As CEO of Odd Culture Group, James Thorpe operates one of Sydney’s only multi-venue pub groups that does not operate gaming machines. He personally welcomes gaming reform, not only as a way to curb problem gambling, but because he also believes it will improve the level of pub offerings throughout Sydney.
In a Broadsheet opinion piece, Thorpe laid out his view that gaming machines in New South Wales have led to the diminished quality of the state’s pubs, with food, beverage and entertainment offers suffering as many operators shift their focus to gaming as a major profit centre. Thorpe admitted to Australian Hotelier that his views would likely “go down like a lead balloon” with many of his industry peers.
But with both NSW Liberal and Labor parties announcing gaming reform as part of the policies they’ll be taking to the election in March, it’s almost inevitable that gaming reform in some shape or form is on its way, and pub operators should now be preparing for a curtailing of their gaming revenue.
Thorpe suggests this forced rethink of pub business models could jolt the industry into more creative offerings.
“I think that creative destruction is exactly what we need. That’s what’s so exciting about this debate to me. Reform in this way is going to spur on a revolution in our pubs.
“For the first time in 30-40 years, operators are going to have to take seriously the notion of delivering good food and beverages no matter where they are. It’s going to be really interesting to see how the industry reshapes itself.”
Government support essential
While Thorpe welcomes gaming reform, he does believe the onus is on the state government to support pub operators throughout this transition period – particularly leaseholders.
With PMEs factored into the worth of a leasehold by landlords, Odd Culture Group has been able to negotiate cheaper leaseholds on occasion by suggesting the landlord lease out or sell the PMEs elsewhere, with a proportionate discount then applied to Odd Culture Group’s rental of the building. While it has worked for Thorpe, he admits that he’s been lucky with landlords and it’s not a common practice – hence the government needs to step in.
“It’s the government’s job to fix this problem. It’s not going to work if its purely market forces doing this. Gaming machines will not be banned anytime soon, what’s likely is that the regulation is going to throttle that revenue right down – which is going to affect their valuation.
“The issue here is that their valuation has been written into a lease that may have been negotiated 15 years ago at what they were worth at the time. If the government were to just ban the things, then they would be on the hook to provide a package to fix up everyone involved in the process, but that’s not what’s going to happen.
Thorpe used covid restrictions and government relief to illustrate his point.
“When your revenue was diminished by covid restrictions, the government’s view eventually became that they weren’t on the hook for any relief – but if you were closed due to a lockdown, then the government’s opinion was that they were on the hook to provide relief.”
“What’s going to happen if revenue is throttled down in the way we’ve been talking about? Cashless gaming with daily max limits is going to do that. Max bets, like what’s happening in Tasmania, will do that as well.
“We need to make sure that the lessees aren’t forgotten about in this process. These poor publicans who signed a lease 15 years ago in that kind of economic environment shouldn’t be on the hook to wear the full force of what will happen to their revenue.”
In the meantime, Thorpe is advocating for his peers to focus more on their food, beverage and entertainment offerings.