Thousands of delegates hit by convention centre delays
Nearly 8000 delegates won’t be able to gather at the $703 million NZ International Convention Centre early next year but SkyCity Entertainment Group remains unconcerned about financial penalties for construction delays.
Figures previously provided by SkyCity, when it announced major conferences, showed four huge events for around 7900 people booked between next February to April.
Graeme Stephens, SkyCity chief executive, said despite the delays, he remained “excited” about the centre and indicated no financial fallout from having to turn away the thousands of delegates. “There are no financial
consequences in terms of penalties because of the way we’ve been managing it,” Stephens said.
“We have to move conferences in February, March, April and May but we’re working with these people, to bring them back into our calendar.
“Some will go somewhere else and hopefully come back. The biggest thing has been to retain the relationship with conference organisers,” Stephens said.
The Herald has previously reported SkyCity information showing bookings had been made for:
● The tripartite colorectal meeting next February, bringing 1200 delegates.
● The International Association for Prevention of Blindness convention next March for about 2000 delegates.
● The Asia Pacific Academy of Ophthalmology is also booked for March with 3500 delegates.
● The World Veterinary Congress next April for 1200 delegates.
● The World Organisation of Family Doctors Asia Pacific Region next July, bringing 2000 delegates. ● The World Congress of the International Union of Food Science and Technology in August next year and 2000 delegates will attend that.
SkyCity told the NZX it expected the “NZICC to open in second half of 2020” and Stephens confirmed that was the calendar, not the financial year, so after July 1.
SkyCity also revealed it would withhold $39.5m from Fletcher Construction for late delivery of the new hotel and centre and that a further $25m had been spent removing aluminium composite panel cladding from the building.
“It was the right decision to replace it but that decision comes at a cost,” Stephens said.
Negotiations were advanced to sell Auckland carparks: “We’re close to concluding. I can’t say if they’re overseas or locals but there are two potential buyers.”
These could generate well over $100m for the business but Stephens declined to give the latest valuations. SkyCity has 1960 parks below its Auckland casino/hotel site and another 1327 are being built across Hobson St beneath the convention centre site, giving it control of 3287 spaces.
Some city parking spaces go for more than $200,000 each, so SkyCity’s spaces could be worth $300m or more. An announcement is expected in the next fortnight.
Anna Haywood, Auckland Tourism Events and Economic Development’s convention bureau head, said it was disappointing the NZICC was further delayed but alternative options would be explored “in the hope that we can still accommodate these events at other venues within Auckland, or look to hold these at another time when the centre is open”.
Stephens said plans were advancing for SkyCity to launch online gaming, expand Federal St’s food, drink and entertainment offerings, and next year open a new attraction with West Workshop to showcase the All Blacks Experience.
SkyCity is also going carbon neutral this year, establishing a green fund to offset emissions and fund staff-led carbon reduction moves.
SkyCity shareholders can look forward to more cash in their pockets, and management increased bonuses, after a year of solid underlying earnings growth for the casino operator.
But the headaches keep coming from the New Zealand International Convention Centre, which has been plagued by controversy since SkyCity struck its deal with the Government to build the thing.
Given the problems previously outlined, along with Fletcher Building’s handling of the construction contract, delays to the completion date were inevitable.
Yesterday’s announcement that it won’t be ready until the second half of next year was a big blow — not least for the thousands of delegates already booked in for conferences. The 32,0000 sq m centre was supposed to open this month.
A major consequence of the delay is the lack of large conference facilities in and around Auckland City at the moment.
Team New Zealand has already moved into their new base at the Viaduct Events Centre on the Halsey Wharf extension, removing that venue for at least three years.
The NZICC delay will likely cause some large events to move to another city, although both SkyCity and Auckland Council are trying to manage the situation. It’s a huge disappointment that will undoubtedly flow through to a fight with Fletcher Building, which is understood to be disputing SkyCity’s claim for liquidated damages to compensate for losses caused by delays.
To date SkyCity has withheld $39.5 million of payments from Fletcher. This has increased from the earlier $26.5m previously flagged and now includes $9.5m for losses caused by delays to the adjacent Horizon Hotel.
Of more surprise is the extra $25m spent on removing aluminium composite panels part way through construction due to safety concerns highlighted by the Grenfell Tower fire in London. It will be interesting to see if these costs are attributable to SkyCity or third parties.
Yet despite all these setbacks, the concessions SkyCity received in its deal with the Government, which included 230 additional pokie machines and a 28-year extension to its gambling licence, appear to be bearing fruit.
The company has seen steady incremental growth in its key Auckland and international business segments and is now gearing up for future growth investments in Queenstown and Hamilton. (It has now acquired land for a future hotel development in Queenstown and submitted an Overseas Investment Office application).
Auckland was the best performer in the six months to December 31, increasing revenue by 6.2 per cent to $307.7m and earnings before interest tax depreciation and amortisation (ebitda) by 5.3 per cent to $138m.
The international business segment saw record six-month turnover of $7.7 billion and ebitda
growth of 164.5 per cent to $24.7m.
“We’ve had a really positive first half of this financial year, aided by some strong gains in International Business turnover and a good result from our flagship Auckland property, particularly on the gaming floor,” chief executive Graeme Stephens said.
The other good news for shareholders was the announcement of a capital return via a share buyback worth about $135m over the course of 2019.
But there are signs of a slowdown and SkyCity warned that both the domestic and international economic environment was becoming more challenging. It has therefore watered down expectations for trading in the second half to about 5 per cent ebitda growth.
SkyCity’s strategy of developing hotels, convention centres and other non-gaming assets is designed to drive additional business into its casinos, which are its big profitmaking vehicles.
Investors are looking to the convention centre to provide concrete evidence of that, which is why the delay to its completion is so disappointing.