SkyCity to expand casino in Adelaide

An artist's impression of SkyCity's redeveloped Adelaide casino.
An artist's impression of SkyCity's redeveloped Adelaide casino.

SkyCity Entertainment shares surged almost 5 per cent to close at $3.79 yesterday after it struck a deal with the South Australian Government to spend A$300 million (NZ$376m) developing its Adelaide casino.

SkyCity will make the investment in return for more poker machines and gaming tables, a sweeter average tax rate and the ability to cater to local and international high rollers through premium offerings.

In New Zealand the Auditor-General's Office is investigating the Government's deal with SkyCity to build a $350m national convention centre in return for hundreds more gaming machines at its Auckland casino. The office has postponed its report until next year.

The Australian deal - 2 1/2 years in the making - appeared doomed last year when the South Australian Government signalled it was not prepared to make tax concessions in return for SkyCity's investment.

SkyCity had sought a reduction in its effective tax rate from A43 cents on every dollar gambled in the casino to a rate more in line with the national average for casinos of 28 per cent.

Both sides yesterday claimed a tax win from the deal, which will also see SkyCity make a A$20m payment to the state government.

South Australian Government Treasurer Jack Snelling said it had negotiated a significant increase in SkyCity's taxes, and that would boost the casino's tax bill by about A$60m over the next four years.

SkyCity chief executive Nigel Morrison said it would pay more tax by virtue of earning more money.

But while the effective tax rate it would pay depended on "how the revenues fall", the deal should see it sink to the national average or even slightly lower. Importantly, the agreement allowed it to compete in the premium market, he said, through cashless gaming technology, a ne "six-star" hotel it planned to build, high-end retail spaces and restaurants, and exclusive gaming lounges.

The cashless technology would allow all gamers to use tickets, on which they could voluntarily set spending limits, instead of coins.

"For high-end gaming machine customers it was totally unacceptable for them to walk around with a bucket of coins. It's an antiquated experience and it's the only casino in Australasia that does that."

While the tax rate on non-VIP gaming machines will increase from 34.3 per cent to no more than 41 per cent, and the rate for non-VIP tables will increase from 0.9 per cent to 3.4 per cent, premium rates will remain comparatively low. The deal introduces a new tax rate for VIP gaming machines of 10.9 per cent, while the rate for VIP table games will remain at 0.9 per cent.

SkyCity will be able to increase the number of gaming machines in the casino from 995 to 1500, and more than double the number of gaming tables from 90 to 200.

The deal also extended SkyCity's exclusive right to offer table games in South Australia.

Forsyth Barr research director Jeremy Simpson said cashless gaming would also create efficiencies for the casino.

"They don't have to have a lot of cash sitting in the machines, and there's a lot of cost in handling cash, in security and shifting it around the casino."

SkyCity also planned to build a new car park at the casino. Fairfax NZ

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