The #1 Resource for aussie gambling!
  • Safe & Secure Sites
  • 100's of Free Games
  • Expert Casino Reviews

The #1 Resource for aussie gambling!

Doubts cast over VIP gamblers at new Barangaroo casino

Tue, Feb 26, 12:29pm by Staff Writer

The Chinese economy grinding to its slowest growth in nearly three decades, coupled with US-China trade tensions has left executives at Australia’s two largest casino operators sceptical on gains to be made to their VIP business.

A sharp pullback in spending by super-rich Chinese gamblers in Australia makes the business case “less attractive” for James Packer’s new VIP casino complex under construction in Sydney, analysts told The Sydney Morning Herald.

Crown’s executive chairman John Alexander spoke to the matter last Wednesday to the Herald stating that: “Chinese people, like Australian people, are suddenly feeling a bit poorer than they were a couple of years ago. It all goes to spending patterns.”

Gambling operators around the globe have been feeling the pinch, with lucrative high roller programs more uncertain than ever.

Chinese punters typically play baccarat and can turn over hundreds of thousands of dollars a hand and millions of dollars an hour.

This softening economic growth coupled with the Chinese government’s crackdown on shady consumption, as well as trade tensions with the United States go some way to explaining the reduction in wealth Chinese gamblers visiting Australia.

Crown told its investors last Wednesday that turnover from its VIP program had shrunk 12.2 per cent to $19.9 billion, driving down company profits over the final six months of 2018.

At Crown’s flagship casino in Melbourne, turnover was down 11.2 per cent to $17.3 billion.

The company’s after-tax profit had risen less than 1 per cent to $194.1 million, short of forecasts by Macquarie Research ($203 million) and JPMorgan ($221 million).

Lower turnover at The Star in Sydney

A decrease in turnover was also noticed at Australia’s second biggest casino, Star Entertainment in Sydney, with a 33 per cent drop to $20.7 billion.

Investment bank JPMorgan’s gaming analyst Donald Carducci said the fact that both Crown and The Star’s VIP programs were weaker than expected indicated the economic situation in China was ‘clearly having an impact.’

Billed as a VIP-only casino and due to completion in 2021, Crown’s new high-end, $2 billion residential and casino complex under construction in Barangaroo will be closely tied to an ‘international VIP program’.

The volume of high roller gamblers coming to Australian casinos has dropped since 2016-17 after the Chinese government embarked on an anti-gambling crackdown, jailing 19 Crown staff for illegal marketing activities on the Chinese mainland.

“The Australian VIP market recovery has potentially stalled. Now you have a macro headwind providing a bit of conservatism for material growth,” Mr Carducci said.

“It makes the business case for Barangaroo less attractive.”

There is a consensus that Crown will have approximately 125 VIP gaming tables in its new casinos and if each can generates $2 million, this will create $250 million in revenue per year.

The question is whether this revenue will be from market growth or taken from its nearby competitor the Star Sydney.

Australian inbound gamblers may choose Sydney over Melbourne for its choice of casino and that could have a negative impact on Crown’s Melbourne operations Mr Carducci asserted.

For the first time in 2018 there were more Chinese visitors to Australia than any other nationality, with 1.39 million Chinese people visiting Australia according to government statistics. This represented a 13.2 per cent rise in visitor numbers.

Star Entertainment chief executive Matt Bekier has remained bullish about his casino’s prospects despite an impending rival.

“If you look at the typical VIP guest who goes to Macau for example, they play in 2.6 casinos over three days. I think the exact same thing is going to happen in Sydney,” Mr Bekier said.

More News

See All News