1. About HANZ

1.1 The Hospitality Association of New Zealand (HANZ) represents businesses in the hospitality industry. Membership is voluntary. Total membership exceeds 1,700 establishments.

1.2 Over 250 HANZ members operate TAB sub agencies for the TAB.

1.3 Of the 1.303 known hotel gaming sites, it is estimated that over 1,000 are Hospitality Association members, and the Association speaks on their behalf.

1.4 The Association was formed in 1902 and has an outstanding record of service and advocacy for, and on behalf of, its members since that time.

1.5 It is estimated that in the year 2000, HANZ member gaming sites raised $125m for the community.

1.6 It is estimated that HANZ members alone employ 2.500 full or part-time employees involved in gaming.

2.1 We have an interest in the Racing Bill because our members are in a similar business to the racing industry and some are service providers to the TAB. Our members, like racing industry participants, provide facilities for entertainment which along with socialising in a licensed premises includes gaming opportunities, through agency arrangements with the TAB and/or through gaming machines.

2.2 It is the view of The Hospitality Association that this Bill completely undermines the Government's 'Review of Gaming' that is currently under way. The Review of Gaming, we thought, was a 'first principles' comprehensive look at gaming in New Zealand in its totality. In a 'first principles' review, one should start with a clean slate and look at the best policy to regulate all aspects of gaming in New Zealand.

2.3 In our view this raises the question of why this Bill is proceeding before the conclusion or findings of the Gaming Review. The Bill deals with the racing industry in isolation to the rest of the gaming industry and it effectively locks the racing industry into the status quo of its current framework. Also the Bill does not appear to be based on any thorough policy analysis or rational basis that we can see, apart from the fact that presumably this is the way its always been and the way the racing industry wants it to continue to be.

2.4 The way the Bill is drafted, it effectively;

· locks in the racing industry's monopoly on racing

· gives the racing industry a monopoly on sports betting;

· gives the racing industry the ability to operate any betting system for the purpose of a game of chance, prize competition or lottery conducted by a society licensed under the Gaming and Lotteries Act 1977; and

· gives the racing industry the superior position of being able to channel all betting profits back into racing, vis-￠-vis the hospitality industry which can not do so.

2.6 This is a privileged position that no other gaming in New Zealand (apart from commercially operated Casino's enjoy) and frankly it is inequitable.

2.7 Racing clubs are able to operate gaming machines in TAB and other outlets in competition with hotels and pubs, but their profits go back into racing. Hotels and Pubs on the other hand, have to pass all proceeds from gaming machines (apart from costs) to charitable community causes and to the Government in taxes.

2.8 In the future it is conceivable that there will be a growing list of other gaming products that the racing industry moves to provide, particularly if the racing side of the business stays in decline. This will see them competing across the board with other gaming providers, but under their own set of special rules that locks in their privileged monopoly position and allows proceeds to be retained.

2.9 We believe the public of New Zealand deserves a higher standard of analysis and policy rigour to be brought to the process of reviewing gaming in New Zealand and that this 'first principles review' should include the racing industry.

3.1 What is needed is a consistent set of rules that apply to tax, distribution of proceeds and probity to be applied to all forms of gaming.

3.2 HANZ believes that the only way to fairly regulate gaming in New Zealand is through the establishment of a Gaming Commission, outlined below.

3.3 We believe that the policy framework for a workable regulatory environment for gaming in New Zealand must focus on the issues at a high level, developing a set of principles to which all gaming industry participants must adhere. Below the principles there should be enough flexibility to allow all forms of gaming to develop in line with commercial objectives (and social if that is what the Government and society want) while at the same time allowing for developing technology.

3.4 We envisage the creation of a Gaming Commission or Authority that would operate the licensing conditions for any form of gaming, in line with the principles set out in the legislation. It would be the role of the Commission to interpret the rules in a consistent way over time.

3.5 The Commission should treat all forms of gaming on a level playing field, and there should be consistent taxation treatment, licensing rules, monitoring and auditing across the whole sector. This will be a challenge for some gaming operators, so the legislation may need to use sunset clauses for a smooth transition to the new regime.

3.7 The Commission could be a judicial body, like the Liquor Licensing Authority. It should be non-political and non-partisan to any sector. Gaming operators would apply to the Commission to have a licence, and would have to meet the criteria set down in the legislation. As long as an operator met the criteria, they would be granted a licence for whatever form of gaming they were proposing.

3.8 Gaming operators should be free to choose, once they have met their tax and minimum charitable contribution (if there is one), whether they operate totally for community purposes, like Lotto, or whether they follow a commercial model, like a casino.

4. What is so different about the racing industry that it requires its own set of rules?

4.1 The rationale for regulation in the general policy statement in the Bill is that the Government maintains its involvement in racing to 'encourage industry performance and a sense of social responsibility'. There is nothing here that justifies a separate Act. A Gaming Commission, as outlined above, could oversee all of the functions, and moreover make sure the operation of the racing industry was consistent with the Government's overarching policy on gaming.

4.2 The establishment of a Gaming Commission could easily cover off the requirement for probity (because of the gaming aspect). The Bill also says the racing industry is significant in terms of employment, exports (bloodstock/breeding) and contributions to GDP.

4.3 The hospitality industry also makes significant contributions in terms of employment, and importantly underpins our biggest growing industry - tourism. In addition, the proceeds of non-casino gaming machines contribute around $150 million per year to charity and community funds and about the same again goes to the Government in taxes.

5. To Conclude

5.1 Times have changed and continue to change and legislation often falls behind the reality of the thing that is being regulated. Regulations can also struggle to cater for or anticipate future change.

5.2 The establishment of a Gaming Commission that operates under a broad set of principals would, in our view, be more accommodating of change, providing the direction being followed was consistent with the principals of gaming laid down in the legislation.

5.3 In creating a new Act for the racing industry that merges the Racing Industry Board with the Totaliser Agency Board, the aim is to simplify the governance and get policy direction to be more in tune with commercial realities. Apart from that though, the status quo has been largely preserved. The reality for the racing industry, which has been experiencing a decline in popularity on an ongoing basis, may be that the best thing that could happen to the industry would be to lose its protected status and monopoly on racing.

5.4 Competition on a level playing field may be just what the industry needs to revitalise itself, break out of old habits and ways of doing things and get innovative. New blood rather than the 'old boys network' and vested interests, which this Bill enshrines, may be just what the industry needs.

5.5 The hospitality industry has experienced first hand the negative effects of the TAB's monopoly on racing, with the majority of our members who have TAB agency's in their hotels being unhappy with the relationship. Both the attitude of the TAB and the level of remuneration were causing concern for the majority of respondents to a HANZ survey on the issue. Members of HANZ continue to provide TAB agency outlets in their hotels as a service to customers, not because they make adequate money out of the arrangement. The comment 'held to ransom' sums up the way members feel the relationship works at present.

5.6 This problem goes back to the monopoly that the TAB has on racing and sports betting. If a Gaming Commissioner could register bookies to take bets, then at least there would be some competition to the TAB.

5.7 If one of the TAB's main sources of retail outlets is not happy with the service or the arrangement, how well can the whole system be working? A mutually beneficial relationship would probably add immense value to the end product for the customer and consequently the racing industry. Currently, a publican earns more by selling drinks than by encouraging patrons to avail themselves of the TAB facilities on offer, so there are no incentives at all to promote the TAB's services.

5.8 It is our view that the racing industry needs a shake up and needs to be able to compete with all comers. They have always enjoyed a privileged protected monopoly on racing and sports betting, with the ability to reinvest their profits, yet this has not protected them from a decline in popularity. The racing industry should be treated like any other industry or entity that wants to provide gaming and entertainment to the population at large.

5.9 In our view, this Bill protects the status quo and is not going to assist the racing industry to stay relevant and successful in the new millennium. With this in mind, the racing industry may be forced over time to move further away from the traditional gaming associated with the sport and supplement earnings with more gaming machines and Casino type gaming activities. There would be nothing in this Bill to stop them doing that and they should therefore be regulated in the same way, under the same set of rules as the rest of the participants in the gaming industry.

5.10 It is our strong recommendation that this Bill be put on hold until the conclusion of the Gaming Review.

We welcome the opportunity to present this submission and would like the opportunity to be heard by the Select Committee.