Parsing the pokie cycle

It’s monthly EGM (pokie) stats time again in Queensland. In September the Cairns SA4 region continued to outperform the state in losing money. I will leave the internal local data for now and look for broadly at Queensland regions.

This is growth in EGM win/loss for the September quarter over the last two years:

SA4                              1 yr %              2 yr %
Central Qld                  7.6%               4.4%
Cairns                           7.2%                8.2%
Mackay                         5.9%              18.7%
The Bush                      4.4%                7.6%
Outback                        4.1%              12.8%
Townsville                   3.9%                6.1%
Queensland                 3.0%                5.9%
Greater Brisbane        2.8%                5.6%
Sunshine Coast           2.8%                4.6%
SEQ                                2.3%                5.1%
Wide Bay                     1.8%                 3.5%
Downs Maranoa         1.7%               10.8%
Gold Coast                    0.7%                3.6%
Toowoomba                -0.7%               1.1%

SEQ = Greater BNE + Gold Coast + Sunshine Coast; The Bush = Queensland – SEQ

Maybe graph that for context. September quarter 2018 growth over the previous 2017 year:

Regiinal Pokies

Yes, everything above the Queensland average is to the north. This also applies to Outback (including Cape York) and my derivation of The Bush which are both weighted to the north in population.

There are lots of factors influencing these numbers at various levels however it’s difficult not to discern a predominant cyclical economic component. Mackay and Central Queensland in particular are both recovering from previous falls. The data posted by OLGR is only for the past three years.

Note: Mackay growth is also coincident with declines in both venues and operational EGM’s over the period. These numbers have increased in Cairns over the same period.

Note2: This is not intended as positive comment on pokies. This can be both a positive indicator of discretionary spending and at the same time an economic and social negative. These are not contradictory.

Previous Posts:

Kachink Kaboom;

Pokies hold down Reef Casino

Douglas pokie boom

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Just saying ………

Bill Cummings presented his annual review of the region’s economy to the Cairns Chamber of Commerce on 24th July 2018:

Growth of the region’s tourism sector with earnings now over $3bn was strongly checked, 2008 to 2014, by the GFC and extremely high Australian dollar causing a retreat of over 20%. But this has been followed by a strong recovery back to record levels following the drop in the dollar. However, there is evidence that the strong upward movement has tended to slow over the past 12 months.

Let me warn everyone however, not to read too much into short term movements in the International Visitor Survey and the National Visitor Survey.
They are based on sample surveys and at regional level, statistical variance can lead to them not accurately reflecting short-term movements.

Airport passengers that account for the bulk of visitors can be more reliable. Over the year, international terminal traffic is up; domestic terminal traffic growth has slowed.

NVS comparison

 

The problem I have is that there are always more questions than answers ……

 

Dog’s breakfast gets down to business

Visitor survey data from Tourism Research Australia is a dog’s breakfast. That is the most apt description I can think of following a series of delays and revisions over recent years and data resources scattered incompletely in various locations.

I don’t know what happened to the old DestinationQ database which was an excellent resource to download and analyse data. TRA don’t post the full regional data from the survey in their excel file and you have to go to Tourism & Events Qld where partial regional data and commentary from the NVS is posted in the Domestic Tourism Snapshot

NVS commentary

Pete has also posted comments on these exceptional numbers on the NVS at Conus: TNQ once again with stunning domestic tourism results.

Is a 17.6% year on year growth in domestic overnight holidaymakers just too good to be true? Is it even feasible in a year where domestic passenger growth through Cairns Airport declined to be barely positive over the year. No, these are not the same data. Domestic air statistics includes international and local Cairns passengers. Domestic overnight visitors would include arrivals by road and cruise. I still wouldn’t expect such significant divergence.

I can think of reasons which could go some way to explain this trend but doubt it would be sufficient without issues related to the National Visitor Survey: Methodology

If I am reading the table right the two million overnight domestic visitors to TNQ translates to +/- 7% within a 95% confidence interval. A simple approach could be to just draw in a trend channel between the peaks and troughs over time. It will be somewhere in there.

Meanwhile Kate Jones has claimed full credit for her tourism events strategy: Aussies flocking to Queensland according to new data

There is really nothing exceptional in the Queensland holiday numbers which are broadly consistent with national averages. Table 11 from TRA is interesting which appears to be quarterly rather than annual. The growth story here is business overnight travel in Queensland and WA. Queensland up 19.2% on the previous June quarter in 2017 for overnight visitors and an astounding 59.9% on visitor nights. Maybe the corporate boxes at events were very full? On those numbers Kate should probably be holding aloft a lump of coal rather than her events calendar.

lump coal

Scott Morrison offers Kate Jones his lump of coal

 

 

Airports & Growth

Cairns Airport passenger numbers for August have been posted just a few weeks after the delayed July data. Nothing much changes with domestic growth for the month at 1.8% and international at 3.4%. August is typically the peak seasonal month for international while it is July for domestic. That leaves annual growth gliding along at a lower slower growth trajectory.

Airport August 1

BITRE now have comparison data for the top 20 airports year to June. These are reported on a slightly different basis to the numbers directly from the Airport and are presented here ex-Proserpine where the aftermath of Cyclone Debbie last year continues to mess with the Whitsundays.
BITRE June 1
Just as well Gold Coast had the benefit of the Commonwealth Games during the year to boost their traffic numbers eh.

Meanwhile it’s not all fun and games down in Canberra where the Productivity Commission is in the midst of an inquiry into the Economic Regulation of Airports

There are more than 50 submissions posted so far, including from North Queensland Airports (Cairns and Mackay), which I haven’t had time yet to peruse. The Qantas submission has attracted some media reports for taking a swing at the market power of the airports.

Something to keep on the radar given the significance of the airport to Cairns. Privatisation of the airport by the Bligh Government in 2008 was specifically linked to funding the Cairns Hospital expansion.

 

Kachink Kaboom

Hasn’t it been a wonderful spell of fine weather the past few months in our FNQ paradise. I just assume that most are like me and try to make the most by getting outside. But no. Apparently what people do more is go and play pokies (Electronic Gaming Machines) in hotels and clubs.

Pokies August

Yes, pokie player losses in Cairns SA4 region surged again in August up 10.3% on last year (ex Reef Casino). This was more than double the also buoyant 4.6% growth for Queensland for the month and shames another lamentable performance by Townsville with just 2.3% growth in player losses.

Douglas again boosted the numbers up 26.5% on expanded EGM numbers from 169 to 178 pokies over the year. Cairns City SA2 also outperformed the mean. Cairns Regional Council area, where most of the people and pokies are, was up 8.8% on last August. August surpassed July in Cairns for the first time on available data.

Growth in EGM pokie player losses currently seems to be outperforming any other statistic I am aware of for the region?

Low altitude Airport

Delayed Cairns Airport numbers for July now posted absent any commentary. Apparently the July numbers were delayed as the format is under review.

The trend decline continues:

Airport July 3
Airport July 2

Airport July 1

Annual growth in domestic now at just 1.2% (ex transits etc) is the lowest since the 2010 recovery from post GFC declines. Constraints in higher end accommodation capacity may be having some marginal effect although doubt that would be significant to the trend. Something to watch as that capacity starts to return later in the year.

Source: Cairns Airport

 

A Mixed Experience

I started a watch on ASX listed Experience Co (EXP) last year after their acquisition of a string of Cairns based tourism businesses: Raging Thunder, Reef Magic, Big Cat, GBR Helicopters, Tropical Journeys. EXP had previously been Skydive the Beach (SKB) with a business model based on aggregating operations in that sector.

My most recent post followed a profit guidance warning in April after an intense wet season period severely impacted the Cairns business. Experience Co announced FY 2018 results today. This was not well received by investors with EXP down about 5% on robust volume. This appears to be mostly related to performance of Skydive.
Experience 6

Experience actually beat the downgraded April guidance following the wet season. However as we can see here there is a problem in Australian skydiving. Within that it was domestic rather than international visitors. This has been attributed partly to a couple of tandem skydiving fatalities in recent years which includes the Mission Beach fatality last October. A warning on the risks inherent in this kind of business. My guess is also that this would be a business with low repeat customers.

Revenue from other adventure experiences is now close to 50% of the group and this is overwhelmingly the Cairns business. The growth number above is nonsense for comparison as it relates only to the company with acquisitions during the comparison period rather than the underlying business. They do then provide some comparisons for the Cairns business:

Expierience 2Expierience 3Where the businesses were acquired during the course of the financial year the comparison provided is only for the relevant period of EXP control:

Expierience 4Expierience 5

Anyway, investors didn’t like it and are now down more than 50% since the start of the year:

Expierience 1

In initial posts on Experience I did specifically warn that the reason for following and posting on Experience was a relatively transparent insight into this important sector of Cairns tourism and not investment advice. I also specifically warned on understanding dilution in an acquisitive company. While revenue and profit are up for the year, Earnings Per Share (EPS) is down significantly on issued shares and capital to fund acquisitions.

Previous Posts: Experience washed away in wet season; Experience Results 1H2018; An eye on Experience; Experience on Watch

Pokies hold down Reef Casino

Reef Casino released half year results last week. The result was in line with previous guidance at the AGM and while a recovery from last years poor first half was not an outstanding result in historical context: Corporate Coffee Gossip

Detailed breakdown commentary provides a some items of interest:

Casino 1

There is also subsequent commentary in this report that hotel room performance has been boosted by currently reduced inventory (GA Group ex Tradewinds). The weak performance of the EGM (pokie) sector contrasts with positive growth in recent years at hotel and club venues in Cairns. Growth since 2015 which was the previous peak at the casino compared to hotel and club venues in the Cairns Regional Council area and the immediate Cairns City SA2:

                                   Casino          Council LGA       City SA2
June Half 2016         -4.2%                 8.7%                  24.0%
June Half 2017         -6.5%                 1.9%                   -1.0%
June Half 2018         -1.1%                 6.9%                    7.2%

The casino numbers derive from commentary in their reports on (gross) revenue which I’m assuming is comparable to the OLG data for metred win by hotels and clubs. A point to note is that operating EGM numbers in the City SA2 have actually declined over this period but have bumped up again in recent months. There have been more than 100 hotel and club EGM’s added in the CRC area since 2015.

To place that now multi year decline in graphical representation:

Casino 2

Meanwhile down in Canberra our old friends at Aquis have turned in another loss at the only casino in Oz where EGM’s are excluded. Revenue was down 3.6% after now a full half comparable trading post a refurbishment despite impressive tourism numbers for the national capital. Progress on a proposed $350 million casino resort development which would include pokies has stalled in negotiations with the ACT Government. Now who would ever have thought that might happen.

All worth keeping in mind with proposals to include a casino in the planned global tourism hub. Reef Casino have expressed interest in that development and have also in this latest report  indicated that they remain in confidential discussions.

Population and Migration

Migration seems to be a current controversy. Nick Behrens has a recent post questioning the low Queensland share of overseas migration Overseas Migrants to Queensland: Where the bloody hell are you?

The most recent data from ABS: 3218.0 – Regional Population Growth, Australia, 2016-17

This provides ABS estimates of net overseas migration by SA2. I have no idea how good this data is at SA2 level but let’s aggregate it to SA4 for Queensland.

Migration 2

Well it looks like overseas migrants like the Gold Coast with the Surfers Paradise SA2 a standout within that. We should also look at this in terms of population for each area:

Migration 1

There are three themes which appear in these ABS overseas migration numbers: 1) Inner city 2) Education 3) Agricultural labour. The position of Cairns SA4 above its weight straddles these three sectors. These are not all apparent so lets look at SA2 level for Cairns SA4.

Migration 4

Beyond the City the JCU location at Smithfield stands out. This is replicated across Queensland and you can pretty much pick out university location from browsing the data. Possibly some surprises here in agricultural locations such as Mareeba on the scale but this is also replicated in many similar Queensland locations with more intensive agricultural labour requirements.

On a % of SA2 population basis Port Douglas moves higher:

Migration 3

I have recently posted on data around Cairns City SA2: ATO income data and Cairns City

Internal migration numbers for Cairns SA4 in 2016 – 2017 were negative. Net overseas migration is a distinguishing factor which separates Cairns from other regions outside SEQ and kept population growth in Cairns for that year above other regions outside SEQ.