Delayed Australian Open could cost tennis more than $100m, accounts reveal
Tennis Australia’s revenue surged this year, but it could be forced to spend its $80m reserves and borrow $40m to survive COVID-19
Tennis Australia is staring at a $100m financial blow this summer and could borrow tens of millions of dollars to pay for biosecurity measures that it hopes will ensure the Australian Open goes ahead.
The huge costs of housing hundreds of elite tennis players in January and February will also see the governing body take a big hit to its balance sheet, including potentially spending a large amount or even all of the $80m reserve it has built up over several years.
Tennis Australia will spend $40m covering the costs of biosecurity protocols and falling revenue for hosting a delayed Australian Open in early 2021, and borrow some or all of that sum as a result.
The revelations of the financial cost of hosting the Open in front of less spectators and a potential cut in television broadcast revenue comes after COVID-19 also sliced a substantial amount off the sport’s 2020 financial results, with tennis officials predicting the sport could take five years to recover from COVID.
Tennis Australia’s 2020 financial accounts, obtained by The Australian, showed the organisation’s surplus for the year to June 30 almost halving to $5.4m compared to a $10.7m profit in 2019.
The result, encompassing the 2020 Australian Open and the first season of the ATP Cup, came despite revenue surging to a record $455m as more broadcast, sponsorship and ticketing revenue flowed into the sport than ever before.
Tennis Australia’s accounts reveal the governing body to be in rude financial health compared to most other sports, with net assets of about $102 million that includes $80m in reserves.
But that amount could be spent on covering revenue shortfalls over the upcoming summer, along with a substantial line of credit Tennis Australia says it will take out.
“The Group will most likely introduce external funding in the form of a line of credit to cover the significant costs that have arisen as part of the COVID-19 response to meeting quarantine and biosecurity measures for AO2021,” Tennis Australia’s accounts say.
Tennis Australia chief executive Craig Tiley told The Australian the organisation had cut its cost base and that financial modelling suggests the pandemic will significantly impact the upcoming Australian Open “with the possibility of future downgrades in AO revenue.”
“We expect quarantine and biosecurity operations cost to keep growing substantially as we finalise arrangement, with the final cost likely to exceed $40 million. We also expect that we will use the majority of our reserves in maintaining funding to the sport and playing group.”
“As a result of these costs we are exploring options for a line of credit and/or a loan which will allow us to maintain cash flow at critical times and support us in the recovery from the impacts of the pandemic once access to Government subsidies have ended. We believe that recovery from the pandemic will take up to five years.”
The 2020 financial accounts indicate the $80m reserve currently sitting on its balance sheet would be needed to help get the sport through this summer and beyond, confirming Mr Tiley’s diagnosis.
“The designated amount of the reserve is currently $80 million and it is highly likely that there may be use of the reserves as the Group executes its recovery plans following the impacts of COVID-19 on the delivery of the 2021 major events,” a note in the account says.
The revelations of the financial impact of likely delaying the tournament until February and having to operate with reduced crowds and corporate support – and probably a drop in broadcast fees – come as talks drag on with the ATP and WTA and the Victorian government about strict quarantine requirements for international players arriving in Melbourne in January.
Mr Tiley has often said Tennis Australia was seeking insurance and building up its cash reserves in the seemingly unlikely event of the lucrative Grand Slam tournament even being cancelled.
Tennis Australia had taken out insurance last year, including pandemics, but the policy expired in June.
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