Karma Group will begin the process of returning The Quod to the Rottnest Island Authority in May.

Western Australia Tourism Minister Paul Papalia said the Wadjemup Working Group was deciding what to do with the site, which will potentially become a museum.

According to the Rottnest Foundation, the island was used as a jail between 1838 and 1903, and prisoners stayed to build roads and other works until 1931.

More than 3700 Aboriginal men from across WA were sent to Rottnest, where about one-tenth died.

They lie buried in unmarked graves near The Quod - the largest deaths in custody gravesite in Australia.

"It would have been a terrible thing in itself to take them off-country and then they ended up dying here, having worked in a prison," Mr Papalia said on Thursday.

"That is a very sad thing. We are acknowledging that."

The minister made the comments in announcing a swathe of new developments on Rottnest that he hopes will further boost tourism to the holiday hotspot, which is bucking the downward visitation trend in WA.

Much of that has been credited to extra ferry services and "quokka selfies" taken by the likes of tennis champion Roger Federer.

And while the notoriously costly island looks set to be transformed from run-down to glitzy - with a new luxury eco-village development, day spa, and near doubling in size of Hotel Rottnest - there will also be more acknowledgement of the island's dark past.

"Further work will be done on recognition and potentially the start of a long-term commemoration of what happened on the island," Mr Papalia said.

"That's a good thing - it needs to happen."

While a small number of people had suggested the island should be closed to tourism in light of its tragic past, the minister said "that's not going to happen".

Mr Papalia also announced the opening of five new walking trails, completing the 45km Wadjemup Bidi network, where visitors will learn about Aboriginal heritage through artwork, audio and signage.

He rejected suggestions the developments would make the island too busy, removing its quiet and quaint appeal.

Driving is only allowed on Rottnest for work purposes and bikes remain the main mode of transport.

"It doesn't take away what people have always loved about the island," he said.

"But what is does address is reasonably regular criticism we get that it's a bit old and tired, and it doesn't compete with other potential destinations for visitors."

The island is central to the WA government's goal of boosting tourism as it seeks to diversify its economy.

Australian Associated Press