SkyCity’s planned Queenstown hotel on hold

SkyCity has dropped plans to build a luxury hotel in Queenstown, at least until its international business improves. And that in turn depends on an end to the Covid-19 coronavirus and Chinese nationals being allowed to travel again.

The company already has two casinos in Queenstown, one of which has a high rollers room. Restrictions on outbound travel from China have seen the company’s international business drop to NZ$4.6 billion (US$3 billion) for the six months ending December 31 down from $NZ7.7 billion in the previous year.

The company has now reduced its full year estimate for international business from NZ$14 billion to NZ$10 billion, which SkyCity says is a NZ$15 million reduction in EBITDA.

SkyCity bought land last year on the edge of Queenstown for NZ$16 million intending to build a five star hotel there targeted at Chinese gamblers on package tours, but Chief Executive Graeme Stephens told an analysts briefing on the company’s interim results released last week that these plans were now on hold.

The company has an additional problem which was proving difficult to solve. The New Zealand government has placed a freeze on the granting of new casino licenses, and the current law does not allow a license to be transferred from one property to another, even within the same town or within a company.

In the longer term SkyCity would like to close one or both of its existing properties as they are small, on leases, don’t offer the standard of facilities SkyCity would like to offer, and not able to be redeveloped. A new hotel with a casino licence would solve several problems in one.

But that option is blocked off unless the government were to agree to change the law to allow a license to be transferred. Prior to the October fire in the international convention center in Auckland and the coronavirus crisis, the company had held some discussions with the government, but was silent about any outcome.