Second Casino option for Adelaide
SKYCITY Casino’s owners are aiming to make inroads into the share of the gaming machine market in hotels and open a second operation in Adelaide.
In an update to investors yesterday, the New Zealand company reveals that its recently extended exclusivity agreement with the State Government would give it the opportunity to open a second operation in South Australia.
The update describes the performance of its Adelaide operation as “poor” and its current facility as an “inferior, unattractive, inefficient and uncompetitive experience”.
“There is a significant opportunity for SKYCITY to grow market share in South Australia,” the update document says.
“SKYCITY has only captured 7.5 per cent of the total SA electronic gaming machines (EGM) market of $790m per annum.
“$550m of the EGMs market is in the pubs and clubs within 35 kms radius of Adelaide.
“Currently, SKYCITY has only got a 10 per cent share of this market – representing significant upside potential, particularly in the new Premium rooms.”
In a section headed “Why are Adelaide earnings so poor?”, the owners say they acquired the Adelaide Casino in 2000, recognising it had some of the most restrictive legislation and regulation and some of highest gaming taxes of any casino in Australia.
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“Through the recent legislative changes and the new Agreements with the South Australian Government these matters have finally been addressed.”
In a damning assessment of its own property, SKYCITY lists the problems it says contribute to poor performance. They include:
- The only casino in Australia with EGMs that operate on ‘Coin-only in and Coin-only Out’, no Bill acceptors. No Ticket in Ticket out (TITO) and no cashless gaming.
- A maximum bet of only $10.
- Restrictions on the types of games.
- No gaming product differentiation between Casino EGMs and Pub & Club EGMs.
- No viable offering for local VIP, interstate or international VIP EGM players.
- A gaming tax rate of 43 per cent – the highest EGM tax rate in any Australian Casino.
- One of only two non-purpose built casinos in Australia (the other being Treasury Casino in Brisbane). Low ceiling height, multi-level, poor layout. Located in a previously under-developed precinct.
- Limited reasons to visit the existing Riverbank Precinct.
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- No link from the Adelaide Oval to the Casino Limited investment in the Adelaide Casino property.
“Given the above, without legislative and regulatory reform, it was not economically viable for SKYCITY to invest the capital in the Adelaide Casino to transform it into an integrated casino entertainment complex,” the company says.
“Further, without a suitable hotel and signature restaurants very limited international, high-roller business could be attracted to Adelaide.”
Under the new Approved Licensing Agreement and new Casino Duty Agreement with the Government, SKYCITY says it can now provide a more competitive, attractive and efficient EGM gaming offering.
Under the new deal it can now operate ‘ticket in ticket out’, removing the dependence on coins, card-based cashless gaming on all EGMs throughout the Casino, removal of the maximum bet of $10 and an increase in the number of machines from 995 to 1,500.
A new tax rate will apply to “premium VIP” EGMs – reduced from 43 per cent to 20 per cent.
The new agreements also provide for State-wide casino exclusivity, extending its monopoly for a further 20 years, out from 2015 to 2035.
SKYCITY then tells investors the exclusivity “provides SKYCITY the opportunity to open further casinos in SA in the future (subject to legislative amendment to the Casino Act)”.
It outlines expenditure of A$45 million “developing the existing Adelaide Casino, to accommodate the new premium gaming facilities, enhance the main gaming floor and create new food and beverage outlets”.
“Plans for the Adelaide Casino expansion are currently being worked on by our industry-leading design team,” it says.
Having identified lack of car parking as a problem, SKYCITY says plans for a car park are being discussed with Government and local interested parties.
Opening of the new expanded Casino is currently anticipated to be by the end of calendar year 2016.
The investors’ briefing will be presented in Adelaide on Friday.
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