Federal coy on sale of hotels

Rob Inglis |Mercury Newspaper | 13 July 2021 

FEDERAL Group isn’t saying whether it intends to sell off any of its 12 pubs, with the state government’s proposed gaming policy set to significantly increase their capital value.

The new model for Tasmania’s gaming industry, detailed last week, would bring an end to Federal Group’s monopoly and transfer control of machines to pubs and clubs, with individual licences to be issued to venues.

The government says the company will be close to $25m worse off under the new arrangement, which will see a 3 per cent increase to the Community Support Levy, reaping the state an additional $3m, while pokies in pubs will be taxed an additional 8.3 per cent, and those in clubs an extra 7.3 per cent. However, the tax on casino pokies would fall by nearly 12 per cent.

Independent economist John Lawrence said the hit to Federal Group’s revenue would be offset somewhat by the forecast capital growth in their pubs.

“If they (pubs) can get a licence for 20 years, that means that they’ve got a nice capital gain that they can cash in,” Mr Lawrence said.

“At the licence level, each pub becomes a separate asset, which then can be sold on.”

A Federal Group spokeswoman said the company’s own modelling showed it would lose about $20m in revenue each year under the proposed new policy.

“This annual loss is entirely different to theoretical capital values,” she said.

“It is irrefutable that the Federal Group will be substantially worse off as a result of the proposed gaming legislation.” The Mercury asked whether the company intended to sell any of its 12 pubs – which include the Elwick Hotel in Glenorchy and Hotel Valern at Moonah – if the government’s policy became law. But an answer was not provided.

Finance Minister Michael Ferguson said it was “illogical” to compare an annual ongoing negative revenue impact on Federal Group with an estimated “effectively one-off” net present value based on a 20-year licence.

“It is comparing apples with oranges,” he said.

Mr Ferguson said the policy would secure hospitality jobs, support problem gamblers and put more money in state coffers. In a joint submission to a parliamentary inquiry in 2017, Federal Group and the Tasmanian Hospitality Association endorsed the individual licence model.

Independent Nelson MLC Meg Webb said the government should release modelling on the expected outcomes and financial viability of all industry stakeholders – including single-operator venues in regional areas – instead of focusing only on the impact on Federal Group.

“The policy we see today is exactly what Federal Group asked for, so of course it is designed to maximise its profits and it must be delighted with this result,” she said.

“Federal Group will remain the dominant industry player – through its casinos, as owners of 12 of the most lucrative pokies hotels and the virtually foregone conclusion that, through Network Gaming, it will become the licenced monitoring operator.”

See Meg’s pokies page for more information, resources and actions to take