SkyCity deal good for Auckland and nation
The SkyCity deal is fair for all parties and will deliver jobs and tourism growth, and some flawed assumptions about the arrangement need correcting, writes SkyCity's chief executive Nigel Morrison.
Skycity Entertainment Group stands by the agreement reached with the Government for SkyCity to build and run the $402 million New Zealand International Convention Centre.
We believe it is a fair deal for all parties and will deliver jobs, tourism growth and economic development.
However, a lot of the media coverage of the deal is based on flawed assumptions that need correcting for the sake of balanced debate.
The first was how astonishing the casino's ambitions were.
Our starting position was simply to bring us into line with other leading Australasian casinos and address the competitive disadvantages we face compared with other forms of gambling.
Currently the Auckland licence comes up for renewal in 2021. We are not permitted to apply for renewal until 2019 which is absurd for one of New Zealand's largest public companies, employing 4000 New Zealanders, with long- term financing arrangements. By comparison our Adelaide casino licence (where we are investing A$350m) goes to 2085.
On the topic of extra pokies, for comparison, Crown in Melbourne has 2500, Burswood in Perth has been approved to increase to 2000 and as part of our investment in Adelaide, we have agreed with the state government an increase of 500 pokies there.
While the increase to 2500 was our opening position, we believed it had merit given it would effectively be the cap for many years. It didn't mean we would install 2500 on day one, but as Auckland grows, we could, too.
On balance, we were prepared to accept an increase of 230 pokies as part of the overall package of concessions, which is the same number that the Labour government granted SkyCity in 2001 for the existing convention centre. This is an increase of 1.1 per cent on the 20,300 in New Zealand.
On age, the gambling age is already 18 for Lotto, for TAB, internet gambling, and even pokies in pubs and clubs. The only thing you can't do at the age of 18 is enter a casino. In all of Australia's 13 casinos the entry age is 18.
Then there is the claim New Zealand will not attract additional conferences. SkyCity operates New Zealand's largest convention centre. This can accommodate a conference of up to 1200 at a stretch. The International Convention Centre (NZICC) will be able to accommodate conferences of up to 3500. This is a significant increase. There was no growth in the market as there were no facilities capable of accommodating larger conferences.
Since the NZICC was announced, we have had more than 50 expressions of interest for conventions from 2017 with total delegates of more than 90,000 - on average nearly 2000 delegates per convention.
The NZICC has been called for in Auckland for more than 10 years. It has been embraced by Tourism New Zealand, the Tourism Industry Association, Auckland Chamber of Commerce, ATEED, the Committee for Auckland and by successive Auckland mayors.
It is also claimed problem gambling will increase.
Ministry of Health research shows the prevalence rate for problem gambling is 0.4 per cent of the adult population compared with hazardous drinking at nearly 18 per cent. The latest Ministry of Health data indicate most problem presentations to gambling counselling agencies relate to pubs and clubs pokies (56 per cent), followed by lotteries (12 per cent) racing (9 per cent ) and casino pokies (8 per cent). SkyCity Auckland has 1647 or about 60 per cent of the 2800 pokies in New Zealand casinos. Given this, SkyCity Auckland is probably responsible for some 5 to 6 per cent of those presentations.
At SkyCity we pride ourselves on our internationally leading harm- minimisation programmes.
Not only are we regarded as having one of the best host responsibility programmes of any casino in the world, but the introduction of the new measures agreed with the Government, caused Professor Max Abbott, director of AUT University's gambling research centre, to state "no other casino in the world has introduced facial recognition technology, electronic monitoring, pre- commitment to time and/or expenditure limits together. It is ground breaking and could raise the bar across all gambling settings and forms".
Then it is said the compensation provisions would result in SkyCity winning "hundreds of millions".
That is totally incorrect. SkyCity is investing its $402m upfront. It will take SkyCity shareholders many years to earn a return on this investment.
The compensation mechanism provides that, if the concessions are reversed after SkyCity has paid out the $402m to build and develop the NZICC, its shareholders are compensated for having spent that $402m and not having the opportunity to earn the returns from the concessions to pay for it. It is not windfall gain for SkyCity, merely compensation.
Lastly, it is said SkyCity has "won a licence to print money".
SkyCity is investing $402m in a tourism infrastructure asset - that does not need to be paid for by taxpayers or Auckland ratepayers. It will create jobs in Auckland, tourism, economic growth and be a catalyst for further development.
How many cranes are on the horizon today in Auckland? SkyCity shareholders are taking all the commercial risk. While this has been debated in the media over the last couple of years - no other organisation has come forward and offered to fully fund the NZICC without cost to taxpayers or ratepayers.