Operator News
New Zealand – SkyCity Adelaide considering its options as court rules loyalty program points must be included as gaming revenue
By Phil - 26 February 2024
The South Australian Court of Appeal has delivered its judgment on the Adelaide Casino Duty Agreement and has determined that loyalty points must be converted into gaming machine revenue for the purpose of calculating casino duty at the SkyCity Adelaide casino.
The matter is a longstanding contractual dispute concerning the interpretation of the Casino Duty Agreement. Given the complexity of the issues involved, both parties agreed to seek declaratory relief from the South Australian Courts as to the proper construction of the Casino Duty Agreement to determine the correct interpretation on both issues.
The Court of Appeal has ruled in favour of the Treasurer of South Australia’s interpretation of the Casino Duty Agreement, finding that credits on gaming machines arising from the conversion of loyalty points, when played by customers, are to be included in gaming revenue for the purpose of calculating casino duty at the SkyCity Adelaide casino, and that loyalty points earned by customers for gaming machine play may not be deducted from gaming revenue. Accordingly, it is estimated based on casino duty returns filed up to January 2024 that SkyCity Adelaide is obliged to pay additional casino duty of around A$73m in respect of complimentary bets arising from the use of loyalty points and deductions for loyalty points made up to January 2024.
The Court of Appeal ruled in favour of SkyCity’s position on the interpretation of the interest clause in the Casino Duty Agreement. This leaves it open for SkyCity Adelaide to argue that the interest clause is unenforceable as a penalty. As a result, the question of the applicable interest rate for outstanding duty, and whether the contractual interest provision is enforceable, remains to be determined by a single Judge of the Supreme Court at a later date. If the Supreme Court’s decision is unfavourable to SkyCity Adelaide in this regard, SkyCity Adelaide may be obliged to pay penalty interest on the additional casino duty, which could be up to around A$20m.
SkyCity Adelaide is currently considering its position in relation to the Court of Appeal’s judgment and the impact on the current structure of its customer loyalty programme.
It is expected that the impact of the Court of Appeal’s ruling on SkyCity’s underlying Group EBITDA in FY24 will be around A$2m with the balance of the additional casino duty payable for previous periods to be provided for as a one-off cost. Note that the full amount of the additional casino duty will impact the reported Group EBITDA in FY24.
Despite the imposition of these additional costs, SkyCity’s underlying FY24 Group EBITDA is still expected to be between NZ$290m and NZ$370m.
