Pubs have only a quarter of pokies in NSW. But they pocket almost half the profits

Pubs are pocketing a rising proportion of the state’s gambling profits and poker machines are being concentrated at a smaller number of venues as large hotel groups shape their business models around gaming.

The latest quarterly data released by NSW Liquor and Gaming shows that pubs reaped 45 per cent of the total gaming revenue in NSW, despite owning a quarter of the poker machines. Most machines are owned by registered clubs.

The Crossroads Hotel in Casula, which was at the centre of a COVID outbreak in 2020, recorded the second-highest gambling revenue in the third quarter of 2023.Credit: Brook Mitchell

The most profitable hotel by gaming revenue was the Markets Hotel in Homebush, followed by the Crossroads Hotel in Casula and the Wentworth Hotel in Homebush West.

Liquor and Gaming does not break down the gambling revenue by venue. The total amount lost by punters on poker machines in hotels hit $946 million for the 92 days to September 30, 2023, which was a slight increase on the same period in 2022.

But the five-year trend shows a marked increase in revenue among pubs. A Wesley Mission analysis of government figures indicates that the proportion of gamblers’ losses in pubs rose from 40 per cent in 2019 to 43.36 per cent in the first three quarters of 2023.

Wesley Mission chief executive and gambling reform advocate Stu Cameron said a small cohort of pubs was exploiting legislative loopholes such as “hardship provisions” that allowed them to extend their trading hours. The top 22 per cent of hotels bring in 62 per cent of the sector’s gambling revenue.

Gaming rooms are generally required to be shut down between 4am and 10am every day, but operators can apply to have this period reduced to three hours if they can demonstrate hardship.

“It is this zealous pursuit of poker machine profit, particularly by a small number of hotel operators, that has helped fuel the state’s growing levels of gambling harm and a worsening public health crisis,” Cameron said.

“They need to be held to account. Their business models make them more akin to mini casinos than a local pub.”

The Markets Hotel and the Wentworth Hotel are situated close to the Sydney Markets in Flemington which trades largely in cash. The Crossroads Hotel, also a consistently high gambling earner, was bought for $160 million in 2022.

Hotels are permitted to operate a maximum of 30 machines, unlike clubs that can operate an unlimited number and include RSLs with more than 700 pokies.

Industry observers say this means that the pokies in pubs are harder working, while many machines in the clubs sit idle for long periods, adding to the allure of choice.

Gaming Consultants International managing director Neil Spencer said pubs had an advantage by being situated in wealthier parts of Sydney, while clubs predominantly operated in the outer suburbs and regions. The averages for the club sector were also distorted by a small number of clubs with a large number of machines. Most clubs had very few or zero machines.

“A club can afford to have many more machines than it needs, so when you walk in you will probably find a machine, whereas in pubs, the utilisation rate is much higher and the turnover of customers is much higher as well,” Spencer said.

Savvy hoteliers are also buying several pubs in the same towns and then consolidating the poker machines at venues that have the longest trading hours. Publican Jim Knox bought three hotels in Griffith and a bevy of hotels in the New England region between 2019 and 2022 (including all five hotels in Moree) and then attempted to increase his gaming machine entitlements at some venues while transferring entitlements to them from other pubs within the portfolio.

The Independent Liquor and Gaming Authority only consented under strict conditions, to which Knox objected, and the matter resulted in legal action. The NSW Court of Appeal confirmed in September that the authority had the discretion to apply harm minimisation measures.

Knox declined to comment.

Similarly, Wentworth Hotel obtained approval to extend trading hours in 2018, and subsequently sought to build a second pub in the car park with an additional 20 machines, but was knocked back by the authority. Gambling revenue is typically higher between the hours of midnight and 3am.

The hotel group that owns the Wentworth has separately been sanctioned for allowing customers there to withdraw cash on credit and for building a doorway between the gaming rooms of two neighbouring pubs in Surry Hills to create one giant gaming floor.

A former pub licensee who asked not to be named out of fear for his personal safety said gaming room staff were incentivised to maximise gambling revenue with bonuses of up to several hundred dollars for high turnover during their shifts.

They set up WhatsApp groups to advise regulars when machines were due to jackpot, illegally brought complimentary food and drinks to them at their machines and allowed them to transfer money to their personal banking accounts to use in the machines when they hit their ATM withdrawal limits. They also ignored the self-exclusion register for people who recognised they could not control their gambling impulses.

“They greet people, ‘Long time no see! How have you been?’” said the man, whose pub was one of the top gambling venues in Sydney’s CBD. “And they will bring out drinks and cigarettes.”

Some pubs also did lock-ins for people who wanted to keep gambling after closing time, he said.

In 2019, the regulator disciplined two North Coast pubs for giving gamblers free drinks and compiling personal information on them to encourage them to gamble for longer. Woolworths, the majority shareholder of the company that owned the pubs, later divested its gambling assets.

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