Council bosses today defended spending £40m to buy Blackpool’s tourism gems – as it was revealed the town hall is carrying a £3.2m deficit because its attractions are not yet making as much money as hoped.
The council will not start seeing a return on its investment until 2018 at the earliest, but bosses maintain the 2010 deal to buy The Tower, Winter Gardens, Golden Mile Centre and Madame Tussauds had been the right thing to do.
Alan Cavill, assistant chief executive at Blackpool Council, today said: “We always anticipated we would be in the red for a while but we do anticipate we will be breaking even in five years’ time.”
While Iain Hawkins, from Merlin Entertainments which operates The Tower and Madame Tussauds on behalf of the council, said: “I don’t think anyone would disagree that it was the right thing to do when you look at all the sparkle that is coming back to the town.”
The deal, signed off under the Tory administration, is bringing in £45m of additional revenue to Blackpool’s economy each year, and has created more than 200 jobs.
All four attractions are making a profit, but not at the levels originally anticipated largely due to the UK’s faltering economy.
The council has a profit-sharing agreement in place with operator Merlin Entertainments which prevents it from disclosing commercially sensitive information about revenue.
But the council’s Financial Performance Monitoring report says: “The portfolio has suffered from poorer trading conditions than originally expected.
“There are a number of facets to the variance and these include items such as vacant units in the Golden Mile complex.”
The main attraction within the Golden Mile complex is the Sea Life Centre.
The report shows a £3.2m cumulative deficit.
Blackpool Council director of finance Steve Thompson said: “All four trading centres are making a profit, it’s just they are not making the levels that were originally planned, in the main due to the added investment the council has made since the acquisition.
“The turning point at which the council should start to see a return on its investments is 2018.”
Mr Cavill said despite this, the purchase of the assets was a success.
The Winter Gardens, in particular, has gone from strength to strength with the arrival of Bill Kenwright productions, including Priscilla Queen of the Desert and Soul Sister this year and the highly anticipated productions Mamma Mia and Riverdance due to take to the stage in 2014. He added: “Finance is not the only measure.
“Because we received European Regional Development Funding, we must measure the economic impact and this shows the changes we have made are delivering an additional £45m of revenue a year into the economy.
“Before we took over the Winter Gardens, there were just more than 50 nights in the previous year when there was something on there, but this year we will have had more than 200 nights when events are on and that will go up to 250 next year. The acquisition has also led to more than 200 direct new jobs in the Winter Gardens, The Tower and Madame Tussauds.
“So yes, it is costing the council more money but in terms of regeneration, this is a success.”
Mr Hawkins, head of the Merlin cluster of attractions in Blackpool, added: “Turning the ship around is a slow process because millions of people don’t suddenly flock here overnight.
“It is about profile building and changing perceptions, and things like last week’s Coronation Street which was filmed in Blackpool are fantastic national publicity.”
Coun Peter Callow, who was council leader when the acquisition was made, said: “When we got the chance to buy these priceless assets, my view was this would save them for this and future generations.
“I had no doubts then and have no doubts now that was the right thing for Blackpool. The Labour government at the time clearly thought the same thing, as it was they that gave us the money.”
Council leader Coun Simon Blackburn said: “The leisure assets are a ring-fenced account for all of the properties purchased from Leisure Parcs on March 31, 2010.
“The account is entirely ring-fenced and all costs are contained in that account. While, due to trading conditions and vacant units, the business plan will not break even and turn to profit it will achieve this within the next five years. This assumes trading remains the same as it has been. If there is any improvement the recovery will be faster than this.
“The individual businesses are all trading in a satisfactory manner and I have regular meetings with the companies and operators involved to discuss progress.”
Claire Smith of hoteliers group StayBlackpool said: “I think without a shadow of a doubt buying these attractions proved to be one of the best decision this town ever made. The Tower is fabulous now and we risked losing the Winter Gardens which would have been criminal. It might be taking a bit longer for it to be bringing more revenue in but five more years to break even is fine by me.”
The funding comprised of £10m from Blackpool Council through borrowing, £7m from the Homes and Communities Agency, £7.9m from the Northwest Regional Development Agency and £14m from the European Regional Development Fund. This year the council cut £14m from its budget.