Star inks government deal to keep pokies from new Crown hotel

by William Brown Last Updated
New entrance for Star Sydney

Star Entertainment has inked a deal with the New South Wales government that blocks its soon-to-be rival Crown Resorts from installing poker machines at its new Sydney casino for the next 21 years.

The $2.8 billion group has also locked in a new, more favourable tax rate for gambling operations at its Pyrmont casino, which opened its doors to a limited number of patrons on Monday afternoon for the first time since March 23.

Sydney Morning Herald reports the Star said the agreement with the New South Wales government means it will continue to operate the only casino in Sydney with poker machines, and that it will be paid compensation if Crown is allowed to install pokies at any point before June 30, 2041.

Despite denials from Crown, there has been constant industry speculation that the James Packer-backed group would seek to have the licence for its $2.2 billion “VIP” casino changed to permit poker machines at some point.

“We now have certainty that it won’t happen,” said Star chief executive Matt Bekier.

“[It] guarantees the operating environment for which we’re paying our taxes, and it de-risks our business for the next 21 years, which is a great thing.”

Sydney Morning Herald revealed last month that Crown was building relationships with some of Sydney’s largest clubs and RSLs as it faces the prospect of opening its Barangaroo casino in February while cut off from international high rollers.

The terms of the compensation clause were not made public.

Crown declined to comment.

Government confirms pokies won’t be part of Crown Sydney’s operation

New South Wales Treasury said in a statement that “poker machines will not be operated at Crown Sydney at least for the duration of the agreement.”

“The agreement will allow long-term revenue certainty for the New South Wales government and contribute billions of dollars to be directed to important projects,” the statement said.

As part of a 20-year tax agreement, Star’s table games will be set at a fixed rate of 29 per cent from 2022 – the same as Crown’s – while pokies will start at a fixed rate of 32 per cent and increase to 34 per cent after six years.

Macquarie analyst David Fabris forecast the new deal would translate to an average tax rate of 30 per cent in the years 2022 to 2024 for Star, which will lift to around 31 per cent from 2028.

Star said its average tax rate was 31.5 per cent in 2019.

Those rates are higher than at Crown’s Melbourne casinos (26 per cent) and in Perth (21 per cent), and Star’s casinos on the Gold Coast (26 per cent) and Brisbane (25.6 per cent).

Star said it would reopen its gaming rooms by 4pm Monday, with seating limited to 500 loyalty club members at a time and by invite only, after consultation with the state government.

Mr Fabris said that if Star invited its highest spending gamblers, who typically spend around $1000 on average per visit, Star could generate revenue of $20 million in June to help cover its $20 million a month cash burn.

Mr Bekier said around 700 stood-down employees could return to work by fully reopening the casino, but he expected the facility to operate on a restricted basis for at least another month or two.

“The way to look at the next month is really just to give everybody confidence that you can ease up without it blowing up into new outbreaks,” he said, however financially, “it’s not going to do much for us.”

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