In Anti Liquor & Gaming by Clyde Mooney

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Woolworths-backed ALH is facing fresh allegations out of an investigation on many of its NSW venues by Liquor & Gaming, as its ASX-listed landlord faces a slump in half-yearly profits.

The NSW regulator has been investigating over 50 pubs operated by Australian Leisure & Hospitality (ALH) for more than a year, and ahead of any findings, told the ABC it is digging deep into the group’s practices in gaming rooms – particularly supplying gaming patrons with free drinks in an attempt to get them to stay and play longer.

L&G says it has issued notices to “obtain a significant volume of information and records, and formally interviewed current and former ALH staff and patrons”.

Testimony includes one whistleblower, former ALH gaming room attendant Emma Pearson, who speaks of the systemic practice of both providing preferred gaming room patrons with complimentary drinks, and deliberately putting these through the main bar till as promo’s, to avoid suspicion.

Pearson says the instructions were widespread amongst venues and known at all levels of management.

“We were told don’t put that through the gaming computer so if we get audited or get checked, it won’t come up on that till,” Ms Pearson said.

Anti-gaming independent politician Andrew Wilkie broke the news a year ago that whistle-blowers had told him how ALH staff tracked patron interests and commonly provided free drinks in the gaming rooms, which is illegal in Australian venues although commonplace in casinos around the world.  

“We are working closely with the NSW regulator,” offered a statement by spokesperson for the group, David Curry.

“ALH does not provide any complimentary service of alcohol in any gaming room Australia-wide.”

The accusations prompted the announcement of an internal investigation by ALH. This was completed in August, advised by MinterEllison and supported by Ernst and Young, reportedly encompassing interviews with venue and operations managers. 

The report conceded the existence of a ‘customer service program’ for around six months, commencing around June 2017. This involved varied practices at venues, including employees recording descriptive information about gaming customers.

A “small number” of venues in South Australia were involved, two in NSW, and a “limited number” in Queensland, where the accusations on free liquor originated.

“… at some venues in Queensland, there was increased provision of complimentary drinks in gaming areas and that in certain instances increased customer service efforts (including the provision of complimentary drinks) were directed to high-value customers to encourage further gaming activity.

“These initiatives have now ceased.”

The internal investigation found no evidence of similar conduct in any other state or territory.

ALH operates around 330 pubs, occupying every Australian state.

Its biggest landlord, holding title on 79 of its venues, is ALE Property Group (ASX: LEP), which was looking to a major 10-year rental review on the portfolio last November as part of lease terms.

Thirty-four properties have negotiated a rental increase to come into effect FY20, averaging a 4.26 per cent uplift for ALE. The remaining properties will be finalised next financial year, and could see rents rise or fall according to valuations.

Releasing half-yearly figures this week, ALE reported after-tax profits down over 80 per cent, to $5.58 million for the six months to 31 December.

The company pointed to higher land taxes and the costs behind the one-off rent reviews, saying that values, rents and capitalisation rates were largely ­unchanged from the end of FY18.

ALE shares are up one per cent since the announcement, closing today at $4.80.