SkyCity gets go-ahead for $330m upgrade of Adelaide casino


skycity-adelaide-casino-expansionAustralian and New Zealand casino operator SkyCity Entertainment Group has good news about its Adelaide casino and bad news regarding its Darwin property.

On Wednesday, SkyCity announced that it had signed a development agreement with the South Australia government that will allow the company to proceed with a A$330m (US $262m) expansion of SkyCity Adelaide Casino that will make the venue “the most luxurious hotel” in the city.

The upgrade includes a boutique all-suite 123-room hotel, a 30% increase in gaming product including four new VIP gaming rooms (natch), along with new restaurants, bars and a 750-person event space for banquets and such. Construction on the project will get underway early next year, with completion estimated by Q3 2020.

While SkyCity believes the “key value driver” of the project is a “significant expected increase in gaming activity,” the company clarified that its so-called ‘international business’ (aka Chinese gambling whales) would remain “an important part of the offering, but less of a focus given greater exposure to external factors.”

SkyCity’s most recent earnings report detailed the “significant reduction” in its IB segment following last year’s detention by Chinese officials of several execs from SkyCity rival Crown Resorts for promoting gambling activity on the mainland.

SkyCity says its Adelaide expansion will include a revitalization of existing gaming spaces that will “appeal to local market” gamblers. The expanded venue will feature around 1,100 electronic gaming machines and 140 gaming tables, of which 30 will be devoted to IB activity.

In less positive news, SkyCity says it’s recognizing a A$95m non-cash impairment of goodwill on its Darwin casino, primarily due to “increased competitive pressures in the gaming machine business.” SkyCity blamed the Northern Territory government’s 2014 decision to remove the cap on gaming machines, which has led to a 75% increase in the number of machines in operation outside the casino.

SkyCity says the impairment charge represents the full value of goodwill the company recognized when it purchased the Darwin property in 2004, thereby reducing the property’s book value to A$195m. SkyCity says it’s now conducting a review of potential strategic opportunities to maximize value from the Darwin property.