Friday, 4 September 2015

Federal Hotels and the public interest

Nobody knows better than MONA owner David Walsh about making money at a casino. Establishing his own casino, however, requires Federal Hotels to agree – as it has exclusive rights to conduct casino operations, as well as gaming machines and keno, in Tasmania until at least 2023.

In 2014 player losses from Federal’s gambling operations were $231 million. It retained $162 million (70 per cent), the State Government got $55 million (24 per cent), with $14 million (6 per cent) going to pubs and clubs.

Earnings from casino tables are a small proportion of earnings from gambling. Table gaming losses for the two casinos of $8.5 million were split $5 million to Federal and $3.5 mainly licence fees to the Government.

Federal told the Public Accounts Committee in 2003 the deal would help underwrite “a significant investment strategy in Tasmania”.

For a while, with its expanded regional coverage, Federal helped promote the Tasmanian brand and it was possible, with a long bow, to argue the spin-offs of the exclusive licence were flowing. Its advertisements promoted Tasmania, indistinguishable at times from those of Tourism Tasmania.

The exclusive licence required the building of a premium resort at Coles Bay. The original proposal for a 160-room complex was cut back by over 80 per cent and delivered five years late.

Federal also bought accommodation businesses at Freycinet and Cradle Mountain and developed Strahan, but then spent far more acquiring the 9/11 chain of pubs and bottleshops and two high-turnover North-West gaming machine pubs.

Abandoning the West Coast Wilderness Railway and selling regional tourism businesses, apart from the mandated Saffire at Coles Bay and a few improvements at Henry Jones Art Hotel in Hobart, Federal has nothing to show but more bottleshops and gaming machine venues, and a winding back of capital expenditure and advertising as it benefits from rising occupancy rates due to the success of Mr Walsh.