Why backpackers are disappearing from Sydney's Kings Cross

“It’s been the toughest three years in the history of the backpacker industry,” said Bruce Kennedy, the general manager of another stalwart, the Original Backpackers on Potts Point’s Victoria Street.

“I think Melbourne now gets more beds occupied at a higher rate than Sydney.

“I think Sydney is too quiet now for backpackers; it’s lost its sparkle, and, unfortunately, I‘ve always considered backpackers to be the forward indicators for the hotel trade and tourism industry generally.”

The number of nights international backpackers spend in Australia has crashed from a high in the year to June 2013 of 48,758,478, to 41,025,939 for the 12 months to June 2019, on figures from the government’s Tourism Research Australia.

Even over the past year, the inflow of backpackers has declined from 627,055 for the year to June 2018, to 612,485 to June 2019. That’s mirrored by the fall in the number of backpackers visiting Sydney, from 445,000 to 423,000 for the same period, with visitor nights dropping from 10.51 million to 10.33 million.

Sarah Flynn, president of the Backpacker Operators Association NSW, said: “The industry is definitely having a tough time, and this year has been the worst we’ve ever had.”

Mike Barrow, the publisher of backpacker and youth tourism newsletter The Byte and tourism site The Word, said the industry was battling myriad challenges.

“The major problem is that real estate has got so expensive and, with backpacker hostels no longer being the cash-cow they once were, people are getting rid of them,” he said.

“Airbnb has also sucked the life out of the industry, young people are online all the time now rather than chatting to other people and enjoying the atmosphere of hotels, and the lockout laws haven’t helped either.

“It’s all down to supply and demand. If the beds are no longer there, people aren’t going to come.”

The latest hostel to go on the market is the four-level, 47-room Jolly Swagman on Orwell Street, Potts Point, with a swath of common facilities including a kitchen, dining and TV room, a reception and office, and laundry. Its annual gross income for this year is estimated to be $1.23 million plus GST, reports Metro Commercial sales agents Allan Levy and Jerry Leis.

It doesn’t yet have a price guide, but the smaller four-storey, 36-room hostel Sydney Central Backpackers, with a lower gross income of $865,000 on the other side of the same street, sold in June 2018 for $7 million. It was bought by a company headed by property investor Allan Feuer.

“The Jolly Swagman would attract a developer or backpacker opportunities,” said Mr Levy of the hostel, which is up for auction on November 12.

“It’s a large freehold building on a good site in a good location close to Kings Cross station and all the amenities of the eastern suburbs.

“It’s been in the same family for 40 years and been operating as a backpackers for all that time. They’re ready to let someone else have a go.”

Just around the corner on Victoria Street, Zing Backpackers was bought in October last year for $6 million by property developer Theo Onisorou. A development application is currently with the City of Sydney to change it into two terrace houses by knocking down one of the buildings on-site and replacing it with a new home, and altering and adding to the property next door.

A council spokesperson said it was currently under assessment so couldn’t be commented on but Joseph Fok from Antoniades Architects which has prepared the application, said the project was “to restore the street to its original streetscape, and we’re talking now about heritage issues”.

The evolution of the Cross

The disappearance of backpackers from Kings Cross has been a steady evolution. Mr Kennedy believes the “draconian” lockout laws have contributed to problems, with bars and nightclubs closing and visitors having to show ID to gain entry to those that are left – and having to repeat the process if they outside for a smoke. The word about the disappearance of the atmosphere from Kings Cross has also spread quickly via social media.

“This is the thin edge of the gentrification of the area – they don’t want us,” he said. “Property is too valuable.”

The incursion of Airbnb has led to others finding it cheaper to rent a small apartment and packing in four people rather than going to a hostel, especially if they’re staying longer to work, said Mr Barrow.

The falling Australian dollar had not helped either when trying to attract backpackers on a working visa.

“There’s also been some negative press in the harvesting area, and despite all the money backpackers bring in, there’s not even a person who is dedicated to them at Destination NSW,” he said.

At the local chamber of commerce, the Potts Point Partnership, executive chairman Carrington Brigham said he knew word of mouth about the lockout laws was having an effect.