Cryptocurrency and blockchain plans to “make Keppel great again”
Great Keppel Island token. Is it going to be a good buy or a goodbye?
In its heyday Great Keppel Island, a holiday island on the Great Barrier Reef, was largely defined by its former slogan: Get Wrecked on Keppel. Now it's going to be defined by its crypto fundraising and tech-happy designs.
A fixer-upper
The promise of a tropical party island was more than enough to draw thousands of tourists from the '80s to early 2000s. But times change, and the island didn't quite overcome the twin challenges of the GFC and a new generation of Australian travellers whose preferred tropical destinations in which to get affordably wrecked started including Bali, Thailand and others.
In 2006, the island was sold to Tower Holdings at a the bargain price of $16.5 million. Over the coming years they discovered why it was so cheap.
Turns out it's really hard to run a island resort profitably, and Great Keppel was no exception. You have to ship everything to and from the island which immediately magnifies the costs of almost everything, including shipping waste out and shipping food, water and staff in.
"Sustaining labour is a big issue on the reef. Finding and keeping good people on a remote island, that can provide five star service and can justify someone spending the level of money on a room is hard," said Professor of service management David Solnet to news.com.au. "People do not want to live for long periods of time on remote islands. It's an issue globally but it's really bad here [in Queensland] because we don't have a migrant pool to pull from."
"It's a difficult slog and you can see that in the number of islands that haven't survived."
On an island the costs never stop. Throw in some increasingly erratic and devastating tropical storms and you have a very tenuous business case.
For Keppel resort, this was probably an untenable situation. Most guests probably aren't too fussed about whether their beach is on a big island like Bali or a small island like Keppel, but the latter is a lot more expensive to run. With flights getting ever-cheaper, it eventually becomes impossible to compete on price with all the beach destinations in South East Asia and beyond that really opened up for mass tourism in the '90s to 2000's.
This is especially problematic when your target demographic responds to the slogan "get wrecked." Getting that young backpacker-focused market means being cheap, which just isn't possible on an island as small as Keppel.
The rebranding, then, might be spot on.
The tech capital of a very specific part of the Great Barrier Reef
"Great Keppel Island will be the first Blockchain, Crypto and Internet of Things enabled island in the world allowing high security, crypto payments and accountability for services. The development will provide over 1,400 full and part time jobs to the local area. It really will make Keppel great again!" says project co-founder Tim Sommers, clearly pronouncing the exclamation mark.
It's also going to be going very, very upmarket, including a world class golf course, a 1.5km commercial airstrip, private yacht berths, 750 luxury villas and 300 luxury apartments, and 9,000 square meters of retail shops and restaurants. It can't compete on price, so it's going to try competing on luxury.
But who's paying for all of that?
Enter the crypto
The Queensland Government is investing $25 million to connect power and water to the mainland, but much of the remainder is expected to come from a token sale.
Specifically, a sale of $300 million "worth" of GKI tokens.
Each token represents a share of the island itself, making any buyer a part owner of Great Keppel Island, at least technically. The exact benefits to be derived from that fractional ownership are still up in the air, but Sommers says token holders will be getting some benefits on the island itself.
In addition, he says, there's the value of the island itself. "The GKI Token Holders will have the very real asset backing of the actual island, which is predicted to be valued at over $3 billion when fully developed within 5 years. Building starts in 2019. The GKI Token Holders also receive the benefit of liquidity should they wish to sell their tokens at any time."
Good buy or goodbye?
It's the largest real estate token offering to date, but it's not the only one.
You can also own part of a renowned Aspen resort on the blockchain, or buy a token to get a share of a wind-powered bitcoin mining project in Morocco. The difference is that both of those projects intend to pay dividends to token holders. Whether those dividends will be worth it is debatable, but at least it's something.
In the case of Keppel, it's not yet clear whether token holders are entitled to any portion of the profits from the operation of the resort, what kind of benefits a token-holding visitor will get over a non-holding visitor, or whether the token is mostly being pitched for the novelty of owning part of an island.
A reasonable assumption might be that the value of the token is dubious if there are no cold, hard dividends to be had.
There's probably little in the way of extras to offer token holders on the island itself. It's meant to be a five star VIP experience for everyone anyway, so any benefits for token-holders would have to be quite ingenious and outside the box things that money can't buy. Perhaps priority bookings, or a membership tier type arrangement. The token itself could also be accepted as currency on the island, but that may be a somewhat slim draw card.
Commercially, discounts or freebies for token holders might not make much sense. If it's more cost-effective to use the token than pay full price and people do that, then that's directly costing the resort money. If it's not, then there's not much point in using the token.
Plus, if the project was such a slam dunk Tower probably wouldn't need to use a token sale to raise funds. Token sales do have some advantages over traditional fundraising, and pooling the investment risks can present a more tasteful different risk/reward flavour for speculators, but it still raises some questions.
The only way of knowing what the token's actually worth is with time, and the upcoming release of more fine print from the project.
Owning an island is hard and commercially risky work. Divvying it up and putting it on the blockchain doesn't make it any easier or safer.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA
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