Profit view changes after casino deal

By Karyn Scherer

Auckland casino operator Sky City has backtracked from an estimate that it could lose up to 6 per cent of its customers if a new casino goes ahead in Hamilton.

The 6 per cent figure was provided to the Casino Control Authority before the company struck a deal to take over a British-based casino operator's interest in the Riverside project.

In an application for clearance for the deal lodged with the Commerce Commission yesterday, Sky City played down the figure, saying it considered the estimate "towards the higher end of the likely impact."

It noted the figure took no account of any increase in patronage it might get as a result of Waikato residents becoming comfortable with gambling, and went as far as to say it believed any overlap would be "insignificant."

Exact details of just how many customers it expects to lose have been deleted from the application, because of "commercial sensitivity."

Riverside's own estimates have also been removed. However, Riverside's own report to the authority stated that the new casino should attract a significant number of Waikato people who visit Sky City, as well as a small percentage of "more discerning" Auckland punters.

According to a study carried out by research firm UMR in April this year, two-thirds of those who pass through Sky City's doors are Aucklanders.

Around 18 per cent are from central Auckland; 16 per cent, West Auckland; 15 per cent, South Auckland; 13 per cent, North Shore; and 5 per cent, eastern suburbs.

A further 10 per cent are from the upper North Island, 9 per cent from the rest of the country, and 14 per cent from overseas.

Sky City has told the commission it does not believe owning casinos in both Auckland and Hamilton would give it market dominance, as they would operate in separate regional markets.

The assertion echoes an opinion the commission offered early last year, when an MP lodged a complaint about a possible monopoly of casino operations in the South Island. However, the opinion was not a formal decision.

The company has also argued that there is an entertainment market, rather than a casino market in which it has plenty of competition. As an example, it notes that each November it suffers a significant drop in revenue around Melbourne Cup time.

The application also reveals one or two interesting titbits for casino patrons.

The company claims, for example, that its gaming machines have an average payout of around 93 per cent - well above the 87 per cent minimum the authority requires.

It claims the ratio is higher than that offered by pubs and clubs, giving it a competitive advantage.

For those not up with casino parlance, the application also mentions that the Auckland casino is what is known as a "grind" casino, meaning: "where revenue is obtained from a large number of small customers."