Sky City finally gets the bets to pay off

By Karyn Scherer

Between the lines


It passed without public fanfare, but it is probably worth noting that the Sky Tower officially turned two last week.

Love it or loathe it, there is little doubting that Auckland's second biggest tourist attraction (the Auckland Museum still ranks No 1) has quickly become the city's most famous landmark.

That it is associated with a gambling den bothers some people. But even Sky City executives admit they are delighted at how Aucklanders seem to have developed a fondness for the tower.

However, Sky City's management team had an even more important milestone to celebrate this week - the company's first annual result since severing its links with its American partner, Harrah's.

The decision to spend more than $20 million buying out Harrah's management contract was a bit of a gamble, and a pricey one at that. But it appears to have been worth it.

For the first time since opening its doors 31/2 years ago, the company has delivered a better than expected annual profit.

For analysts, the company has been a difficult one to track, given that it is a new business.

Forecasts of likely revenue have varied wildly and its share price has been volatile.

In the event, the forecasts provided in its listing profile proved over-optimistic, although the amount each punter has been prepared to hand over has been higher than expected.

Freed from the shackles of Harrah's, and with the help of several new staff from Melbourne's Crown Casino, Sky City has shown it is perfectly capable of running its own show.

The flashy cabaret shows favoured by the Americans are no longer a feature of its theatre, and it is no longer losing money.

It has finally got its restaurant mix right and has done a good job of keeping its hotel busy, despite the explosion in the amount of accommodation now available in Auckland.

While the numbers visiting the Sky Tower have been much lower than initially predicted, last year's sudden drop-off in tourist numbers and the power crisis in the inner-city could not have been foreseen.

Thanks to Brierley Investments' decision to quit its stake earlier this year, the company has 20,000 new shareholders, most of whom are New Zealanders attracted by its generous dividend policy.

With no big shareholder breathing down its neck, the company is now free to pursue whatever strategies its managers and its board see fit.

Buoyed by its newly acquired skills, it is not ruling out the possibility of taking advantage of other opportunities in either Australia or New Zealand, although it expects to be busy over the next 18 months establishing a new casino operation in Queenstown and, possibly, in Hamilton.

It is confident it will do a good job, but with growth expected to slow in 2001, investors will be keen for it to prove it has other cards in its hand.