NSW club plans 100-room hotel to offset slide in pokies income
Club Sapphire Merimbula plans to build a 100-room hotel in the popular NSW South Coast holiday spot as it looks to establish new income streams to offset declining gaming revenues – a strategy it believes other clubs will soon also have to consider.
The five-level project, which would sit on top of the existing club facilities, would provide a new annual revenue source, and give the club ownership of an appreciating asset while bringing more people to its restaurants, bars and events.
“We still see gaming as a legitimate form of entertainment,” the club’s chief executive, Damien Foley, told The Australian Financial Review.
“But from an economic perspective, gaming revenue peaked in 2005-6 and has gradually declined since, putting pressure on the future viability of the club.”
While gaming still accounts for about 45 per cent of the club’s revenue – it was around 50 per cent three years – in 10 to 20 years’ time, that number is expected to fall below 40 per cent (the remainder of its revenue comes predominantly from food and beverage facilities).
This means that clubs need to reinvent its business model, Mr Foley said.
A spokesperson for ClubsNSW, which represents 1270 venues across the state, said NSW clubs were increasingly investing in diversification projects to reduce their reliance on gaming revenue – “a trend that ClubsNSW strongly encourages its members to follow.
“Clubs now offer hotel accommodation, childcare centres, seniors’ living facilities, medical care and other community services to suit the changing needs of their members and patrons,” she added.
Profits from gaming machines at clubs and pubs hit a record $3.8 billion in the first half of 2022, according to figures published by NSW Liquor & Gaming – a surge partly attributed to pent-up demand that grew during the pandemic.
However, proposed reforms such as cashless gaming technology, which is being trialled at a number of venues, is likely to drive down revenues in coming years.
This week, the NSW government announced a $100 million investment in gambling harm minimisation including funding for reforms. A February report by the NSW Crime Commission identified “widespread and significant” money laundering alongside problem gambling within the industry.
Mr Foley said the club was open to the idea of cashless gaming and had put its hand up as a trial participant.
Given the prominence of social issues linked to gaming, as a not-for profit community business, the club wanted to make money from something more socially responsible, Mr Foley said.
“We’re putting ourselves in a position, as interest in gaming declines, to backfill that revenue,” he said.
He added that local tourism research had revealed a gap in the market for a new hotel. Merimbula, which lies between Bega and Eden, has a local population of about 4000 people. But that swells to 20,000 during the peak Christmas holiday period.
While the building of a hotel is a long-term plan, the club has already received gateway approval from the state government that will require the Bega Valley Shire Council to amend local planning rules (subject to a number of conditions being met) to lift the height of the club from 16 to 26 metres to accommodate a new multi-storey building.
Community consultations kicked off this week. Alongside further construction and conceptual approvals, club members will also have to approve the project.
Mr Foley said the club was absolutely committed to building the hotel.
“Things needs to change, clubs needs to diversify their income. The best opportunity for that is this long-term [hotel] project,” he said.
