Australian Casino Association ECONOMIC REPORT Prepared for Australian Casino Association June 2004 Finance and Economics
Contents Executive Summary-------------------------------------------------------------------------------------------- ES-1 1 Introduction------------------------------------------------------------------------------------------------- 1-1 1.1 About the Report 1-1 1.2 Report Process and Survey Data Collected 1-2 1.3 Outline of Report 1-2 2 Australian Casinos --------------------------------------------------------------------------------------- 2-1 2.1 ACA and Australian Casinos 2-1 2.2 Casino Facilities 2-1 2.3 Casino Visitors 2-3 3 Casino Industry Financials ---------------------------------------------------------------------------- 3-1 3.1 Casino Revenue 3-1 3.1.1 Casino Revenue Growth 3-1 3.1.2 Revenue Sources 3-1 3.2 Casino Expenditure 3-3 3.2.1 Operating Expenditure 3-3 3.2.2 Capital Expenditure 3-4 3.3 Government Revenue 3-4 3.3.1 State and Local Government Revenue 3-5 3.3.2 Federal Government 3-6 3.4 Direct Contribution to Australian GDP or Value Added 3-7 4 Socio Economic Contribution ------------------------------------------------------------------------ 4-1 4.1 Employment 4-1 4.1.1 Occupations and Incomes 4-1 4.1.2 Age of Employees and Employment Type 4-2 4.2 Contribution to the Community 4-3 4.2.1 Community Benefit Fund 4-3 4.2.2 Other Community Contributions 4-3 5 Economic Impact Analysis ---------------------------------------------------------------------------- 5-1 5.1 Economic Impact Analysis 5-1 5.1.1 Types of Economic Impacts and Indicators 5-1 5.1.2 Economic Impact Approach 5-1 5.2 Economic Impact Results 5-2 5.2.1 Output 5-2 5.2.2 Value Added or GDP 5-2 5.2.3 Household Income 5-2 5.2.4 Employment 5-3 5.3 Economic Impact Comparisons 5-3 \ i
Executive Summary A. Headline Results Executive Summary About the Australian Casino Industry: 13 casinos located across all States and Territories of Australia and located in key Australian cities Nearly 41 million Australian and international visitors who spent over $3.1 billion With nearly 1.5 million international visitors who spent at least $550.4 million at Australian casinos 12,568 gaming machines and tables, 3,224 hotel rooms and a range of recreational, entertainment and sporting facilities Supporting a range of community activities to the value of over $39 million And providing facilities for over 1,500 conferences with over 252,000 conference delegates. In 2002/03 the Australian casino industry was estimated to: Generate $8.6 billion in industry sales in the Australian economy Create 46,012 full and part time jobs in Australia during 2003. Directly provide $0.7 billion in revenue to Federal, State and Local Governments Contribute $5.9 billion in additional Gross Domestic Product to the Australian economy Provide $2.1 billion in salaries and wages to Australian households. And pay above average wages and salaries to employees. The economic impact o f the Australian casino industry was estimated to be. Around half the size of Sydney Airport Similar in size to that of 2000 Olympics, i.e. it is equivalent to having an Olympic Games held in Australia each year.. Nearly $1 billion in GDP larger than the construction of the Adelaide to Darwin railway; and... More than 4 times the size of Sydney Port Botany. ES-1
Executive Summary B. Section-by-Section Executive Summary Section 1 Introduction The report outlines the findings of Australian Casino Association (ACA) 2002/03 economic business survey covering all casino operations located in Australia undertaken by URS Finance and Economics (URS). The 2002/03 edition of this industry survey is the first edition undertaken by URS. Australian casinos are not just centres for gaming - with 76 restaurants, 3,224 hotel rooms, 50 entertainment facilities and 62 retail shops. To obtain information for the report, a survey was designed by URS in consultation with ACA and was distributed to all Australian casinos to obtain information on facilities, visitation and financial performance. Section 2 About Australian Casinos Australian casinos offer gaming and a range of other recreational activities to local, interstate or international visitors including theatre productions, sporting activities, conferences and shopping. With 76 restaurants, 50 bars and over 3,224 hotel rooms, Australian casinos are just not centres for gaming but offer a range of other business, recreational and leisure activities to visitors including: 50 entertainment facilities to casino visitors - 14 movie theatres, 28 live theatres, 5 night clubs and 3 amusement arcades; 31 sporting facilities - 12 gyms / health clubs, 2 golf courses, 1 driving range, 10 swimming pools and 6 tennis courts; 62 retail shops for casino visitors; and the industry hosted; and International visitors to casinos spent at least $550.4 million in 2002/03. 1,567 conventions / conferences with over 252,000 attendees in 2002/03. Nearly 41 million visitors used Australian casino facilities in 2002/03, an increase of 2.5 million from the previous year. International visitors represented only a small proportion of total visitors at approximately 1.5 million, although total Australian international visitors for 2002 amounted to approximately 4.8 million 1. Based on this estimate of international visitors, up to 31 per cent 2 of international visitors go to casinos when in Australia reflecting the important role the industry and its facilities play within the Australian tourism market. Further, international casino visitors were estimated to have spent at least $550.4 million at Australian casinos. 1 Department of Industry, Tourism and Resources February 2004 Monthly Fact Sheet 2 Maximum percentage as assumes all international visitors go to a casino once while in Australia. ES-2
Executive Summary Section 3 Casino Industry Financials In terms of the casino industry financials for 2002/03, the headline results are revealed in the following table: Table ES.1 Summary of Casino Industry Financials 2002/03 Total casino industry revenue amounted to $3.145 million from gaming and non gaming activities. Financial Item $ Billion Revenue 3.145 Wages and Salaries 0.712 Other Operating Expenditure 1.137 Taxes Paid to Governments 0.727 Other Value Added 3 0.569 Source: ACA survey and URS analysis Casino industry revenue for 2002/03 was up 0.43 per cent from the previous year. Revenue from gaming and gambling activities totalled approximately $2.5 billion in 2002/03. Nongaming revenue totalled $614.6 million, an increase of 1.36 per cent from the previous year of $606.3 million. The percentage increase in non-gaming revenue was well above that of the increase in revenue sourced from gaming activities, reflecting growing importance of non gaming revenue and the fact that a range of entertainment and leisure facilities are available to casino visitors. Key non-gaming revenue components included food and beverage sales, accommodation, rent and leasing and entertainment. Casino operating expenditure for the industry totalled $1.849 billion in the 2002/03 up 7.2 per cent from the previous year. The largest expenditure component was wages and salaries at $0.712 billion for the year. The remaining operating expenditure of $1.137 billion consisted of labour on costs, utilities, marketing and promotions, repairs and maintenance, business services, cost of goods sold and other sundry costs. Wages and Salaries amounted to $712 million reflecting the important employment contribution the industry makes to the economy. In addition to operating expenditure, the casino industry undertook substantial capital investment during the year with nearly $180 million invested in casino infrastructure upgrades and expansions along with new equipment. The casino industry also made a considerable contribution to all levels of Government revenue. A break down is outlined in the table below. 3 Value added is an approximation of Gross Domestic Product and consists of wages / salaries and gross operating surpluses before tax, ie earnings before income tax, depreciation and amortisation (EBITDA). Other value added Table ES.1 represents gross operating surplus excluding all taxes. ES-3
Executive Summary Table ES.2 Summary of Casino Industry Tax Contribution 2002/03 Level of Government $ Million State and Local Government 4 561.9 Federal Government 165.3 Total 727.2 Source: ACA survey and URS analysis Total casino industry contribution to Government revenue amounted to $727.2 million in 2002/03. Total taxes and levies paid to the all levels of Australian Government amounted to $727.2 million. State and Local Government revenue amounted to $561.9 million, the majority of which was derived from State gambling taxes of $472.6 million. Other key taxes included payroll tax, the state Government regulated community benefit funds 5, land taxes and local Government rates. Federal Government tax revenue amounted to $165.3 million consisting of predominately company tax. In terms of total direct value added or contribution to Australian Gross Domestic Product, the casino industry contributed just over $2 billion in 2002/03 as outlined in the table below. Table ES.3 Casino Industry Contribution to GDP Value Added or GDP Component $ Billion Wages and Salaries 0.712 Taxation Contribution 0.727 Other Value Added 0.569 Total 2.008 Source: ACA survey data and URS analysis Value added or GDP consists of wages / salaries and EBITDA. In terms of the casino industry, its direct contribution to GDP in 2002/03 amounted to $2.008 billion. On average that equates to approximately 64 per cent of total sales, i.e. 64 cents out of every dollar spent at Australian casinos contributes directly to Australia s GDP. 64 cents out of every dollar spent at casinos directly contributes to Australia s GDP. Section 4 Socio Economic Contribution The Australian casino industry provides a range of employment opportunities from management professionals to hospitality staff to repairs and maintenance teams. The industry s workforce is relatively young with 87 per cent aged under 45 years age and are paid above average wages. 4 Local Government revenue amounted to $13.1 million. 5 Various State Governments administer Casino Community Benefit Funds levied at percentage rate of gaming revenue including NSW (2 per cent), Vic (1per cent), Qld (1 per cent) and WA (1 per cent). ES-4
Executive Summary The majority of staff employed by casinos are involved in the gaming operations with 7,701 gaming staff, followed by 5,652 staff involved in food and beverage (eg chefs, bar managers etc), managers and administration (3,185), cleaning and housekeeping (1,434), security officers (1,089) and maintenance (378). Total industry employment amounted to 19,439 for 2002/03. Average income for all casino employees was $36,612 in 2002/03 and was 2 per cent higher than national Australian average. Total employment amounted to 19,439 and with staff paid above average incomes. The Australian casino industry also contributed just over $39 million to the community in 2002/03. Examples of the types of organisations the industry supported during the year included local sporting groups, sponsorship of arts festivals, problem gambling support services and a number of charity organisations. Section 5 Economic Impact Analyses All the operations of the Australian casino industry make a significant contribution to the Australian economy. To estimate the value and size of the industry s impact, URS undertook an economic impact analysis. An economic impact analysis measures the total economic contribution of a project, infrastructure facility or industry such as the casino industry on a regional, state or national economy by taking into account direct and flow on effects of the industry. Using the information provided by the survey, URS adjusted the data so that it was suitable for economic impact analysis, allowing the calculation of flow on effects via industry multipliers. The total economic impact (direct + flow on) of the Australian casino industry was estimated to: generate $8.6 billion in output; Taking into account flow on impacts the casino industry generated output of $8.6 billion, resulting in $5.9 million in GDP, $2.1 billion in household income employing 46,612 people. contribute $5.9 billion to Australia s Gross Domestic Product; provide $2.1 billion in household income; and employ 46,612 people (full and part time). To provide a perspective of the size of the economic impact of the Australian casino industry, URS compared the estimated economic impact to a number of other economic impact studies covering a range of operations and events to provide a perspective of the size of the casino industry. URS obtained economic impacts studies on the effects of Sydney Airport, 2000 Olympic Games, the construction of the Adelaide to Darwin railway and the economic contribution of the Sydney Port on the economy. ES-5
Executive Summary In comparing the economic impact results in terms of contribution to Australia s GDP it was estimated that the Australian casino industry is 6 : around half the size of Sydney Airport; similar in size to that of the 2000 Olympics, i.e. it is equivalent to having an Olympic Games held in Australia each year; The casino industry s economic impact in 2002/03 was similar in size to the 2000 Olympics and four times the size of Sydney Port Botany. nearly $1 billion in GDP larger than the construction of the Adelaide to Darwin railway; and more than 4 times the size of Sydney Port Botany. 6 Caution should be used in examining the comparisons as different economic impact studies cover different time frames, geographic regions and use different economic impact methodologies. ES-6
1 Introduction Introduction SECTION 1 1.1 About the Report The Australian Casino Association 2002/03 economic business survey covers all casino operations located in Australia and was undertaken by URS Finance and Economics (URS). The 2002/03 edition of this industry survey is the first edition undertaken by URS. The ACA Economic Report is the only regular source of information on the Australian casino industry. The annual casino industry survey report is of vital importance to the industry as it plays a key role in the process of promoting the activities and the economic importance of the industry to the Australian economy. It is the only regular source of information on the industry, as the Australian Bureau of Statistics (ABS) has not provided a report on the casino industry since 1998/99. A number of additions and changes were made to the report compared to previous years including the incorporation of capital expenditure data, additional taxation data and information on the range of facilities available at Australian casinos. In addition, URS undertook an economic impact analysis of the industry to estimate the total economic impact the industry has on the economy utilising the information gathered via the survey. The survey collected information on the direct impact casinos have on the economy. However, through economic impact analysis, flow on impacts of such expenditure to other parts of the economy can be estimated. These flow on impacts include: the flow on effects of casinos purchasing various business inputs to operate their business; and An economic impact analysis of the casino industry on the Australian economy was undertaken. the flow on effects of casino employees spending their wages / salaries in the Australian economy. To provide a perspective of the casino industry in terms of size, the economic impact results were compared to the economic impact results of a number of large infrastructure facilities and projects to provide a perspective on the size and the impact of the industry. Comparisons included infrastructure facilities such as Sydney Airport, Sydney Port Botany and also the economic impact of the 2000 Olympic Games. 1-1
Introduction SECTION 1 1.2 Report Process and Survey Data Collected To obtain information for the report, a survey was designed by URS in consultation with ACA and was distributed to all Australian casinos. Casinos were requested to provide the following information: Casino Facilities and Visitor Data All Australian casinos were surveyed in regard to facilities, financial performance and community contribution. Number of entertainment and recreational facilities; Number of commercial facilities; and Number and type of visitors. Financial and Economic Data Revenue, operating expenditure and capital expenditure; and Government revenue and taxation. Social and Community Data Number of employees and associated characteristics; Contribution to community groups; and Number of conventions. Once surveys were returned to URS, the data provided was collated and aggregated at a casino industry level. Once aggregated, data gaps and omissions were identified by URS and follow up procedures were undertaken with appropriate casinos to clarify and ensure accuracy of data allowing report finalisation. 1.3 Outline of Report The report is outlined as follows: Section 2: About Australian Casinos; Section 3: Casino Industry Financials; Section 4: Socio Economic Contribution; and Section 5: Economic Impact Analysis. 1-2
2 Australian Casinos Australian Casinos SECTION 2 2.1 ACA and Australian Casinos The Australian Casino Association (ACA) represents the interests of Australia s 13 casinos located around Australia. The core functions of ACA are to promote the casino industry as one that is a leader in regulatory compliance and in promoting responsible gambling practices that reflect community expectations of the highest standards of probity and integrity. All Australian casinos are members of the ACA as outlined below: The Australian casino industry consists of 13 casinos located in all States and Territories across Australia. Wrest Point Hobart and Country Club Launceston in Tasmania; Burswood International Resort Casino Perth, Western Australia; Reef Casino, Cairns, Queensland and Casino Canberra; Crown Melbourne, Victoria; Star City Sydney, New South Wales; Lasseters Alice Springs, Northern Territory; MGM Grand Darwin, Northern Territory; Sky City Adelaide, South Australia Conrad Jupiters Gold Coast, Conrad Treasury Casino, Brisbane and Jupiters Townsville, Queensland. Australian casinos offer a range of facilities to visitors including gaming, food and beverage, sport and accommodation. In addition, Christchurch Casino and Dunedin Casino New Zealand are Associate members of the Association. New Zealand s Sky City Group is represented through its ownership of Sky City Adelaide. 2.2 Casino Facilities The Australian casino industry offers gaming and a range of other recreational activities to visitors whether local, interstate or international including theatre productions, sporting activities and shopping. Outlined in the table below are the current gaming and recreational facilities available with a comparison with the previous year. 2-1
Australian Casinos SECTION 2 Table 2.1 Key Australian Casino Facilities Facility Number 2002/03 Number 2001/02 Number Change % Change Gaming Tables 1,098 1,082 16 +1.48 Gaming Machines 11,560 11,502 58 +0.50 Restaurants 76 71 5 +7.04 Bars 80 71 9 +12.68 Hotel Rooms 3,224 3,134 90 +2.87 Source: ACA Survey and URS analysis Growth in non gaming facilities was significantly higher than gaming facilities over the year. Gaming facilities available to visitors increased over the year with the number of gaming tables up by 16 and gaming machines increasing by 58. In addition, the number of food and beverage services available to casino visitors also increased with the restaurants up by 5, the number of bars up by 9 and hotel accommodation also increased with the industry adding an additional 90 rooms over the year. Interestingly, the percentage change in non-gaming activities in terms of restaurants, bars and hotel rooms was significantly higher than the growth in gaming tables and machines leading to the fact that Australian casinos are not just gaming locations offering a wide range of other facilities to visitors and tourists. Australian casinos offer a range of convention / conference facilities, leisure activities, entertainment complexes, sporting amenities and retail shops. The table below outlines the number of these convention and recreational / entertainment facilities available to the casino visitor. Table 2.2 Recreational and Convention Facilities Australian casinos hosted 1,567 conventions with over 252,000 attendees in 2002/03. Facility Number Entertainment 50 Sporting 31 Retail Shops 62 Conference / Convention 52 Source: ACA Survey Based on the information and the data collected through the survey the recreational and convention facilities included: 50 entertainment facilities to casino visitors - 14 movie theatres, 28 live theatres, 5 night clubs and 3 amusement arcades; 31 sporting facilities - 12 gyms / health clubs, 2 golf courses, 1 driving range, 10 swimming pools and 6 tennis courts; 62 retail shops for casino visitors; and the industry hosted 1,567 conventions / conferences with over 252,000 attendees in 2002/03. 2-2
Australian Casinos SECTION 2 2.3 Casino Visitors In 2002/03 casinos had over 41 million visitors an increase of 2.5 million from the previous year. The table below provides a break down in terms of origin of visitors for 2002/03. Table 2.3 Australian Casino Visitors in 2002/03 Origin of Visitors Number of Visitors 2002/03 (million) % share Local 34.70 85 Interstate 4.30 10 Australian casinos had over 41 million visitors in 2002/03 with 1.5 million international visitors. International 1.50 5 Total 41.00 100 Source: ACA Survey Local visitors totalled 34.7 million and represented 85 per cent of total visitors followed by interstate casino visitors with 4.3 million (10 percent) and international 1.5 million (5 per cent). International visitors represented only a small proportion of overall visitors (1.5 million). However, it should be noted that total international visitors for 2002 to Australia amounted to 4.8 million 7. Based on these visitor numbers, up to 31 per cent 8 of international visitors go to casinos when in Australia reflecting the important role the industry and its facilities play within the Australian tourism market. Furthermore, international visitors tended to spend proportionally more than Australian casino visitors. According to survey data, international gambling revenue from international visitors was estimated at $550.4 million 9 approximately 17.5 per cent of the industry turnover excluding their expenditure on other activities at casinos such as accommodation and food and beverages. 7 Department of Industry, Tourism and Resources February 2004 Monthly Fact Sheet 8 Maximum percentage as assumes all international visitors go to a casino once while in Australia. 9 Estimated to consist of individual commission revenue ($255.3 million), group commission ($184.8 million) and rated player revenue ($106 million). 2-3
3 Casino Industry Financials Casino Industry Financials SECTION 3 3.1 Casino Revenue Total revenue for the industry totalled $3.145 billion in the 2002/03, up 0.43 per cent from the previous year. The historical growth in overall revenue along with key sources of revenue and a break down of non-gaming revenue is outlined in the following sections. Total industry revenue for 2002/03 was $3.145 billion up 0.43 per cent on the previous 3.1.1 Casino Revenue Growth In 1997/98 casino industry revenue was approximately $2.67 billion and it has increased to its current level of $3.15 billion in 2002/03 at a compound average growth rate of 2.8 per cent. In recent years revenue growth has stabilised at around the $3.1 billion level peaking in 2002/03. year. Figure 3.1 Casino Revenue Growth 1997/98 to 2002/03 3.20 3.14 3.13 3.15 3.10 3.05 3.00 2.90 $ billion 2.80 2.75 2.70 2.67 2.60 2.50 2.40 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 Key industry revenue sources included gaming, food and beverage, accommodation and entertainment. 3.1.2 Revenue Sources Source: ACA survey data The key source of revenue is from gaming and gambling activities and these totalled approximately $2.5 billion in 2002/03. Other key sources included food and beverage sales, hotel accommodation, rent and leasing and entertainment. Other minor income included items such as foreign exchange commissions and car parking income. Outlined in the table below are the aggregated industry casino revenue estimates for the industry for key revenue items along with a comparison with the previous year. 3-1
Casino Industry Financials SECTION 3 Table 3.1 Industry Revenue Item $ Million $ Million $ Million change % Change 2002/03 2001/02 Gaming Revenue 2,530.6 2,525.6 4.9 0.20 Food & Beverage 357.2 337.2 20.1 5.83 Accommodation 131.3 121.4 9.9 8.18 Rent / Leasing 29.9 23.1 6.9 29.25 Entertainment 30.9 29.1 1.9 6.36 Other Income 10 65.9 95.5-30.3-31.64 Gaming revenue amounted to $2.531 billion in 2002/03 up 0.2 per cent on the previous year. Total 3,145.2 3,131.9 13.3 0.43 Source: ACA Survey Data As mentioned earlier, overall total casino revenue totalled $3.145 billion in 2002/03, an increase of 0.43 per cent from the previous. As one would expect gaming revenue is the largest contributor to overall revenue at an estimated $2.531 billion, increasing slightly on the previous year by 0.20 per cent. The Australia casino industry also generates a significant amount of non-gaming revenue. In 2002/03 non-gaming revenue totalled $614.6 (20 per cent of total revenue), an increase of 1.36 per cent from the previous year of $606.3 million. It included food and beverage sales of $357.2 million, followed by accommodation ($131.3 million), rent and leasing ($29.9 million), entertainment ($30.9 million) and other income of $65.9 million consisting of items such as car parking fees, foreign exchange commissions and casino guest services. Growth non gaming revenue is significantly higher than gaming revenue at 1.36 per cent and compared to gaming revenue growth of 0.43 per cent. Non-gaming revenue amounted to $614.6 million in 2002/03 up 1.36 per cent on the previous year. In terms of industry revenue category changes over the year rent / leasing income increased by 29.25 per cent followed by accommodation (8.18 per cent), entertainment (6.36 per cent) and food and beverage (5.83 per cent). In addition, the figure below outlines the percentage share of non gaming revenue with food and beverage at 58 per cent, accommodation 21 per cent, other 11 per cent and entertainment and rent/leasing both 9 per cent. 10 It should be noted that URS has checked and clarified the other income category with appropriate casinos to ensure accuracy given the change over the previous year. However, URS is of the view the movement is likely to be the result of a combination of modifications in revenue allocations and accounting staff changes at individual casinos since the previous survey. 3-2
Casino Industry Financials SECTION 3 Figure 3.2 Percentage Breakdown of Non Gaming Revenue Other 11% Entertainment 5% Rent and Leasing 5% Accommodation 21% Food and Beverage 58% Food and beverage represented the largest share of non gaming revenue at 58 per cent. Source: ACA Survey 3.2 Casino Expenditure Total casino operating expenditure for the industry totalled $1.849 billion in the 2002/03 up 7.2 per cent from the previous year. The following sections outline the operating expenditure along with casino capital investment expenditure. 3.2.1 Operating Expenditure Casinos are large employers of labour and can operate up to 24 hours per day resulting in the largest expenditure component for the casino industry being salaries and wages. In 2002/03, casino staff salaries and wages amounted to $711.7 million with additional labour on costs at $124.3 million consisting of costs such as superannuation and other associated staff costs such as uniforms. Total industry operating expenditure amounted to $1.849 billion with wages and salaries at $711.7 million. Other key expenditure items included utilities amounting to $239.6 million, marketing and promotions $95.6 million, repairs and maintenance $60.8 million, other business services $121.2 million, cost of goods sold (cogs) totalling $142.2 million and a combination of a range of sundry costs totalling a $350 million 11 as outlined in the table below. 11 Please note the other cost category included high roller related costs and expenses, contract / temporary labour, security services, transport, travel, consultants, consumables and sundry / miscellaneous cost items. 3-3
Casino Industry Financials SECTION 3 Table 3.2 Casino Industry Expenditure by Major Items 2002/03 12 Capital expenditure on expansions, redevelopments and equipment amounted to $180 million in 2002/03. Expenditure Item $ Million Wages and Salaries 711.7 Utilities 239.6 Food and Beverages and Other COGS 145.2 Labour on costs 124.3 Other Business Services 121.2 Marketing and Promotion 95.6 Repairs and Maintenance 60.8 Other Costs 350.7 Total 1,849.1 Source: ACA Casino Industry Survey 3.2.2 Capital Expenditure For the first time capital expenditure data was obtained through the survey. The data showed that the casino industry undertook substantial capital investment during the year with nearly $180 million invested in casino infrastructure, associated facilities and equipment. A break down of capital expenditure for the year is provided below: Table 3.4 Casino Industry Capital Investment Capital Expenditure Item $ Million Expansion of Facilities 88.7 Redevelopment of Facilities 54.0 Other Capital Investment (eg equipment) 36.8 Total 179.5 Source: ACA Survey Total industry taxes and levies paid to various governments amounted to $727.2 million in 2002/03. The majority of the capital expenditure incurred was in regard to the expansion of facilities estimated at $88.7 million. In addition $54 million was spent on casino redevelopment and refurbishment of casino facilities with other capital investment amounting to $36.8 million - predominately for the purchase of gaming and gambling equipment. 3.3 Government Revenue In addition to operating and capital expenditure, the casino industry also made a considerable contribution to Government revenue at the local, state and federal levels. Total taxes and levies paid by the industry in 2002/03 amounted to $727.2 million. The key taxes for the Australian casino industry are gambling taxes and payroll tax at the state level and company tax at the federal level. 12 A detailed comparison was not available to compare with the previous year. 3-4
Casino Industry Financials SECTION 3 In terms of a break down of taxes between State and Local and Federal Government taxes paid: total State and Local Government tax amounted to $561.9 million; and total Federal Government tax amounted to $165.3 million. 3.3.1 State and Local Government Revenue State and Local Government taxes amounted to $561.1 up 0.48 per cent of the previous year. State and local Government taxes and charges include local council rates, land taxes, payroll tax and gambling taxes. In addition, seven casinos contributed to State Government Casino Community Levies or Funds. The figure below outlines the estimated contribution of each revenue component and the total amount of Government revenue contributed. Figure 3.3 State and Local Government Revenue Rates and Land Taxes 20.7 Community Benefit Levy 27.8 Payroll Tax 40.8 Gambling Taxes 472.6 Gambling taxes were the largest contributor to State and Local Government revenue at $472.6 million. Total 0 50 100 150 200 250 300 350 400 450 500 550 600 Source: ACA Survey Total State and Local Government taxes / levies amounted to $561.9 million, the majority of which was derived from state gambling taxes. Payroll tax was estimated at $40.8 million followed by the community benefit fund derived by state Government levies at $27.8 million with local Government and land taxes estimated at $20.7 million 13. $ Million 561.9 13 Local government rates were $13.1 million and land tax was $7.6 million. 3-5
Casino Industry Financials SECTION 3 In terms of a comparison with the previous year the table below outlines the changes over time. Table 3.5 Casino Industry Contribution to State and Local Government Revenue Item $ million $ million $ million % 2002/03 2001/02 change change Gambling Taxes 472.6 469.0 3.6 +0.77 Payroll Tax 40.8 40.4 0.4 +0.99 A number of casinos contributed to community benefit funds totaling $27.8 million. Community Benefit Fund Rates and Land Taxes 27.8 31.8-3.0-12.6 19.8 18 1.8 +10 Total 561.9 559.2 1.8 +0.48 Source: ACA survey State and local Government revenue increased over the year by 1.8 million from the previous year. Overall the largest contributor to State Government revenue was gambling related taxes which totalled $472.6 million followed by payroll tax $40.8 million, community benefit fund $27.8 million 14 and rates and land taxes $19.8 million. It should be noted that a number of Australian casinos contribute to state Government regulated community benefit funds. Their primary objective is to benefit key local community projects including community counselling support services and improvements to community assets. Specific examples of the types of projects that these funds support to include contribution to problem gambling treatment services, hospital foundations, sporting clubs and youth organisations. 3.3.2 Federal Government Company tax paid by the industry was estimated at $165.3 million in 2002/03. In addition to the state and local Government revenue, the casino industry contributes to Federal Government revenue. The key taxes contributed by the casino industry are fringe benefits tax and company tax. Information on fringe benefits tax was collected via the ACA survey, however, given the different ownership structures of various casinos it was difficult to obtain company tax data from all individual casino operators. However, in consultation with the casino industry, URS has provided an industry estimate based on independent analysis of the industry, industry views and where possible estimates from casino operators where the ownership allowed the provision of an accurate estimate. Based on URS analysis total contribution to Federal Government tax revenue was estimated at $165.3 million as outlined in the table below. 14 In addition to the community benefit fund the Australian casino industry contributed an additional $11.7 million to a number of community groups in 2002/03. For further details please see Section 4 of this report. 3-6
Casino Industry Financials SECTION 3 Table 3.6 Casino Industry Contribution to Federal Government Revenue Type of Tax $ Million 2002/03 Fringe Benefits $3.0 Company Tax $162.3 Total $165.3 Source: ACA Survey and URS analysis Casinos directly contributed just over $2 billion to Australia s GDP in 2002/03. 3.4 Direct Contribution to Australian GDP or Value Added Value added or GDP predominately consists of wages / salaries and earnings before interest tax, depreciation and amortisation. In terms of total direct value added or contribution to Australian GDP, the casino industry contributed just over $2 billion in 2002/03 with wages and salaries of $0.712 billion, taxation $0.727 billion and other value added of $0.569 billion as outlined in the table below. Table 3.7 Casino Industry Contribution to GDP Value Added or GDP Component $ Billion Wages and Salaries 0.712 Taxation Contribution 0.727 Other Value Added 0.569 Total 2.008 Source: ACA survey data and URS analysis On average 64 cents out of every dollar spent at Australian casinos contributes directly to Australian GDP. In terms of the casino industry direct contribution to GDP of $2.008 billion in 2002/03, this equates to approximately 64 per cent of total sales of the casino industry ($3.145 million), i.e. 64 cents out of every dollar spent at Australian casinos contributes directly to Australia s GDP. 3-7
Socio Economic Contribution SECTION 4 4 Socio Economic Contribution The socio economic contribution of the casino industry includes the employment of nearly 20,000 employees, their salaries / wages and contribution to the community through the community benefit fund and other casino community specific cultural activities and financial assistance with community events. 4.1 Employment The industry directly employs nearly 20,000 staff. Total casino employment was estimated at 19,439, down slightly from the previous year of 19,657. The following section outlines the survey results relating to the types of occupations, average income levels and employee employment characteristics. 4.1.1 Occupations and Incomes The casino industry employs a range of people from management professionals to casino hospitality staff such as waiters and bar managers. Outlined below is a break down in the number of casino employees along with a comparison with the previous year 15. Table 4.1 Casino Industry Employees by Occupation Type of Occupation Number of Employees 2002/03 Number of Employees 2001/02 Number Change % Change Managers/ Clerical and Admin 3,185 3,309-124 -3.90 Licensed Gaming Staff 7,701 7,488 213 2.76 Chefs Bar Managers Attendants, Waiters Kitchen Hands 5,652 6,002-349 -6.18 Security Officers 1,089 1,086 3 0.23 Casinos offer a range of employment opportunities from management to catering and hospitality. Maintenance 378 401-22 -5.80 Cleaning Housekeeping Staff 1,434 1,371 62 4.34 Total 19,439 19,657-218 -1.12 Source: ACA Survey The majority of staff employed by casinos are involved in the gaming operations with 7,701 gaming staff, followed by staff involved in food and beverage (eg chefs, bar managers etc) with 5,652, managers and administration (3,185), cleaning and housekeeping (1,434), security officers (1,089) and maintenance (379). 15 Please note URS Finance and Economics has aggregated some categories from the previous year for comparability purposes. 4-1
Socio Economic Contribution SECTION 4 Most categories of employment experienced slight declines in the level of employment consistent with the overall fall. Chefs and bar managers fell by 6.18 per cent, followed by maintenance staff (5.80 per cent), managers and administration (3.90 per cent). Small gains were experienced in the numbers of gaming staff up by 2.76 per cent, with housekeeping and cleaning staff up by 4.34 per cent and security up fractionally by 0.23 per cent. Casinos provide above average incomes to predominately young staff. As mentioned earlier, total wages for the Australian casino industry were $711.7 million employing 19,439 employees. Based on these figures, the average income of all employees was $36,612 in 2002/03. Using the Australian Bureau of Statistics data for the total work force, average casino incomes were 2 per cent higher than national average in 2002/03 as outlined in the table below. Table 4.2 Casino Industry Average Incomes 2002/03 16 Economy / Industry Average Income Level Australian Economy $ 35,890 Australian Casino Industry $ 36,612 Source: ACA Survey and ABS 4.1.2 Age of Employees and Employment Type In terms of the age of staff, the casino industry currently employs relatively young people. Employees aged 25 to 34 represent 37 per cent of the labour force, followed by the 18 to 24 age group (26 per cent), 34 to 45 age group (24 per cent) and 45 plus representing 13 per cent. This results in 87 per cent of casino employees being under the age of 45. A breakdown of casino industry employees by age is provided in the table below. Table 4.3 Casino Industry Employees by Age Age Group Number % Share 18 to 24 5,054 26 24 to 34 7,192 37 Casinos offer a mix of full time and flexible part time and casual employment. 34 to 45 4,665 24 45 + 2,528 13 Total 19,439 100 Source: ACA Survey In terms of the employment structure, the casino industry provides a mix of full time and flexible part time and casual employment opportunities. The majority of employees are full time with 58 per cent or 11,275 people employed on a full time basis, followed by casual employees (24 per cent or 4,665) and part time employees (18 per cent or 3,499). 16 ABS data based on Feb 2004 excluding superannuation contributions. It should also be noted that it is a like with like comparison as Australian average includes full time, part time and casual worker similar to the casino work force which comprises full time, part time and casual employees. 4-2
Socio Economic Contribution SECTION 4 Table 4.4 Casino Industry Employment Full and Part Time 2002/03 Employment Type Number % Share Full Time 11,275 58 Part Time 3,499 18 Casual 4,665 24 Total 19,439 100 Source: ACA Survey The casino industry contributed $39 million to a range of community groups in 2002/03. 4.2 Contribution to the Community In 2002/03, the Australian casino industry contributed just over $39 million to the community through state Government community benefit funds and through individual casino contributions to specific community groups and events. 4.2.1 Community Benefit Fund The Australian casino industry contribution to state Government community benefit funds amounted to $27.3 million in 2002/03. These funds were established and are regulated by a number of State Governments including NSW, Qld, Vic and WA. Their key objective is to support local community and social projects such as gambling treatment services, hospital foundations, sporting clubs and youth organisations. 4.2.2 Other Community Contributions In addition to community benefit levy, the Australian casino industry contributes to a range of other specific community groups, charities, special events and sporting organisations. For 2002/03, total additional contributions totalled $11.7 million as outlined in the table below. Casinos supported specific cultural events, and charities outside of the Community Benefit Funds in 2002/03. Table 4.5 Casino Industry Community Contributions Contribution Type $ Million Community Groups 6.4 Sponsorship of Cultural Events 2.9 Problem Gambling 1.5 Charity 0.9 Special Events 0.05 Total 11.7 Source: ACA survey Local community groups received $6.4 million, followed by the sponsorship of cultural events ($2.8 million), problem gambling ($1.5 million), charity (0.9 million) and special events (0.05 million). 4-3
Economic Impact Analysis SECTION 5 5 Economic Impact Analysis URS undertook an economic impact analysis of the casino industry on the Australian economy utilising input output analysis techniques and utilising the data collected from the casino industry survey. Outlined below is a brief description of the economic impact analysis process and the results. For further details please see Appendix A. 5.1 Economic Impact Analysis An economic impact analysis measures the contribution of project or industry on an economy. An economic impact analysis measures the total economic contribution of a project, infrastructure facility business operation or industry such as the casino industry on a regional, state or national economy. In this analysis, URS estimated the total economic impact of the Australian casino industry on the Australian economy. 5.1.1 Types of Economic Impacts and Indicators There are two components to an economic impact analysis a direct component and a flow on component. While direct employment and economic activity impacts of a casino or the industry are usually obvious, eg the number of staff employed by casino, flow on impacts are not so obvious, referring to the multiplier effect of the direct activity. URS normally provides four key economic indicators when undertaking economic impact analysis for industry sectors. These include: output: the total value of sales; value added: an approximation of the contribution to Gross Domestic Product (GDP), consisting of gross operating surplus and wages / salaries of employees; household income: the wages / salaries before tax of employees; and Key economic impact indicators included output, value added, household income and employment. employment: the total number of employees. 5.1.2 Economic Impact Approach URS utilised an input output modelling approach to assess the economic impact of the Australian casino industry. Input output models or tables are matrices of data that disaggregate the inputs used, and the outputs produced, by the various activities that comprise an economy. Input output tables outline the structure of an economy and were developed so that the transactions between industries could be analysed. Flow on effects are generated through industry expenditure on locally provided intermediate inputs and labour. The composition of the inputs used and the capacity of the defined economy to supply those inputs determine the size and industry composition of the flow on effects. 5-1
Economic Impact Analysis SECTION 5 5.2 Economic Impact Results Using the information provided by the survey URS, adjusted the data so that it was suitable for input output analysis allowing the calculation of flow on effects via industry multipliers. As mentioned earlier, URS normally calculates the economic impact of an industry in terms of output, value added, household income and wages/salaries. The total economic impact of the Australian casino industry was estimated to: generate $8.6 billion in output; Total output generated by the industry totaled $8.6 billion resulting in a $5.9 billion contribution to Australian GDP. contribute $5.9 billion to Australia s Gross Domestic Product; provide $2.1 billion in household income; and employ 46,612 people (full and part time). Table 4.6 Economic Impact Summaries Economic Impact Indicator Direct Impact Flow-on Impact Total Impact Output 3.1 5.5 8.6 Value Added 2.0 3.9 5.9 Household Income 0.7 1.3 2.1 Employment 19,439 26,573 46,612 Source: ACA survey and URS analysis 5.2.1 Output Total household income was estimated at $2.1 billion employing over 46,612 people. Total direct output (or sales) generated by the Australian casino industry was estimated at $3.1 billion. Taking into account the estimated value of imported material and resources of $115.6 million derived from survey data and flow on impacts the total economic impact of the industry was estimated at $8.6 billion. 5.2.2 Value Added or GDP Total direct value added was estimated at approximately $2 billion consisting gross operating surplus and the value salaries and wages. Taking into account flow on effects total value added or contribution to Australia s GDP was estimated at $5.9 billion. 5.2.3 Household Income Direct household income (casino wages and salaries) was estimated at $0.7 billion providing an average salary per employee of approximately $36,612 per annum. Taking into account flow on effects of employees spending their income within the economy total household incomes generated by the casino industry was estimated at $2.1 billion. 5-2
Economic Impact Analysis SECTION 5 5.2.4 Employment Total direct employment including full time, part time and casual employees was estimated at 19,439. Taking into account the effect of flow on effects total employment created by the casino industry was estimated at 46,012 full time, part time and casual jobs 17. 5.3 Economic Impact Comparisons The casino industry was ranked third in terms of contribution to GDP behind that of Sydney Airport and slightly lower than the 2000 Olympics. To provide an indication of the size of the economic impact of the Australian casino industry, URS has compared the estimated economic impact to a number of other economic impact studies covering a range of operations and events to provide a perspective of the size of the casino industry. In terms of an economic impact indicator comparison, URS utilised the value added or contribution to GDP to provide a perspective of the size and contribution of the casino industry. URS obtained economic impacts studies on the effects of Sydney Airport, 2000 Olympic Games, the construction of the Adelaide to Darwin railway and the economic contribution of the Sydney Port on the economy. 17 It should be noted that of all the measures of economic impact, the employment results are increasingly complicated by the growing flexibility in employment arrangements. However, where possible URS was cautious in estimating flow on effects and it should be highlight that it includes full and part time jobs. 5-3
Economic Impact Analysis SECTION 5 Figure 5.1 GDP Economic Impact Comparisons 16 14 12 10 The casino industry s economic impact was similar to that of the 2000 Olympics. GDP $ Billions 8 6 4 2 0 Sydney Airport Sydney Olympics Casino Industry Adelaide to Darwin Railway Sydney Port Botany Source: various economic impact studies, ACA survey data and URS analysis Based on the comparison above, Sydney Airport contributes the largest amount of GDP at $13. 6 billion followed by the Sydney Olympics ($6.5 billion), the casino industry ($5.9 billion), Adelaide to Darwin Railway ($5.1 billion) and Sydney Port Botany contributing $1.4 billion per annum. The casino industry ranks third in terms of GDP based on the above comparison and is: around half the size of the impact of Sydney Airport; Australian casinos contribute four times the amount of GDP to the Australian economy than Sydney Port Botany. similar in size of the 2000 Olympics and equivalent to having an Olympic Games held in Australia each year; nearly $1 billion in GDP larger than the construction of the Adelaide to Darwin; and more than 4 times the size of Sydney Port Botany. It should also be noted that caution should be used in examining the comparisons as each of the economic impact results presented in the figure below may have used different economic impact approaches, models and some were calculated for different geographic regions and time frames. However, in URS view it provides an indicative guide as to the size of the casino industry. 5-4