Star fails to attract predicted crowds

05 Feb 2015

It could take up to 75 years for the Melbourne Star Observation Wheel to turn a profit, if passenger numbers during its first year of operation are anything to go by.

In December the Herald Sun newspaper reported the wheel had carried “more than 300,000 passengers” since opening 12 months earlier.

Melbourne Star Management confirmed this number and its CEO Chris Kelly told Docklands News the company was “delighted” with the first year of operations.

But this was despite it falling short of the predicted 1.5 million passengers who were expected to ride the wheel annually.

In October 2008, former Southern Star chairman Fred Maybury predicted 40,000 people would ride the wheel every day, totally 1.5 million passengers per year.

At the launch of the Southern Star the premier of the day, John Brumby, said Victoria would benefit from 100 permanent and ongoing jobs in tourism.

Based on the costs of a standard $32 adult ticket, 300,000 passengers equates to $9.6 million income in the wheel’s first year of operation.

After deducting annual staff, operating and marketing costs, which are estimated to cost at least $7 million each year, this leaves behind a meagre $2.6 surplus.

If the wheel continues to attract passengers at the same rate as it did in its first year of operation, it will take around 76 years for Japanese owners Sanoyas Rides Corporation to see any profit from its estimated $200 million investment in the wheel.

Docklands News understands that Sanoyas contributed about $40 million to the original 2008-version of the wheel, spent $100 million rebuilding the structure under warranty and then bought the wheel from ING Real Estate Development for about $60 million in 2013.

The wheel continues to be managed by the Melbourne Star Management Group.

When asked if Sanoyas Rides Corporation and the management group were happy with the first year’s passenger figures CEO Chris Kelly said: “We are delighted with our first year of operations and how Melburnians and regional Victorians have so warmly embraced us.”

“Our numbers are steadily increasing and we are seeing a large repeat visitation, whilst the overwhelming reaction to the experience is extremely positive.”

When Docklands News asked how both parties could be happy considering the results were significantly less than anticipated passenger numbers and that it was estimated take at least 75 years for the wheel to return a profit, a Melbourne Star Management Group spokesperson said she could not comment.

“However, the figures used in your commentary are guesswork and significantly inaccurate,” the spokesperson said.

“As part of a significant, publicly listed company, Melbourne Star Observation Wheel does not comment on its financial performances,” the spokesperson said.

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