operates the facility, which covers a 55.9ha site.4 This also includes parcels of land owned by private aviation businesses and aircraft owners.5

3.2. Plans for an Aviation Visitor Attraction

Offering an aviation visitor attraction is important for locally-based operators to expand their aviation services.6 The main features that would be proposed for any aviation visitor attraction (the attraction) include:

▪ a mezzanine level with function rooms, open foyer area, ARO, bathrooms, commercial kitchen and cantilevered shared balcony; ▪ café and gift shop; ▪ public amenities to service the airport terminal area; ▪ 3,200m2 of exhibition space which would be air-conditioned; and ▪ a lift for disabled access.

3.3. Comparative Aviation Museums

Comparative analysis of similar aviation museums was undertaken to assess visitor markets, operating costs and governance structures.

Table 2 illustrates 18 comparative aviation museums across Australia, New Zealand and the USA. The following key findings were identified from the comparative exercise:

▪ 6 museums (33%) have aircraft which currently operate. Aircraft are typically flown on special days such as the Omaka Aviation Heritage Centre’s “Flying Days” or shows such as Temora Aviation Museum’s Aviation Down under Air show. ▪ The Open Cockpit Weekend hosted by the Queensland Air Museum attracts 4,500 people, while the Star-Spangled Spectacular (featuring air shows and displays) hosted by Glenn L. Martin Maryland Aviation Museum attracts 4,000 visitors. Other specialty events include Aerobatic Competitions (Omaka Aviation Heritage Centre) and the Festival of Vintage Planes, Boats and Trains (South Australian Aviation Museum).

3 Road distance. Scone Regional Airport Master Plan Final Report, June 2016, three consulting & Leading Edge Aviation Planning Professionals 4 Scone Regional Airport Master Plan Final Report, June 2016, three consulting & Leading Edge Aviation Planning Professionals 5 Scone Regional Airport Master Plan Final Report, June 2016, three consulting & Leading Edge Aviation Planning Professionals 6 Scone Regional Airport Master Plan Final Report, June 2016, three consulting & Leading Edge Aviation Planning Professionals

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▪ Construction and development costs ranged from US$1.3m - AUD$110m. The Qantas Founders Outback Museum received a $110m Queensland and Federal Government grant, the Hinkler Hall of Aviation cost $7.5m to construct, while Fighterworld Aviation Museum cost $3.5m. The construction of a new building for the Hill Aerospace Museum cost $1.3m. ▪ The most common opening hours are 10am-4pm (39%), followed by 9am-5pm (22%). ▪ Most museums are open 7 days a week (14 museums, 78%). ▪ The average entry fee for adults is $11, with the most expensive being the Qantas Founders Outback Museum (which charges $28), while the RAAF Museum Point Cook, Air Force Museum of New Zealand and Hill Aerospace Museum offer free entry. ▪ The average entry fee for children is $5. Again, the most expensive museum was the Qantas Founders Outback Museum (which charges $18). Five museums allow free entry for children. ▪ The average building footprint for a facility is 2,526 m2. The largest footprint recorded is the Ashburton Aviation Museum (5,659 m2), while the smallest footprint is the Australian National Aviation Museum (308 m2). ▪ Annual visitation data is available for several museums, with the Hill Aerospace Museum recording the highest visitation (160k), followed by the RAAF Museum Point Cook (90k), the Temora Aviation Museum (40k), Queensland Air Museum (22k), Aviation Heritage Museum (20k), and Hinkler Hall of Aviation (10k). The high visitation for Hill Aerospace Museum may be due to the larger population base of the area and free entry while the high visitation for RAAF Museum Point Cook may be due to free entry and interactive flying displays three times per week. ▪ Several of the museums require funding to remain financially viable. Qantas Founders Outback Museum has entered a funding agreement with Qantas (five-year agreement worth $5m and announced in 2016) and the Omaka Aviation Heritage Centre is receiving Tourism Growth Partnership funding of NZ$1.5m for 3 years which began in June 2015). In 2005-06, the Fleet Air Museum recorded $1.95m in expenditure while it received $592k in funding. Over the same period, RAAF Point Cook recorded $6.98m in expenditure and received $6.32m funding. ▪ The Glenn L. Martin Maryland Aviation Museum recorded a net profit in 2014, with a gross income of $72k and $55k in expenses while the Aviation Heritage Museum also recorded a net profit of $35k (July 2014 – January 2015) with a gross income of $189 and expenses of $154.7

Average visitation from all the aviation museums with visitor data was 57k, though the Hill Aerospace Museum figure (160k) is significantly higher than others and skews the results. If it is removed from the visitation comparison, the average becomes 36k. We have applied this figure as we consider it more realistic and applicable to reflect the range for what the proposed Scone Aviation Visitor Attraction could generate.

7 Note: The Aviation Heritage Museum also received a Commonwealth grant of $81k and it is not known whether this figure was included in the financial summary for July 2014 – January 2015.

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Table 2: Comparative Aviation Museums

Operating Population Name, Location & Operator/ Aircraft # of Staff/ Opening Entry Number of Budget/ Construction Aircraft in Collection Events of Nearest Size Owner in use Volunteers Hours Fees Visitors Income/ Costs Town Expenses Hinkler Hall of Aviation8, Bundaberg The DH80A Puss No Bert Hinkler's - 5,484 9am- Adult: 10,032 $184,296 $7.5m Bundaberg, Qld, 1,577m2 Regional Moth, The Ibis Birthday 4pm $18 (2011/12) revenue ($400k grant Council, (Replica) Mon-Sun Child: (2011/12) from State Hinkler $10 government)9 House Memorial Museum and Research Committee owns the collection Queensland Air Museum10, Trust, 89 aircraft including Yes Open Cockpit 6 staff 3,558 10am- Adult: 22k per - - Caloundra, Qld, 2,971m2 Queensland Armstrong Whitworth Weekend 4pm $13 year11 Air Museum Meteor TT MK 20 WD Mon-Sun Child: Inc. 647 & Fairey Gannet $7 4,500 at AS MK 1 XA331 C/N 'Open F9223 Cockpit Weekend'

Qantas Founders Outback Trust, PBY Catalina Flying No - - 3,356 9am- Adult: - Five-year Received Museum12, Longreach, Qld, Qantas Boat, the Douglas 5pm $28 funding $110m grant 3,136m2 Foundation DC3, the Boeing 707 Mon-Sun Child: agreement from Memorial and Boeing 747 $18 with Qantas Queensland Ltd worth and federal $5million governments to build stage 2 of the museum13

8 http://fultontrotter.com.au/projects/hinkler 9 http://www.news-mail.com.au/news/battle-for-berts-last-plane/2458667/ 10 https://www.tripadvisor.com.au/LocationPhotoDirectLink-g261635-d2433206-i103018049-Queensland_Air_Museum-Caloundra_Sunshine_Coast_Queensland.html 11 http://www.sunshinecoastdaily.com.au/news/volunteers-keep-queensland-air-museum-flying/2834561/ 12 https://www.tripadvisor.com.au/Attraction_Review-g499668-d297143-Reviews-QANTAS_Founders_Museum-Longreach_Queensland.html 13 http://www.queenslandcountrylife.com.au/story/3962841/plenty-of-air-under-the-wings-for-qantas-founders-museum/ Scone Aviation Attraction Feasibility Study 11

The Australian Aviation Heritage Trust, 16 aircraft including - Used for - 267 9am- Adult: - - - Centre14, Winnellie, NT, 3,698m2 Aviation Spitfire & B-52 functions 5pm $14 Historical Bomber Mon-Sun Child: Society $7

Temora Aviation Museum15, Trust, David 16 aircraft including Yes Aviation 14 staff 4,417 10am- Adult: 40k - - Temora, NSW, 2,478m2 Lowy/ DH-82A Tiger Moth & Downunder 4pm $13 Temora CA-16 Wirraway Airshow Mon-Sun Child: Aviation $7 Museum Inc.

Fleet Air Arm Museum16, Nowra, Navy 102 airframes. - Big Band Night - 5,394 10am- Adult: - Total Gross - NSW, 5,472m2 Includes de Havilland Under 4pm $10 Expenditure Sea Vampire Mk1 Concorde Mon-Sun Child: $1.95m Free (2005-06), Funding from Defence Budget

14 https://www.expedia.com.au/Australian-Aviation-Heritage-Centre-Darwin.d6244479.Attraction 15 http://www.aromet.com/images/large/temora_tourism.html_PHOTO2.jpg 16 http://www.fleetairarm.com/collections-aircraft.aspx Scone Aviation Attraction Feasibility Study 12

Fighterworld Aviation Museum17, Trust, 18 aircraft including Yes Used for 3-10 staff 875 10am- Adult: - - $3.5m Williamtown, NSW, 1,802m2 Fighterworld Hawker Hunter & functions 4pm $15 Inc. Boeing Stearman Mon-Sun Child: $10

Australian National Aviation Trust, 25 aircraft + engines, - Open Cockpit - 5,283 10am- Adult: - - - Museum18, Morrabbin, Vic, Australian including Bristol Day 4pm $10 308m2 Aircraft Sycamore Mon-Fri, Child: Restoration 10am- $5 Group 5pm Sat- Sun

Ballarat Aviation Museum19, Trust, - - - 35 5,465 1pm- - - - - Ballarat, Vic, 500m2 Ballarat members 5pm Sat- Aviation Sun Museum Inc.

17 http://www.fighterworld.com.au/the-aviation-collection/aircraft-displays/dassault-mirage-iii 18 https://www.tripadvisor.com.au/LocationPhotoDirectLink-g2020520-d257180-i111849965-Australian_National_Aviation_Museum-Moorabbin_Kingston_Greater_Melbourne.html 19 http://www.ballarataviationmuseum.com.au/ Scone Aviation Attraction Feasibility Study 13

RAAF Museum Point Cook20, RAAF Includes Bristol Yes Interactive - 32,413 10am- Free 90,000 Total Gross - Point Cook, Victoria, 2,668m2 Boxkite Replica, Flying Displays 3pm (2002) Expenditure Boneyard Wrangler, Tues-Fri, $6,979,000 Canberra Bomber, 10am- (2005-06), General Dynamics F- 5pm Sat- Funding from 111C A8-125 Sun Defence Budget $6,318,000 (2005-06) South Australian Aviation Trust, South 17 aircraft including - Festival of - 1,293 10.30am- Adult: - - - Museum21, Port Adelaide, SA, Australian Douglas C-47 and Vintage Planes, 4.30pm $10 3,203m2 Aviation Sea Venom Boats & Trains Mon-Sun Child: Museum Inc. $5

Classic Jets Fighter Museum22, Trust, 5 aircraft including de - Used for - 15,317 10am- Adult: - - - Parafield, SA, 1,050m2 Classic Jet Havilland Sea Venom, functions 4pm $10 Aircraft and de Havilland Mon-Sun Child: Tiger Moth $5

20 http://www.airforce.gov.au/raafmuseum/news_events/acquisitions.htm 21 https://photomorsels.com/2013/11/06/sa-aviation-museum/ 22 http://community.history.sa.gov.au/classic-jets-fighter-museum Scone Aviation Attraction Feasibility Study 14

Aviation Heritage Museum of Owned and 23 aircraft including - Used for 254 7,541 10am- Adult: 20,000 p.a. Net Income - Western Australia23, Bull Creek, operated by Super Marine Spitfire functions volunteers 4pm $10 for January WA, 1,225m2 RAAF & Dakota C47 Mon-Sun Child: 2015 $ 10,480; Association $6 Net Income (Western for July 14- Australian Jan 15 Division)24 $35,345

Omaka Aviation Heritage Trust, Peter Boeing Stearman Yes Flying Days, - 2,736 9am- Adult: - NZ Govt TGP - Centre25, Blenheim, NZ, 3,040m2 Jackson/ used for joyrides book launches, 5pm $30 Funding of Aviation Aerobatic Mon-Sun Child: $1.5m for 3 Heritage Competition (Dec- $12 years Trust "The Pitts are Mar); (beginning Coming" 10am- June 2015) 4pm Mon-Sun (Apr- Nov) Air Force Museum of New RNZAF 34 aircraft including - Used for - 2,448 10am- Free - - - Zealand26, Wigram, NZ, 3,648m2 Aermacchi & Avro functions 5pm 626 Mon-Sun

23 http://blog.perthmint.com.au/2014/04/29/military-aviation-coin-joins-illustrious-exhibits-at-historic-museum/ 24 http://www.raafawa.org.au/museum/the-museum/history 25 http://nzff.org/viewtopic.php?p=8379309&sid=1ed79595d2e32cee7d2016ec91ee45d0 26 http://www.christchurchconventions.com/venues-and-event-services/event-services/air-force-museum-of-new-zealand/ Scone Aviation Attraction Feasibility Study 15

Ashburton Aviation Museum, Trust, Includes Porterfield - - - 19,600 1pm- Adult: - - - Ashburton27, NZ, 1,958m2 Ashburton 35W & de Havilland 3pm $10 Aviation Vampire T11 Mon-Sun Child: Museum Free Society Inc.

Hill Aerospace Museum, Trust, Over 90 aircraft. - Annual Easter 100 3,051,217 9am- Free 160,000 - $1.3m for a Utah28, USA, 1,075m2 Aerospace Includes B-17 Flying Egg Hunt, volunteers29 (Utah) 4.30pm p.a.30 new building Heritage Fortress and SR-71C Aviation Camp, Mon-Sat (1998)31 Foundation Blackbird Wings and of Utah, Wheels Car US Air Force Show and Food Drive, Annual Santa Clause Museum Visit Glenn L. Martin Maryland Trust, The Includes Beech 18S Yes Star-Spangled 66 622,793 11am- Adult: 4,000 visitors 2014 Income: - Aviation Museum32, Baltimore, Glenn L. and Republic RF-84F Spectacular volunteers33 3pm $3 at Star- $71,585 2014 USA, 5,659m2 Martin and Annual Wed-Sat Child: Maryland dinner $1

27 http://rnzaf.proboards.com/thread/2445/ashburton-aviation-museum 28 http://www.bigroads.com/usa-museums-aviation-top25.html 29 https://www.aerospaceutah.org/about-us/volunteers/ 30 https://www.aerospaceutah.org/hill-aerospace-museum/ 31 http://www.deseretnews.com/article/613772/House-approves-650000-for-Hill-Aerospace-Museum.html 32 http://s868.photobucket.com/user/youthspictures/media/Washington%20air%20museum/HPIM3817.jpg.html 33 http://www.mdairmuseum.org/resources/GLM-Report-2014b.pdf Scone Aviation Attraction Feasibility Study 16

34 http://www.mdairmuseum.org/resources/GLM-Report-2014b.pdf 35 http://www.mdairmuseum.org/resources/GLM-Report-2014b.pdf Scone Aviation Attraction Feasibility Study 17

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4.1. Comparative Operating and Funding Models

The following table illustrates the operating and funding models for the comparative museums in Section 4. The key findings include:

▪ The most common operating model were museums operated by a trust (67%), followed by museums operated by a federal government agency (22%), museums operated by council with a committee owning the collection (6%), and museums with a partnership between a federal government agency and trust (6%). ▪ Seven museums (39%) received construction funding from their respective federal governments, three museums (17%) received funding from state governments, 6% of museums received funding from both state and federal governments, 6% of museums received funding from a private benefactor, and 6% of museums received their funds primarily through fundraising initiatives. ▪ Development and construction costs ranged from AUD$1.7m - AUD$110m. The Qantas Founders Outback Museum received a $110m Queensland and Federal Government grant, the Hinkler Hall of Aviation cost $7.5m to construct, while the Fighterworld Aviation Museum cost $3.5m. The construction of a new building for the Hill Aerospace Museum cost US$1.3m.36

Table 3: Operating and Funding Models for Comparative Museums

Museum Managed/Operated Funding for Establishment Hinkler Hall of Aviation ▪ Operated by Bundaberg Regional ▪ Committee received $400k grant from Council State Government ▪ Hinkler House Memorial Museum and ▪ Bundaberg City Council applied for Research Committee owns the grants on the Committee’s behalf37 collection Queensland Air Museum ▪ Trust, Queensland Air Museum Inc. - Qantas Founders Outback Museum ▪ Trust, Qantas Foundation Memorial Ltd ▪ Organisation received $110m grant from Queensland and federal governments to build stage 2 of the museum38 ▪ Qantas and Defence Display funded by Queensland Government39 The Australian Aviation Heritage Centre ▪ Trust, Aviation Historical Society ▪ Constructed by Northern Territory Government40 Temora Aviation Museum ▪ Trust, Temora Aviation Museum Inc. ▪ Funded by David Lowy ▪ David Lowy (President and Founder) Fleet Air Arm Museum ▪ Royal Australian Navy ▪ Federal Government Fighterworld Aviation Museum ▪ Trust, Fighterworld Inc. ▪ $500k provided by the federal government41 Australian National Aviation Museum ▪ Trust, Australian Aircraft Restoration - Group

36 Note a grant of 100k was received by the Aviation Heritage Museum of Western Australia, however this is unlikely to represent the total cost for construction 37 http://www.news-mail.com.au/news/battle-for-berts-last-plane/2458667/ 38 http://www.queenslandcountrylife.com.au/story/3962841/plenty-of-air-under-the-wings-for-qantas-founders-museum/ 39 https://qfom.com.au/qantas-founders-museum-launches-qantas-and-defence-interactive-table-display/ 40 https://www.tourismtopend.com.au/tour/darwin-region/australian-aviation-heritage-centre 41 http://www.fighterworld.com.au/about-fighterworld/fighter-world-history

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Museum Managed/Operated Funding for Establishment Ballarat Aviation Museum ▪ Trust, Ballarat Aviation Museum Inc. - RAAF Museum Point Cook ▪ Royal Australian Airforce ▪ Federal Government South Australian Aviation Museum ▪ Trust, South Australian Aviation ▪ New hangar 50% funded by the Federal Museum Inc. Government42 Classic Jets Fighter Museum ▪ Trust, Classic Jet Aircraft Association - Inc. Aviation Heritage Museum of Western ▪ Owned and operated by RAAF ▪ Western Australian Government funded Australia Association (Western Australian group donated $100k for construction44 Division)43 Omaka Aviation Heritage Centre ▪ Trust, Aviation Heritage Trust ▪ Support from Marlborough District ▪ Peter Jackson Council and a grant from Federal Government for initial construction ▪ Expansion of facilities through MBIE grant, funds from various trusts and private donations45 Air Force Museum of New Zealand ▪ Royal New Zealand Air Force ▪ Federal Government Ashburton Aviation Museum ▪ Trust, Ashburton Aviation Museum ▪ Fundraised by the society, with help Society Inc. from Ashburton local community Hill Aerospace Museum ▪ Trust, Aerospace Heritage Foundation ▪ Federal Government of Utah ▪ US Air Force Glenn L. Martin Maryland Aviation Museum ▪ Trust, The Glenn L. Martin Maryland - Aviation Museum

4.2. Operating Model Options

The various comparative aviation museums have different operating systems and governance models, with no model necessarily being preferred. Based on the current understanding of possibilities and any potential relationship with the aviation collection owners and Council, there would appear to be the following primary46 options:

▪ the owner of the collection takes responsibility for operating the attraction facility and charges Council a rental if the airport terminal and other ancillary uses is housed within the overall facility; ▪ Council operate the facility under an agreed contractual arrangement with the collection owner; ▪ the collection owner funds the development and leases it back to Council to operate; ▪ the Council (with grant funding assistance and other contributions from sponsors etc.) fund the development and either operate it themselves, or lease it to the collection owner to perform this task (excluding the airport terminal operation which remains with Council); or ▪ a public private partnership arrangement is formed between Council, the collection owner and potential third party donors, to jointly fund the development and to co-jointly operate the facility.

42 http://www.saam.org.au/ 43 http://www.raafawa.org.au/museum/the-museum/history 44 http://www.raafawa.org.au/museum/the-museum/history 45 http://www.omaka.org.nz/donations-bequests.htm 46 It could be possible that a hybrid version of any of these model options could be developed but legal and tax advice would need to be obtained to determine the various implications of the models.

Scone Aviation Attraction Feasibility Study 20

Based on the comparative operating models and noting the uniqueness of the Scone aviation collection, the Temora Aviation Museum operating model would appear to offer the closest comparison, with a single private individual owning the collection. In the case of Temora, the owner funded the aviation museum to exhibit and hold his collection, and as a community benefit.

Scone Aviation Attraction Feasibility Study 21

Scone Aviation Attraction Feasibility Study 22

5.1. Market Demand Summary

The following figure provides an overview of visitation to the Hunter Tourism Region, Upper Hunter Shire, Scone, and projected visitation for the aviation attraction in Scone. The figure demonstrates the following:

▪ visitors to Upper Hunter Shire account for 0.2% of total visitation to the Hunter Tourism Region; ▪ Scone captures an estimated 46% of total visitation to Upper Hunter Shire; and ▪ the proposed Attraction is expected to initially attract 24k visitors in 2019, which is likely to more than double visitation to Scone and is expected to offer constant and sustainable growth over a ten-year forecasted period with visitation expected to consolidate around years 5-6 with slower growth there-after.

This should be viewed as realistic but conservative, noting that by year 10 (2028), the attraction should be attracting 46k visitors annually.

Figure 3: Visitation Summary

Scone Aviation Attraction Feasibility Study 23

5.2. Visitation to Hunter Tourism Region

5.2.1. Total Visitation

Total visitation to the Hunter Tourism Region increased to 10.2m visitors in 2016. Over the ten-year historic period assessed, visitation grew on average by 3% per annum.

For the most recent year’s data (YE September 2016), 66% of visitors are estimated as domestic day visitors, 33% as domestic overnight visitors and 2% as international overnight visitors.

Figure 4 illustrates visitation to the Hunter Tourism Region based on visitor type from 2007-2016.

Figure 4: Visitation to Hunter Tourism Region, YE Sept 2007-201647

Domestic Day Domestic Overnight International Overnight Total

10.2m 9.3m 8.8m 9.0m 8.6m 8.8m 8.9m 8.2m 8.1m 8.0m 6.7m 6.2m 5.9m 6.1m 5.7m 5.7m 5.3m 5.2m 5.3m 5.5m

3.1m 3.3m 2.8m 2.8m 2.6m 2.8m 2.9m 2.8m 2.9m 2.9m

142k 132k 134k 146k 150k 129k 136k 142k 167k 155k

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5.2.2. Visitor Nights

Total visitor nights increased slightly over the last ten years to 11.6m nights, with an average annual growth of 1%. Most visitor nights (78%) are estimated to have been domestic visitor nights (YE September 2016).

The following figure illustrates visitor nights for the Hunter Tourism Region based on visitor type from 2007-2016. An aviation visitor attraction will attract a mix of overnight and day users with some preferring to stay overnight within the Hunter Tourism Region and combining their trip with other visitor attractions such as visiting local wineries etc. Potential also exists to package up visits to the aviation attraction with equine events which are already held in Scone, and to potentially increase the overnight domestic and international visitor markets as a result.

47 Travel to The Hunter, Year ended September 2016, Destination NSW; Travel to The Hunter Tourism Region, Year ended September 2015, Destination NSW. Note: Total figure does not always equal the figure provided by Destination NSW due to rounding of domestic day, domestic overnight and international overnight figures.

Scone Aviation Attraction Feasibility Study 24

Figure 5: Visitor Nights for the Hunter Tourism Region, YE Sept 2007-201648

Domestic Nights International Nights Total

11.2m 11.6m 10.3m 10.6m 10.4m 10.6m 9.6m 10.1m 10.0m 9.3m 9.0m 8.6m 8.1m 8.0m 8.1m 8.5m 7.4m 7.7m 7.9m 7.8m

2.5m 2.4m 2.5m 2.2m 2.5m 2.8m 2.6m 1.8m 1.5m 1.9m

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5.2.3. Average Length of Stay

Figure 6 provides a summary of the average length of stay (ALOS) for both domestic and international visitors to the Hunter Tourism Region over the last ten years. The ALOS decreased to 2.7 nights for domestic visitors in 2016 (average decline of 1% per annum), while it increased to 16.6 nights for international visitors (4% average annual increase).

While the ALOS for international visitors (16.6 nights for 2016) compared to domestic visitors (2.7 nights for 2016) is considerably higher, The Group considers that the holiday/leisure figure for international visitors is lower, as international workers on short- term contracts may possibly be skewing the results along with international students. The domestic overnight figures are therefore likely to be more realistic for capturing the true ALOS.

Figure 6: Average Length of Stay for the Hunter Tourism Region, YE Sept 2007-201649

Domestic Overnight International Overnight

19.2 17.4 17.4 16.3 16.1 16.5 16.6 14.4 12.5 11.1

3.1 2.9 2.9 2.9 2.7 2.9 2.7 2.8 2.8 2.7

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5.2.4. Purpose of Visit

Table 4 provides a breakdown of the purpose of visit to the Hunter Tourism Region. In 2016, visitors travelling on a holiday, accounted for the largest percentage of visitors, with 47% of domestic day visitors, 40% of domestic overnight visitors and 63%

48 Travel to The Hunter, Year ended September 2016, Destination NSW; Travel to The Hunter Tourism Region, Year ended September 2015, Destination NSW. Total figure does not always equate to the figure provided by Destination NSW due to rounding of domestic overnight and international overnight figures. 49 Travel to The Hunter Tourism Region, Year ended September 2016, Destination NSW

Scone Aviation Attraction Feasibility Study 25

of international overnight visitors travelling on a holiday. This is significant as it assumed that the clear majority of people who would visit an aviation visitor attraction are those travelling for leisure/holiday purposes.

The next largest percentage of visitors were those visiting friends and relatives (VFR), accounting for 27% of domestic day visitors, 38% of domestic overnight visitors and 31% of international overnight visitors. This group are also likely to visit an aviation visitor attraction as locals and their family and friends from outside the region may want to experience the aviation attraction together.

Table 4: Hunter Tourism Region Purpose of Visit, YE Sept 2012 and 201650

2012 % Split 2016 % Split

Domestic Day Holiday 2,294,000 38% 3,142,000 47% VFR 1,976,000 32% 1,786,000 27% Business 854,000 14% 786,000 12% Other 969,000 16% 976,000 15% Total 6,093,000 100% 6,690,000 100%

Domestic Overnight Holiday 1,165,000 42% 1,337,000 40% VFR 1,070,000 39% 1,278,000 38% Business 397,000 14% 552,000 17% Other 132,000 5% 178,000 5% Total 2,764,000 100% 3,345,000 100%

International Overnight Holiday 73,200 58% 90,300 63% VFR 37,800 30% 43,800 31% Business 9,300 7% - - Employment - - - - Education 6,000 5% 9,200 6% Other - - - - Total 126,300 100% 143,300 100%

5.2.5. Visitor Expenditure

Figure 7 illustrates a breakdown of visitor expenditure for the Hunter Tourism Region over the last ten years. Total visitor spend has increased to $2.4b in 2016 (average annual growth of 4%).

For the most recent year’s data (YE September 2016), 62% of expenditure was estimated to be spent by domestic overnight visitors, 30% by domestic day visitors and the remaining 8% by international overnight visitors.

50 Travel to The Hunter Tourism Region, Year ended September 2016, Destination NSW. Note: total figures do not always equal the figure provided by Destination NSW due to rounding of holiday, VFR, business, employment, education and other figures.

Scone Aviation Attraction Feasibility Study 26

Figure 7: Visitor Expenditure for the Hunter Tourism Region, YE Sept 2007-201651

Domestic Day Domestic Overnight International Overnight Total $2.4b $2.2b $2.2b $2.0b $1.9b $1.9b $2.0b $2.0b $1.8b $1.8b $1.4b $1.5b $1.2b $1.3b $1.3b $1.3b $1.1b $1.2b $1.2b $1.2b

$665m $616m $715m $503m $555m $519m $533m $562m $593m $546m $126m $137m $130m $169m $148m $183m $143m $164m $190m $178m

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Figure 8 illustrates the average spend per visitor per day broken down by visitor type. For 2016, domestic overnight visitors spend the most on average ($163 per day), followed by domestic day visitors ($107 per day) and international overnight visitors ($69 per day).

Figure 8: Spend Per Visitor Per Day for the Hunter Tourism Region, YE Sept 2007-201652

Domestic Day Domestic Overnight International Overnight

$172 $168 $164 $169 $163 $153 $158 $152 $150 $132 $108 $117 $108 $107 $96 $93 $97 $91 $90 $97 $99 $74 $71 $67 $66 $61 $65 $67 $69 $69

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5.3. Visitation to Upper Hunter Shire

5.3.1. Total Visitation

Total visitation to Upper Hunter Shire increased to 19.7k visitors in 2015/16, indicating that there is a compelling volume of visitors to help support an aviation visitor attraction. Visitation has grown by 17% since 2012/13.53

In 2015/16, domestic visitation accounted for 18k visitors (89% of total visitation) and international visitation accounted for 0.7k visitors (4% of total visitation).54

The following figure illustrates visitation to Upper Hunter Shire based on visitor type for 2012/13 – 2015/16.

51 Travel to The Hunter Tourism Region, Year ended September 2016, Destination NSW. Total figure does not always equate to the figure provided by Destination NSW due to rounding errors from adding the domestic day, domestic overnight and international overnight categories. 52 Travel to The Hunter Tourism Region, Year ended September 2016, Destination NSW 53 Note data is based on visitation to the Upper Hunter Shire VICs, however it is likely that these are not the only visitors to the Shire. 54 The remaining 7% of visitors are unknown.

Scone Aviation Attraction Feasibility Study 27

Figure 9: Visitation to Upper Hunter Shire by Visitor Type, 2012/13 - 2015/1655

Domestic International Unknown Total

19.6k 19.7k 16.8k 17.2k 17.4k 18k 14.7k

1.8k 1.3k 1.4k - - - 0.8k 0.8k 0.7k

2012/13 2013/14 2014/15 2015/16

5.3.2. Total Visitor Nights

Figure 10 shows that total visitor nights decreased from 2012/13 to 2015/16, falling to an estimated 7.9k nights (17% average annual decline since 2012/13).56

Figure 10: Visitor Nights for Upper Hunter Shire, 2012/13 - 2014/1557

13.5k 12.1k

7.7k 7.9k

2012/13 2013/14 2014/15 2015/16

5.3.3. Average Length of Stay

The following figure provides a summary of the ALOS for Upper Hunter Shire from 2012/13 – 2015/16. Over the four-year period, the ALOS has increased by an annual average of 4% to 1.77 in 2015/16.

The construction of an aviation visitor attraction may also contribute to the ALOS increasing in the future by adding a further activity to the mix of attractions in Upper Hunter Shire.

55 Upper Hunter Shire Council VIC Annual Report 15/16; Upper Hunter Shire Council VIC Annual Report 14/15; Upper Hunter Shire Council Visitor Centre Annual Report 13/14; Upper Hunter Shire Council Visitor Centre Annual Report 12/13. 56 Note data is based on visitation to the Upper Hunter Shire VICs, however it is likely that these are not the only visitors to the Shire. 57 Visitor Nights were evaluated using the number of visitors who stay overnight or more nights multiplied by the estimated ALOS (see Section 6.3.3). Upper Hunter Shire Council VIC Annual Report 15/16; Upper Hunter Shire Council VIC Annual Report 14/15; Upper Hunter Shire Council Visitor Centre Annual Report 13/14; Upper Hunter Shire Council Visitor Centre Annual Report 12/13

Scone Aviation Attraction Feasibility Study 28

Figure 11: Average Length of Stay for Upper Hunter Shire, 2012/13 - 2015/1658

1.83 1.77 1.71 1.60

2012/13 2013/14 2014/15 2015/16

5.3.4. Purpose of Visit

Figure 12 illustrates the breakdown of purpose of visit for Upper Hunter Shire.59 The most common purpose of visit to Upper Hunter Shire is for holiday (8.8k, 45%), followed by visiting friends and relatives (6k, 31%), business (2.6k, 13%) and other (2.2k, 11%).

It is anticipated that the holiday and business markets are those most likely to visit an aviation visitor attraction, and these markets account for 11.4k visitors collectively (58% of total visitors) to the Upper Hunter Shire.

Figure 12: Purpose of Visit for Upper Hunter Shire, 2015/1660

19.7k

8.8k 6.0k 2.6k 2.2k

Holiday VFR Business Other Total

5.3.5. Referrals by Visitor Centre Staff

The following figure illustrates referrals made by Visitor Centre staff in the Upper Hunter Shire in 2015/16. Local museum/history referrals are the second most common referral type, accounting for 18% of referrals. This category ranked behind referrals to national parks (23% of total referrals).

Keeping in mind that not all people who visit museums and historical attractions would have been referred by the visitor centre, local museum/history referrals represent 9% of total visitors to the Upper Hunter Shire.

58 To calculate ALOS, it was assumed that those staying 3 or more nights stayed an average of 3.5 nights. Upper Hunter Shire Council VIC Annual Report 15/16; Upper Hunter Shire Council VIC Annual Report 14/15; Upper Hunter Shire Council Visitor Centre Annual Report 13/14; Upper Hunter Shire Council Visitor Centre Annual Report 12/13 59 Note data is based on visitation to the Upper Hunter Shire VICs, however it is likely that these are not the only visitors to the Shire. 60 Purpose of visit was evaluated by using the % split calculated from Destination NSW’s Hunter Tourism Region report. Note that 2015/16 data was used for total population, while YE September 2016 was used to evaluate the % split of purpose of visit. Travel to The Hunter Tourism Region, Year ended September 2016, Destination NSW

Scone Aviation Attraction Feasibility Study 29

Figure 13: Referrals by Visitor Centre Staff for Upper Hunter Shire, 2015/1661

2,388

1,848 1,463 1,228 940 642 548 512 383

124 91 71 41 36 31 28 26 24 11 9

4WD

Hiking

Cycling

Festivals

Chargebar

Horse Studs Horse

Art Galleries Art

Motor Cross Motor

Timor Timor Caves

Battery Battery Rock

Horse Riding Horse

Horse RacingHorse

Mwa Mwa Eateries

National Parks National

Needle

Wallabadah Wallabadah Rock

Local Museum/History Local

Fishing/Water Activities Fishing/Water

Paradise Park/Eye of theof Paradise Park/Eye Horse Interpretive Centre Interpretive Horse Sports eg Tennis, Football eg Sports

5.3.6. Visitor Expenditure

Table 5 illustrates Upper Hunter Shire’s total visitor expenditure.62 Total visitor expenditure increased from an estimated $3.9m in 2012/13 to $4.5m in 2015/16.

Table 5: Upper Hunter Shire Visitor Expenditure, 2012/13 – 2015/1663

2012/13 2013/14 2014/15 2015/16 Total Visitors 16,842 17,242 19,599 19,655 Spend Per Visitor $233 $247 $250 $231 Total Visitor Spend $3.9m $4.3m $4.9m $4.5m

5.4. Visitation to Scone

5.4.1. Total Visitation

Total visitation to Scone was estimated at 9.1k in 2015/16 which represents a 3% annual average increase from 2013/14.64

For the most recent year’s data, domestic visitors account for most total visitors (8k, 88%), while international visitors account for 0.5k visitors (6%).65. The reason the two figures don’t equal 100% is the unknown category.

The following figure illustrates visitation to Scone based on visitor type for 2013/14 - 2015/16.

61 Upper Hunter Shire Council VIC Annual Report 2015/16 62 Note data is based on visitation to the Upper Hunter Shire VICs, however it is likely that these are not the only visitors to the Shire. 63 The spend per visitor was calculated from Destination NSW’s Hunter Tourism Region report. It is assumed that average spend per visitor in the Upper Hunter Shire is the same for Hunter Tourism Region. Note visitor spend for YE September 2013 was used for 2012/13, spend for YE September 2014 was used for 2013/14, spend for YE September 2015 was used for 2014/15 and spend for YE September 2016 was used for 2015/16. Travel to The Hunter Tourism Region, Year ended September 2016, Destination NSW; Upper Hunter Shire Council VIC Annual Report 2015/16; Upper Hunter Shire Council VIC Annual Report 14/15; Upper Hunter Shire Council Visitor Centre Annual Report 2013/14; Upper Hunter Shire Council Visitor Centre Annual Report 2012/13. 64 Note data is based on visitation to the Scone VIC, however it is likely that these are not the only visitors to Scone. 65 The remaining 6% of visitors are unknown.

Scone Aviation Attraction Feasibility Study 30

Figure 14: Visitation to Scone by Visitor Type, 2013/14 - 2015/1666

Domestic International Unknown Total

10.4k 8.7k 9.0k 9.1k 8.0k 7.1k

1.1k 0.5k 0.6k 0.8k 0.5k 0.6k

2013/14 2014/15 2015/16

5.4.2. Visitor Nights

The following figure shows that total visitor nights decreased from 2013/14 to 2015/16, falling to an estimated 4.4k nights (declining by 19% per annum from 2013/14).67

Figure 15: Visitor Nights for Scone, 2013/14 - 2015/1668

7.0k

4.5k 4.4k

2013/14 2014/15 2015/16

5.4.3. Average Length of Stay

The following provides a summary of the ALOS for Scone from 2013/14 – 2015/16.69 The ALOS increased by 6% per annum to 1.85 nights in 2015/16.

With the introduction of an aviation visitor attraction, it is likely that the ALOS will continue to increase in the future as additional packaged product is offered.

66 Total Visitation to Scone was calculated by summing the visitor distribution categories for Scone. Upper Hunter Shire Council VIC Annual Report 2014/15; Upper Hunter Shire Council Visitor Centre Annual Report 2013/14; Upper Hunter Shire Council Visitor Centre Annual Report 2015/16 67 Note data is based on visitation to the Scone VIC, however it is likely that these are not the only visitors to Scone. 68Upper Hunter Shire Council Visitor Centre Annual Report 2015/16; Upper Hunter Shire Council VIC Annual Report 2014/15; Upper Hunter Shire Council Visitor Centre Annual Report 2013/14 69 Note data is based on visitation to the Scone VIC, however it is likely that these are not the only visitors to Scone.

Scone Aviation Attraction Feasibility Study 31

Figure 16: Average Length of Stay for Scone, 2013/14 - 2015/1670

1.85 1.81

1.64

2013/14 2014/15 2015/16

5.4.4. Purpose of Visit

Figure 17 illustrates the breakdown of purpose of visit for Scone.71 The most common purpose of visit to Scone is for a holiday (4.1k, 45%), followed by visiting friends and relatives (2.8k, 31%), business (1.2k, 13%) and other (1.0k, 11%).

It is anticipated that the holiday and business markets are those most likely to visit an aviation visitor attraction. Collectively, these markets account for 5.3k visitors (58% of total visitors) to Scone.

Figure 17: Scone Purpose of Visit, 2015/1672

9.1k

4.1k 2.8k 1.2k 1.0k

Holiday VFR Business Other Total

5.4.5. Referrals by Visitor Centre Staff

The following figure illustrates referrals made by visitor centre staff in Scone in 2015/16. Local museum/history referrals are the fifth most common referral type, accounting for 11% of referrals. This category ranked behind referrals for national parks (29% of total referrals), horse interpretive centre (21% of total referrals), festivals (14% of total referrals) and horse studs (11% of total referrals).

While not all people who visit museums and historical attractions would have been referred by the visitor centre, local museum/history referrals represent 5% of total visitors to Scone.

70 To calculate ALOS, it was assumed that those staying 3 or more nights stayed an average of 3.5 nights. Upper Hunter Shire Council Visitor Centre Annual Report 2015/16; Upper Hunter Shire Council VIC Annual Report 2014/15; Upper Hunter Shire Council Visitor Centre Annual Report 2013/14 71 Note data is based on visitation to the Scone VIC, however it is likely that these are not the only visitors to Scone. 72 Purpose of visit was evaluated by using the % split calculated from Destination NSW’s Hunter Tourism Region report. Note that 2015/16 data was used for total population, while YE September 2016 was used to evaluate the % split of purpose of visit. Travel to The Hunter Tourism Region, Year ended September 2016, Destination NSW; Upper Hunter Shire Council Visitor Centre Annual Report 2015/16

Scone Aviation Attraction Feasibility Study 32

Figure 18: Referrals by Visitor Centre Staff for Scone, 2015/1673

1,270

940

603 503 494 335 104

55 31 20 17 15 11 10 9

4WD

Hiking

Cycling

Festivals

Chargebar

Local

Activities

Horse Studs Horse

Centre

Timor Timor Caves

Football

Horse Riding Horse

Horse RacingHorse

Fishing/Water

National Parks National

the the Needle

Museum/History

Sports eg Tennis, eg Sports Horse Interpretive Horse

Paradise Park/Eye of Paradise Park/Eye

5.4.6. Visitor Expenditure

The following table illustrates Scone’s total visitor expenditure.74 Total visitor expenditure increased from an estimated $1.8m in 2013/14 to $2.1m in 2015/16.

Table 6: Scone Visitor Expenditure, 2013/14 – 2015/1675

2013/14 2014/15 2015/16 Total Visitors 7,090 9,002 9,134 Spend Per Visitor $247 $250 $231 Total Visitor Spend $1.8m $2.3m $2.1m

5.5. Demand Forecasts for Scone Aviation Visitor Attraction

The following figure illustrates the realistic but conservative demand forecasts for the proposed Scone Aviation Visitor Attraction, reflecting a ten-year period (2019-2028). The forecasts are based on visitation to Upper Hunter Shire as the aviation visitor attraction will have a positive impact not only on visitation to Scone, but also for the wider Shire.

In 2019 (year 1), it is projected that visitation would commence at 24k, which is more than double the current visitation to Scone.

By 2028 (year 10), demand for the attraction is forecasted to reach 46k, which reflects 90% growth over the ten-year period.

73 Upper Hunter Shire Council Visitor Centre Annual Report 2015/16 74 Note data is based on visitation to the Scone VIC, however it is likely that these are not the only visitors to Scone. 75 The spend per visitor was calculated from Destination NSW’s Hunter Tourism Region report. It is assumed that average spend per visitor for Scone is the same for Hunter Tourism Region. Note visitor spend for YE September 2014 was used for 2013/14, spend for YE September 2015 was used for 2014/15 and spend for YE September 2016 was used for 2015/16. Travel to The Hunter Tourism Region, Year ended September 2016, Destination NSW; Upper Hunter Shire Council VIC Annual Report 2015/16; Upper Hunter Shire Council VIC Annual Report 2014/15; Upper Hunter Shire Council Visitor Centre Annual Report 2013/14

Scone Aviation Attraction Feasibility Study 33

Figure 19: Demand Forecasts for Scone Aviation Visitor Attraction, 2019-2028

44k 45k 46k 42k 43k 40k 38k 35k 29k 24k

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Scone Aviation Attraction Feasibility Study 34

Scone Aviation Attraction Feasibility Study 35

The following section provides a cost benefit assessment from the development of the proposed Scone Aviation Visitor Attraction.

6.1. Capital Expenditure

The following table provides an overview of the top-line capital expenditure items applied, estimated at $7.4m. A 10% contingency has also been applied to help cover any additional unforeseen items.

The main capital expenditure items are noted below:

▪ Preliminaries (including design) at $1.1m. ▪ Concrete and tilt panels at $989k. ▪ Structural steel and internal framing at $615k. ▪ Kitchen and fixtures at $146k, however this will support catering for conferences/weddings etc. which will be an additional business opportunity for added income generation for the facility. ▪ Air-conditioning at $386k will be especially important with Scone’s hot summers and cooler winters. ▪ Projectors, audio visual displays and AV equipment are estimated at $250k. These features will offer greater interactive displays, and help visitors to stay for longer, thereby increasing visitor spending at the café and/or gift shop. ▪ Car parking and access roads are estimated at $200k. ▪ A lift at $96k to ensure that the attraction complies with WHS standards. ▪ In addition, upgrades have been included for year 5 and year 10 (at $300k for each year), to cover additional enhancements and improvements as elements of the attraction start to wear and updated displays are audio visual coverage is needed to help generate a repeat visitor market.

Table 7: Capital Expenditure

CAPEX Summary Earthworks, site preparation, excavation (4.5%) $78,250 Pavements $190,525 Concrete and tilt panels $989,129 Structural steel and internal framing $615,384 Carpentry, fix out, plasterer and painter $175,883 Kitchen and fixtures $146,124 Resilient finishes, PU flooring and tiling $326,659 Cladding and roofing $301,455 Electrical $386,100 Hydraulic (plumber) including fire services $340,362 Mechanical (air conditioning) $386,100 Metalwork $155,925 Lift $96,228 Glazing $325,497 Projectors/ Audio visual displays, AV equipment PC sum $250,000

Scone Aviation Attraction Feasibility Study 36

CAPEX Summary Furniture PC sum $20,000 Displays PC sum $150,000 Carparking, access roads and landscaping (2000 sqm), fencing $200,000 PC sum Stormwater, onsite water detention PC Sum $150,000 Preliminaries including design (18.9%) $1,055,229 Professional fees (6%) $380,331 Contingencies (10%) $633,885 Total Development Costs $7,353,066

The following image shows a possible concept as an example for an aviation visitor attraction façade. In addition, this could accommodate aircraft and the proposed mezzanine-level would be economical to construct. The style of design below has been used to help determine the likely construction costs.

Figure 20: Concept Only Example Façade

Figure 21 illustrates the potential concept site plan for the Attraction. Importantly, the design allows for ease of access for manoeuvring aircraft, but also allows for the showcasing of aircraft and associated artefacts. Key features include:

▪ 3,200m2 of exhibition space which would be air-conditioned; ▪ a mezzanine level with function rooms, open foyer area, ARO offices, bathrooms, commercial kitchen and cantilevered shared balcony; ▪ café and gift shop; ▪ bathrooms to service the terminal area; and ▪ a lift for disabled access.

Scone Aviation Attraction Feasibility Study 37

Figure 21: Potential Scone Aviation Attraction (Concept Only Site Plan)

Scone Aviation Attraction Feasibility Study 38

6.2. Cost Benefit Findings

The cost benefit assessment utilises visitation estimates based on visitation trends to the Upper Hunter Shire, as the attraction will have a positive impact not only on visitation to Scone, but also for the wider region. The Group determined annual cash flow over a ten-year period along with the likely return on investment as expressed through the net present value and internal rate of return results generated.

The cost benefit findings are based on a variety of variables and factors including the following:

▪ A discount rate of 6.8% was applied reflecting the current cost of capital. ▪ The required yield was set at 7%. If the yield were to be set higher, this results in a negative NPV being generated. ▪ The Group has increased the rates for entry, function/meeting room hireage, aviation events and shows, and joy rides as well as revenue generated by the café and merchandise sales by 20% in year 5. ▪ 28% of attraction visitors are estimated to be using the café. ▪ 15% of visitors are estimated to purchase merchandise. ▪ The number of staff members required to run the attraction is estimated at 2.5 full time equivalents including a curator. ▪ It is assumed that the inflation rate remains constant throughout the ten-year period at 3.0%.

The following provides a summary of the main cost benefit results. Points to note include the following.

▪ Revenue ranges from $533k in year 1 to $1.25m by year 10. ▪ Aviation events and shows account for the largest share of this revenue, comprising 23% of all revenue generated. ▪ Expenditure ranges from $407k in year 1 to $561k in year 10. ▪ Expenditure associated with staff salaries accounts for the largest percentage of expenditure (ranging from 44% in year 1 and 42% in year 10), followed by marketing expenditure (ranging from 30% in year 1 and 28% in year 10). ▪ The EBITDA ranges from $126k in year 1 to $687k in year 10, illustrating the ability of the attraction to achieve a positive cash flow year on year. ▪ The cost benefit indicates a positive but modest IRR and NPV achievable based on the assumptions and forecasts made.

Table 8: Cost Benefit Results Summary

The following table provides a ten-year cash flow model and cost benefit assessment. Importantly, the cost benefit is assessed over a ten-year period only, though the life of the asset is far longer. A longer period has not been applied reflecting the difficulty

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(lack of accuracy and value) of trying to determine likely user numbers, spend levels and longer term maintenance costs especially beyond this 10- year time frame. There are many externalities which could impact on visitation and yield post the 10-year period which make longer term forecasting inaccurate. There is also no way of assessing the impact of new competition from within the wider region which may impact on visitation numbers, spend patterns and user demand for the attraction post 2028 (10 years).

For the above reasons, a ten-year cash flow model has been provided though the aviation visitor attraction will have a lifespan beyond this timeframe, dependent on various factors associated with its maintenance, upkeep, promotion and future market demand.

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Table 9: Cost Benefit Assessment

Cost Benefit Assessment for Scone Aviation Attraction ASSUMPTIONS Required Yield 7.0% Discount rate 6.8%

1 2 3 4 5 6 7 8 9 10 Demand (assumes operational from 2019) 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 adult entry 6,840 8,208 9,850 10,835 11,376 11,831 12,186 12,552 12,803 12,995 child entry 1,330 1,596 1,915 2,107 2,212 2,301 2,370 2,441 2,489 2,527 family pass (2 adults, 2 children) 1,650 1,980 2,376 2,614 2,744 2,854 2,940 3,028 3,088 3,135 school - education group entry 1,330 1,596 1,915 2,107 2,212 2,301 2,370 2,441 2,489 2,527 coach tour groups 1,900 2,280 2,736 3,010 3,160 3,286 3,385 3,487 3,556 3,610 retirees 1,750 2,100 2,520 2,772 2,911 3,027 3,118 3,211 3,276 3,325 corporate groups 360 432 518 570 599 623 641 661 674 684 bespoke small groups with individual guide 829 995 1,193 1,313 1,378 1,434 1,477 1,521 1,551 1,574 aviation events and shows 8,075 9,690 11,628 12,791 13,430 13,968 14,387 14,818 15,115 15,341 joy rides 61 73 88 96 101 105 108 112 114 116

Total Visitation Estimate 24,125 28,949 34,739 38,213 40,124 41,729 42,981 44,270 45,156 45,833

Revenue rates adult entry (rates increase in year 5 by 20%) $ 15 $ 102,600 $ 123,120 $ 147,744 $ 162,518 $ 204,773 $ 212,964 $ 219,353 $ 225,934 $ 230,452 $ 233,909 child entry (increase of 20% in year 5) $ 7 $ 9,310 $ 11,172 $ 13,406 $ 14,747 $ 18,581 $ 19,325 $ 19,904 $ 20,501 $ 20,911 $ 21,225 family pass (2 adults, 2 children)- increase in year 5 of 20% $ 33 $ 54,450 $ 65,340 $ 78,408 $ 86,249 $ 108,673 $ 113,020 $ 116,411 $ 119,903 $ 122,301 $ 124,136 school - education group entry (increase in year 5 of 20%) $ 7 $ 9,310 $ 11,172 $ 13,406 $ 14,747 $ 18,581 $ 19,325 $ 19,904 $ 20,501 $ 20,911 $ 21,225 coach tour group rate (increase in year 5 of 20%) $ 11 $ 19,950 $ 23,940 $ 28,728 $ 31,601 $ 39,817 $ 41,410 $ 42,652 $ 43,932 $ 44,810 $ 45,482 retirees (increase in year 5 of 20%) $ 7 $ 12,250 $ 14,700 $ 17,640 $ 19,404 $ 24,449 $ 25,427 $ 26,190 $ 26,976 $ 27,515 $ 27,928 corporate groups (increase in year 5 of 20%) $ 15 $ 5,400 $ 6,480 $ 7,776 $ 8,554 $ 10,778 $ 11,209 $ 11,545 $ 11,891 $ 12,129 $ 12,311 bespoke small groups with individual guide (year 5 increase $ 20 $ 16,782 $ 20,139 $ 24,166 $ 26,583 $ 33,495 $ 34,834 $ 35,879 $ 36,956 $ 37,695 $ 38,260 of 20%) café revenue (28% penetration rate) increase year 5 $ 7 47,284 56,741 68,089 74,898 94,372 98,146 101,091 104,124 106,206 107,799 function/meeting room hireage per day - increase year 5 $ 250 $ 7,000 $ 7,700 $ 8,470 $ 9,317 $ 12,298 $ 16,234 $ 21,429 $ 28,286 $ 37,338 $ 49,286 merchandise sales (penetration rate of 15%) increase year 5 $ 10 36,187 43,424 52,109 57,320 72,223 75,112 77,365 79,686 81,280 82,499 aviation events and shows - increase in year 5 of 20% $ 15 $ 121,125 $ 145,350 $ 174,420 $ 191,862 $ 241,746 $ 251,416 $ 258,958 $ 266,727 $ 272,062 $ 276,143 joy rides per 60 minute - increase rate in year 5 of 20% $ 1,500 $ 91,200 $ 109,440 $ 131,328 $ 144,461 $ 182,021 $ 189,301 $ 194,980 $ 200,830 $ 204,846 $ 207,919 Total Revenue $ 532,848 $ 638,718 $ 765,691 $ 842,260 $ 1,061,807 $ 1,107,723 $ 1,145,663 $ 1,186,247 $ 1,218,458 $ 1,248,122

Expenditure (CPI indexed) staff salaries (curator + 2.5 f/t) $ 180,000 $ 185,400 $ 190,962 $ 196,691 $ 202,592 $ 208,669 $ 214,929 $ 221,377 $ 228,019 $ 234,859 staff on costs (holiday, sick leave, superannuation) $ 36,000 $ 37,080 $ 38,192 $ 39,338 $ 40,518 $ 41,734 $ 42,986 $ 44,275 $ 45,604 $ 46,972 marketing $ 120,000 $ 123,600 $ 127,308 $ 131,127 $ 135,061 $ 139,113 $ 143,286 $ 147,585 $ 152,012 $ 156,573 cleaning and maintenance $ 12,000 $ 12,360 $ 12,731 $ 13,113 $ 13,506 $ 13,911 $ 14,329 $ 14,758 $ 15,201 $ 15,657 utility charges (gas, elec, water, sewer charges) $ 12,000 $ 12,360 $ 12,731 $ 13,113 $ 13,506 $ 13,911 $ 14,329 $ 14,758 $ 15,201 $ 15,657 volunteer training $ 2,500 $ 2,575 $ 2,652 $ 2,732 $ 2,814 $ 2,898 $ 2,985 $ 3,075 $ 3,167 $ 3,262 council levies and rates $ 3,000 $ 3,090 $ 3,183 $ 3,278 $ 3,377 $ 3,478 $ 3,582 $ 3,690 $ 3,800 $ 3,914 cost of goods sold food and beverage (35%) $ 16,549 $ 19,859 $ 23,831 $ 26,214 $ 33,030 $ 34,351 $ 35,382 $ 36,443 $ 37,172 $ 37,730 insurance on building (excluding collection) $ 10,000 $ 10,300 $ 10,609 $ 10,927 $ 11,255 $ 11,593 $ 11,941 $ 12,299 $ 12,668 $ 13,048 cost of goods sold merchandise (40%) $ 14,475 $ 17,370 $ 20,844 $ 22,928 $ 28,889 $ 30,045 $ 30,946 $ 31,875 $ 32,512 $ 33,000

Total Expenditure $ 406,524 $ 423,994 $ 443,043 $ 459,461 $ 484,548 $ 499,703 $ 514,695 $ 530,135 $ 545,356 $ 560,672

EBITDA $ 126,324 $ 214,724 $ 322,649 $ 382,799 $ 577,259 $ 608,020 $ 630,968 $ 656,111 $ 673,101 $ 687,451

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Capital Costs earthworks, site preparation, excavation (4.5%) $78,250 pavements $190,525 concrete and tilt panels $989,129 structural steel and internal framing $615,384 carpentry, fix out, plasterer and painter $175,883 kitchen and fixtures $146,124 resilient fininshes, PU flooring and tiling $326,659 cladding and roofing $301,455 electrical $386,100 hydraulic (plumber) including fire services $340,362 mechanical (air conditioning) $386,100 metalwork $155,925 lift $96,228 glazing $325,497 Projectors/ Audio visual displays , AV equipment PC sum $250,000 furniture PC sum $20,000 Displays PC sum $150,000 carparking, access roads and landscaping (2000 sqm), $200,000 fencing PC sum stormwater, onsite water detention PC Sum $150,000 prelimnaries including design (18.9%) $1,055,229 professional fees (6%) $380,331 contingencies (10%) $633,885 upgrades/refresh year 5 and year 10 -$300,000 -$300,000 Total Establishment Costs $7,353,066 Centre Value $ 9,820,723

Cash Flow -$7,353,066 $ 126,324 $ 214,724 $ 322,649 $ 382,799 $ 277,259 $ 608,020 $ 630,968 $ 656,111 $ 673,101 $ 10,208,174 IRR 7.7% NPV $ 531,098

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The cost benefit analysis for the development of the Scone Aviation Visitor Attraction indicates that:

▪ the market demand forecasts are conservative but realistic, based on historic visitation trends to other aviation museums and visitation to the Upper Hunter Shire; ▪ by 2028 (year 10), the attraction should be attracting 46k visitors; ▪ future visitor growth in Scone is likely to be partly predicated on the development of the aviation attraction and current visitation levels could more than double in 2019 (year 1 of the attraction opening); ▪ a positive cash flow would appear to be consistently generated from the revenue generated after expenses are deducted; ▪ over the ten-year forecast period, a positive economic result should be generated via a positive NPV and IRR result; ▪ the aviation attraction will add to the attractiveness of Scone and should stimulate longer length of stay, along with higher visitor spend levels and offer new employment opportunities; ▪ the attraction will also help to position Scone and Upper Hunter Shire as a stronger visitor hub which offers a variety of visitor attractions and facilities including the aviation focus and the strong existing equine industry; and ▪ the local community will also benefit through having important aviation heritage and artefacts properly displayed and presented which will invoke greater community pride.

And based on the various components proposed for the development, it will also offer various ancillary benefits to support commercial and private functions, a variety of rural fire service and related support facilities, and a new attractive airport terminal. This project should therefore be seen within a wider context of the various benefits it can help generate, and not merely as a unique and attractive new aviation visitor experience.

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