Banning pokies from pubs and clubs will pull plug on hotels

John Blacklow says the fallout from Labor’s policy will shake small Tasmanian towns

OVER the past 34 years, as a specialist sales agent in the hotel and motel sector, I’ve sold over 400 licensed establishments and have a dominant share of the market with sales over $450 million.

In this time I have seen many changes to the pub industry and am convinced that if gaming machines are removed from hotels, a large number would be forced into bankruptcy or simply close.

The introduction of drink driving laws in 1972 meant hotels had to reinvent themselves to overcome dwindling trade. Many were forced to spend a large amount of capital on bottleshops, kitchen trade and tourist accommodation.

By 1997, when gaming machines were introduced, hotels became more diversified with Keno and Tote as well.

The industry peaked in 2007 with the sale of larger venues at record prices to industry groups such as Federal, ALH, Kalis Properties, Dixon Brothers, and the Goodstone Group.

At that time, new liquor licences were difficult to obtain and only a handful of bottleshops were independent of a hotel premises.

This all changed from 2010 up until 2017 when the state’s Liquor Licencing Commission felt it necessary to issue large numbers of licences for wine bars, shops, bottleshops, supermarkets, corner stores and retailers.

This extra competition had a severe impact on city hotels in particular.

Twenty years ago the hotelier might have had five competitors within a 3km radius, now that competition can be 30 or more. Hotels went out of business. At least 17 closed, including the Black Prince, Royal Exchange, Racecourse Hotel, Travellers Rest, Alabama, Good Woman Inn and Duke of York.

It is not possible to replace the earnings lost from gaming by improving the performance of existing activities or introducing new ones since: SUPERMARKET giants and others continue to flood the market with bottleshops and sell products at far cheaper prices than pubs can. ACCOMMODATION faces new competition from the likes of Airbnb which does not bear the material costs of OHS, regulation and tax. OPERATING cost pressures continue to run well above general inflation and cannot be passed on to customers in full — levies, rates, taxes, power, insurance, wages.

It is obvious that if gaming machines are removed, then jobs will be lost, hotels will close and some owners will be forced into bankruptcy.

In the past 30 years hoteliers have faced many challenges, forcing them to continually reinvent themselves to survive and compete.

Today there are precious little alternatives available.

Since the market peak of 2007, the value of gaming based hotels has reduced by at least 30 per cent.

In one case, a pub I sold in 2007 for $14 million is now worth less than $6 million today.

The removal of machines will of course hasten their demise.

A freehold hotel is normally valued by, and sold on, its business performance.

The bottom line profit is capitalised at varying percentages that change over time depending on market conditions.

In today’s market, a top gaming hotel’s profit would be capitalised at about 13 per cent to 14 per cent in order to

determine its freehold value. Mid-range gaming hotels are generally capitalised at between 15 per cent and 18 per cent.

If gaming machines are no longer part of the hotel’s business, then the profit would be substantially less, as would the freehold value of the hotel.

For example, a top hotel would lose an average of about $500,000 from their bottom line. If capitalised at say 14 per cent, the loss in freehold value would be $3.57 million. The smaller regional and lower ranked hotels can be expected to lose 100,000 to $200,000.

Labor’s policy would therefore see $150 million wiped off the value of pubs across Tasmania.

This obviously has huge ramifications for business owners, investments and future development activity.

We should expect many regional hotels to close.

The Labor Party policy makes little economic sense. I acknowledge pokies have an effect on the community. We know this, but so do alcohol, cigarettes, drugs, and many other forms of gambling.

At the end of the day, the individual should always have a choice. We are not a nanny state. The younger gamblers are more likely to lose their money through online opportunities, of which there is a huge range of options, rather than through the pokies.

A lot of activities centre around the pub — meetings, fundraisers and charities, clubs, groups such as eight-ball and darts, footy and cricket clubs.

It is where people get to know each other, forming bonds so that the community prospers.

If the pub does not survive, then whole towns will be affected.

Many hotels are already struggling. The so-called compensation for the removal of machines prior to 2023 is a pittance.

There has to be a better way to handle the pokies conundrum.

In my opinion you cannot, and should not, enact legislation that will cost jobs, force businesses to close and bankrupt owners.

Our economy is in good shape, tourism is booming, house prices are on the rise, unemployment is at record lows.

So why introduce measures that are counter-productive and that effect livelihoods and the very fabric of our societies, particularly our smaller towns?