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SkyCity's Queenstown growth ambitions face test with convention centre decision tomorrow

Monday 16th September 2013

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SkyCity Entertainment Group's Queenstown growth ambitions will be tested tomorrow when the local council decides whether to greenlight a proposed $50 million convention centre with the casino company as preferred operator.

The Queenstown Lakes District Council is set to make a decision on the convention centre at a special meeting tomorrow after wading through 750 public submissions on the plan. In February, SkyCity was named as the preferred operator of the proposed centre, as part of a consortium with South Island iwi developer Ngai Tahu Property and Wellington investment bank Morrison & Co.

SkyCity has accelerated its expansion in the wealthy alpine resort town it first entered in December 2000. In the past year, SkyCity gained control of the town's only two casino licenses, paying $5 million to buy out Queenstown Casino from its partner Skyline Enterprises, and a further $5 million to acquire the rival Wharf Casino from Singapore-based Lasseters. The council's convention centre concept includes a casino, hotel and restaurants.

"SkyCity is focusing on trying to create hubs to try to attract wealthy international players," said Rickey Ward, who holds SkyCity shares among the $450 million in equities he manages at Tyndall Investment Management. "Queenstown has a clear lever on that front because there are a helluva lot of things for your family to do while you go and gamble."

The casino company recently struck a deal with the government to fund a $402 million convention centre in Auckland which will generate a marginal return in exchange for an extension to its gaming licence and the addition of more gaming machines and tables.

Tomorrow's decision on the Queenstown convention centre is "very material" to SkyCity's desire to expand, said Tyndall's Ward. "Investors will look at what levies or benefits will you obtain by trying to develop other parts of that region."

Shares in SkyCity recently traded at $3.93, having gained about 4 percent so far this year.

The council's preferred site is Lakeview, on a terrace above the central business district, because it allows for future expansion and could support an adjoining hotel, casino and retail development. The centre is forecast to generate $22 million to $36 million in annual gross domestic product for the district, according to estimates prepared for the council.

Earlier this month, the council published submissions on its proposal which showed almost 33 percent strongly opposed a relocated casino in the complex, while a further 10 percent opposed it and about 25 percent supported or strongly supported the idea.

SkyCity executives weren't immediately available to comment on the company's Queenstown plans.

Even though Queenstown makes up less than 1 percent of SkyCity's New Zealand earnings, the casino company is keen to ramp up its offering in the tourist town to compete with rival operators in Singapore, Macau and Sydney to lure big spending Asian gamblers to New Zealand.

SkyCity is increasingly courting high-spending Asian gamblers, hundreds of whom arrive every year with more than $100,000 to spend. The casino company reportedly paid more than $2 million for a 21-metre luxury launch to entertain its high rollers while sightseeing and fishing in Auckland's Hauraki Gulf.

The strategy is already paying dividends after Queenstown turnover rose significantly in the fourth quarter of the 2013 financial year as international players from Auckland visited Queenstown as part of their New Zealand package. SkyCity's Queenstown international business revenue soared 1,100 percent in 2013 from the year earlier.

Queenstown is one of the wealthiest areas in the country as measured by house values, recording the nation's highest average house value until it was overtaken by the surging Auckland market in late 2009. In the latest figures from Quotable Value, Queenstown had the third highest average house value of $644,000, after Auckland City and Auckland's North Shore.

The area has attracted wealthy businesspeople including jewellery chain founder Michael Hill, who developed The Hills golf course on a former deer farm near Arrowtown and Forsyth Barr chairman Eion Edgar. Former Serious Fraud Office chief executive Adam Feeley left his high powered role to become the council's chief executive.

Auckland International Airport, which owns 25-percent of Queenstown Airport, said in a submission to the council that it supports plans for the convention centre which is says will help broaden the destination's appeal. The airport company says Queenstown is on track to transform from an international winter getaway into a year-round gateway for international visitors and become the second-most important international airport in New Zealand.

The preferred consortium to develop the centre also involves Auckland-based architecture firm Fearon Hay and Queenstown construction company Naylor Love.

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