David Penberthy: The numbers show why the Adelaide Oval hotel needs to go ahead

Building a hotel at the Adelaide Oval makes great — even necessary — business sense, writes David Penberthy. The problem is how the stadium management went about it.

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The construction of a private hotel at Adelaide Oval makes perfect business sense.

The politics around this project are now a shambles.

We have a lamentable situation where the taxpayer-funded jewel in the crown of our sporting and entertainment culture is regarded as a rogue entity by Adelaide City Council, many hoteliers and every political party outside of government.

Much of this is the predictable bleating of old Adelaide, living in fear as it does of anything different and new.

But as someone who supports the project, albeit with aesthetic grievances about bolting a hotel onto something that is, in its current unsullied form an architectural masterpiece, I think the blame for the political stand-off also rests with the Oval’s management.

It is worth looking at the business case for the project, because it’s being lost in the noise.

There is a widely held view that the Oval is a massive cash cow. It most certainly is that. The problem is that everyone wants to milk it.

Almost all of the millions that wash through its doors in the form of tickets, memberships and merchandise end up in the hands of someone else — our two AFL clubs, Cricket Australia, the AFL, SAGA and the SANFL. It is through match day catering, concerts, weddings and conferences that the Stadium Management Authority can recoup any dough for itself. Even then it has to give most of it away.

Its overheads are massive, and increasing. Its power bill went from $1.5 million in 2016 to $2.5 million in 2017.

It is a good corporate citizen and pays plenty of tax. Its casual wages bill for its 1375 staff rose 3.5 per cent last year, fuelling a payroll tax contribution that has risen from $898,000 in 2014 to almost $1.3 million last year.

In that same period, its ESL bill went from $103,00 to $367,000. It is alone as an entity in having to pay into a legislatively required sinking fund, and has contributed some $8.3 million to date. It pays $1 million a year in rent to the State Government.

While its costs continue to increase, the projections are that its revenue streams will only continue to decline.

An artist’s impression of the proposed hotel’s interior. Picture: Supplied

This is because its chief source of revenue is AFL match-day crowds, and with the exception of 2016, the novelty of our “new” Oval is wearing off. In year one, 2015, AFL games attracted an average crowd of 46,242 for an annual attendance of 1,017,321. With the exception of 2016, numbers have fallen every year, hitting an all-time low in 2018 of 42,795 a game and 941,488 for the season.

If you have a mind for business, these figures tell you that you’re only a few years away from having no business at all.

This is the key reason the Stadium Management Authority wants to build a hotel, to diversify its revenue stream so it can maintain services and keep prices down (or at least at their same irritatingly high level).

With a business idea this sensible, it’s no surprise Adelaide City Council is against it.

This is the same entity whose recent business achievements include a $32 million patch of lawn at the old Le Cornu site.

Audaciously, having been so hostile to the Oval redevelopment that they were deliberately excluded from the process, the council is now posturing as the Oval’s best friend, rallying to save the very thing they didn’t want fixed.

Confirming their lack of business acumen, the council went into apoplexy this week upon “discovering” the wholly open secret that the Oval generates income from hosting parties and conferences, in the exact same way that Footy Park used to, too.

Having said all that, the SMA’s problems do not go to the logic of its business case. The SMA has given plenty of ammo to those who hate development by appearing to act imperiously in pursuing this plan.

A project this big and contentious was always going to require a campaign to win over hearts and minds. It has instead felt like a fait accompli, something for which the SMA and the Marshall Government share responsibility.

Adelaide Oval Hotel plans and designs approved by the State Commission Assessment Panel. Picture: SCAP

If you want to win hearts and minds, you don’t do it by having hushed conversations in the North Tce corridors about something they called “Project X”.

You don’t do it by announcing the hotel is a done deal and firing off jpegs of artist’s impressions to the relevant media outlets.

You announce that it’s your intention to build a hotel, candidly identifying the looming pressures to your business model, as outlined above.

You make the case in the first instance — with the help of the Government — as to why your Crown Land arrangements mean you will be unable to secure a traditional bank loan, but politely hope to rely on a state loan that will benefit the taxpayer through interest.

You bring in the pubs and hotels and restaurants to share the quantifiable, genuine benefits the Oval brings as an attracter of local and interstate expenditure across our town.

You can only win these arguments if you make them first.

Instead, every argument the SMA has put forward has sounded like a rearguard measure to save a project that was presented as a foregone conclusion.

As things now stand, a loose and potentially lethal coalition has formed against the project.

It comprises hoteliers understandably offended by the perceived absence of a level playing field, an Opposition that is gunning for the project it seems out of a bloody-minded dislike of SMA deputy chair, the Liberal John Olsen, and crusty old Adelaide, epitomised by the oppose-everything council.

In the same way the council is devoid of business acumen, the SMA board has in this case been cursed by it.

The SMA is dominated by highly successful businessmen who are used to having an idea and seeing it through.

The SMA isn’t a business in the true sense of the word. It’s getting mugged by the crude and dirty realities of politics.