The Victoria Racing Club insists it is on track to clear more than $70 million in debt as it begins to focus on a 20-year master plan that could involve developing seven hectares of freehold land for residential development.
VRC chairman Neil Wilson told this masthead that the club would return to profitability by 2028 on the back of a lucrative new media deal, a return to bumper Melbourne Cup week crowds and new sponsorship agreements.
Victoria Racing Club CEO Kylie Rogers and chairman Neil Wilson.Credit: Victoria Racing Club
In a wide-ranging interview, Wilson blamed a lingering COVID-19 hangover for the club’s four years of stinging losses, discussed restructuring under new CEO Kylie Rogers, explained why top-shelf Grange was served at a Melbourne Cup week function and revealed why luxury car brand Lexus supplied him with a free car.
Wilson also hosed down suggestions the club that hosts the Melbourne Cup needed to be bailed out of financial trouble and dismissed speculation that the VRC had borrowed $10 million from Racing Victoria to help pay staff wages.
As the club prepares for its autumn carnival, including the group 1 All-Star Mile, group 1 Newmarket Handicap and group 1 Australia Cup, Wilson sat down to answer 12 areas of concern among the VRC’s 34,000 members.
How did the VRC lose $70 million across the past four financial years?
Wilson said the club had only now emerged from the tail of a COVID-19 hangover.
He said the VRC took on a $45 million debt to build its new $130 million Club Stand, opened in October 2018 – the same year they announced a $5 million profit.
“Entering into COVID, we were well on our way for continued profitability, reducing debt, and then ‘bang’, we were having to manage a very serious cost profile, with no carnival,” Wilson said.
He said that while racing and wagering continued during the pandemic, the VRC lost 90 per cent of its income stream. Memberships were frozen and crowds lost.
VRC chairman Neil Wilson gets the use of a Lexus in his role with the racing club.Credit: Getty Images
“But it wasn’t like, ‘OK, now COVID is over, we revert back to everything being OK’,” he said.
Wilson said the club did extended deals with sponsors, partners and members to help them transition through that “tricky” period, and those deals had only now “washed through”.
Why didn’t the club slash costs to improve the bottom line?
“People sometimes are critical, saying, well, you should have just ‘cut, cut, cut’, but it’s not as easy as that,” Wilson said.
He said the VRC continued to invest in its platform – assets such as the racetrack, the grandstands, fences, grounds, car park areas and gardens – to ensure it had the “same quality engagement” to offer sponsors and members.
“That was a big decision … ‘what if we actually destroy this platform by cutting it completely?’. It’s going to be very hard to rebuild,” Wilson said.
“When you let the roses, and this is a very simple example, 70,000 roses not cared for, will have to be replaced.
“We could have carved a lot of money out, but we would have been rebuilding it now.”
But what about Cup week entertainment (the carnival costs the club $65 million)?
“Look, it’s something that we look at each year, and it’s a real balance,” Wilson said.
“But if you’re going to do it – if you’re going to entertain international guests and international media people and international owners, trainers – if you’re going to do it, you want to do it well.
“So that the experience is something that they go back and tell people that they had a wonderful experience. That’s the feedback we’ve consistently got.”
Wilson said the VRC viewed Cup week as an “experience like no other” and it had a flow-on economic benefit for the state.
“Are there more economic ways to do that? I think so, and we’ll continue to look at those,” he said.
“[But] it’s not just a party, and there’s no result. There’s a result out of this, and we’re very conscious of the result.”
Isn’t serving guests Grange at a Cup week function exorbitant?
Grange was served to Cup Week guests at a special function.Credit: George Fetting
“I understand the optics of that,” Wilson said.
“That’s not a personal thing. In fact, I don’t drink red wine very often. It’s not something for me, but I understand that’s not the point, the point is that it happened under my watch.
“That was Penfolds’ decision to actually elevate the experience as a partner of the club, and rightly or wrongly, that was what they wanted to do.
“We didn’t say to them, ‘Can you serve Grange?’ They said, ‘we want to do this’ as a symbol of the quality of the relationship and their support. Because it’s a brand and it’s a product that people respect as quality.”
Wilson said Penfolds had supplied the top-shelf wine as part of a sponsorship deal.
Why do you get a free Lexus courtesy of the club’s major sponsor?
Wilson said the luxury car brand insisted that the chairman and VRC executives drove a Lexus as part of their partnership – Lexus sponsors the Melbourne Cup.
He personally pays more than $10,000 a year in Fringe Benefits Tax (FBT) in relation to the vehicle.
The Lexus deal is at no cost to the VRC.
So, what levers does the club have to pull to return to profitability?
“We’ve got a six-year deal we’ve done with Tabcorp and Nine (owner of this masthead) which is supporting that position significantly,” Wilson said.
While he would not disclose the media deal figures, Wilson said it was “a material uplift from what we have done previously”.
The 2024 Melbourne Cup Carnival attracted the biggest crowd since 2018.Credit: Getty Images
Wilson said the club was on terms with creditors and had renewed sponsorships at “better levels” post-COVID, as well as attracting new sponsorships and partners to improve the club’s bottom line.
The VRC was also buoyed by a bumper 2024 spring carnival in which crowds were up eight per cent.
The other significant change has been restructuring under new CEO Rogers – 40 staff were cut in December, but the club has created 13 new roles “more aligned to moving forward as a business”.
Does the club have land to sell to offset any financial stress?
Wilson said the VRC had seven hectares of freehold land at Flemington, which is valued at $70 million and underwrites its ANZ loan.
He said the future of the land was all part of the club’s master plan, which was yet to be signed off by the board or made public.
“We’re looking at the Flemington precinct (127 hectares) and we’re saying, ‘what will that look like in 2040-2050?’,” he said.
“We’re looking at it through a lens of working with our partners and delivering assets that have a commercial return.
Gillon McLachlan talks to trainer James Cummings in the lead-up to the 2024 Melbourne Cup.Credit: Eddie Jim
“So this will be the future of the club, where there’ll be residential development there, there’ll be mixed-use development.
“This plan is having this whole precinct activated 365 days a year.”
Is the VRC confident new Tabcorp CEO Gillon McLachlan will honour the media deal?
“I think you’d ask him about that,” Wilson said.
“But what I can say is that post the 2024 carnival, the feedback from all stakeholders, including Tabcorp, has been tremendous.
“And I think we’ve established a platform going forward that will only get better. I don’t have any concerns in that regard.”
Is the club under pressure to pay off its ANZ loan – now at $57.5 million?
“The debt is not at the profile that is concerning at all,” WIlson said.
“I mean, the ANZ are completely supportive of our strategy.”
The chairman said the VRC had decided to manage investment in the club, alongside their debt.
He said the return on these investments – improving facilities, expanding year-round events, engaging with members and the public – would “significantly” outweigh the cost of the debt.
Why did the club borrow $10 million from Racing Victoria to help pay its way?
“That was directly related to the Club Stand,” Wilson said. “Maybe we need to be clearer about that.
“It was completely before COVID. We went to the government, we went to Racing Victoria, and we said, ‘we are building this asset that you’re all going to benefit from … because we are going to have more people on course, more people wagering, and you’re going to benefit’.
Victoria Racing Club chairman Neil Wilson in front of the new Club Stand.Credit: Wayne Taylor
“They support a lot of different industry assets at different racecourses – country and other metros – and we thought, ‘we’ll line up as well’.
“Sometimes they actually don’t make those loans. They actually allocate it as support. But, we took it as a loan … and we’re paying it back by 2028.”
So why did you close the new stand during January?
“When I talk about the cost structure of the business, that’s not just people, it’s actually about how our assets are used,” Wilson said.
He said the New Year’s Day meeting cost the club a lot of money because it was a public holiday.
“So we just looked at, ‘What are our options here? How do we reduce the cost profile?’” he said.
“The AFL do it, other stadiums do it. They don’t open everything because they don’t have to accommodate everyone (like they do on big event days).”
He said the Club Stand would be open for the rest of the calendar year.
Is ABBA Voyage part of the year-round activation?
“It’s not something we can talk about,” WIlson said. “They’re not really public that it’s even a Flemington project to be honest, but I think there’s enough talk in the market that people are trying to get ABBA to Melbourne. And we’ve been talked about as one of the sites.
“I can only comment that that’s something that’s confidential, and it’s not over. Whether we’re in the mix or not, time will tell.”
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