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Will a casino be a boon or a bane for Barangaroo?

Casinos have the capacity to drive economic benefits - but must avoid becoming an enclave with little connection to the surrounding city. AAP

Barangaroo, on Sydney’s harbour, is no ordinary development.

It has been promised that the 22-hectares of former industrial land sitting on the western edge of the CBD will transform Sydney both culturally and economically.

In particular, the economic benefits of a second Sydney casino licence at Barangaroo have been much touted - but does this stack up?

In our third piece in our series, Deborah Edwards, Senior Research Fellow and Tony Griffin, Senior Lecturer, both in Events, Leisure, Sport and Tourism program at the UTS Business School, write that it would be a mistake to simply assume casinos automatically generate greater economic rewards.

There are some important considerations missing from the current debate on the proposed casino development at Barangaroo.

There are a number of potential benefits that could be derived from casinos, such as utility (for those gambling in moderation for entertainment), job creation, investment stimulation, tourism and economic development and additional revenues to the public sector.

However, these benefits are highly dependent on the way the development is carried out and the extent with which it connects with its surrounds. Unfortunately, this is where casinos have a poor reputation; the mantras of “build it and they will come” and “the economy will inevitably benefit” are far too simplistic.

Casinos can become self-contained enclaves. A casino tourist is often in a totally managed entertainment environment from which the tourist has no reason to leave. Unlike other tourists who explore the destination, visit its attractions, and engage in outdoor activities that bring them into contact with a variety of businesses within a destination. Because casinos are predominantly full-service complexes offering food and sustenance, retail, accommodation, cinemas and other services, local service businesses may receive little benefit from their presence.

Casinos have also been described as an island or an economy within an economy because job creation in the casino service sector can have minimal spill over to other areas. In other words the enclave economy is, cut off from the wider economy it sits within with limited benefits outside its own activities. In some circumstances, casinos may displace existing businesses and residences by driving up local real estate prices and rents.

Moreover, income generated by casinos can be dissipated through leakages via newly created jobs going offshore rather than to local people, because of the need to import skilled labour.

Studies have also found that urban markets can experience local substitution rather than export effects. (See more research here, here and here.)

That is the extent to which new business is attracted from outside the area or from other firms within the area.

Further research is required to confirm whether earnings in state and local government sectors are actually stimulated. For these reasons it is valid for communities to be concerned about the extent to which they will capture the benefits of casino development in increased local revenues. More generally, there needs to be a debate about the contribution that a second casino makes to the place that Barangaroo will become.

From its inception, Barangaroo has been characterised as a great opportunity for Sydney, the last piece of substantial harbourside land left in the city.

Its prime location on the harbour, the symbolic heart of the city, increases the stakes associated with getting its development right. All land uses permitted in this area need to be considered in terms of how they will integrate with others and contribute to the overall character of the place.

If the casino development is to be an enclave-like and exclusive space, dedicated to the entertainment of international high-rollers, then doubts must be raised about it’s connection at all. It could hardly be argued that Sydney’s existing casino, The Star, connects or contributes much to its surrounding areas of Pyrmont and west Darling Harbour. Can we expect any more in this regard from the new entrant?

Arguably, the main connection the casino and accompanying highrise hotel will have to their surrounds is in danger of being a superficial and unilateral one – the harbourside location providing a great outlook for hotel guests, but the development not providing much to harbourside location other than an enormous physical presence.

These comments do not represent an argument for or against casinos, but are a starting point for deeper reflection about the issues.

In making a decision like this, there are many factors which need to be considered to ensure that the outcome is of real benefit to the broader community, rather than just a small minority.

Read more in the series:

Part one: Barangaroo: the loss of trust?

Part two: Barangaroo: Politics, property and players - it’s business as usual

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