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Will Crown shake up Sydney casino market?

Fri, Mar 1, 9:51am by Staff Writer

Crown Resorts’ latest venue is set to shake up the Sydney casino sector when it opens in Barangaroo in 2021.

Crown Sydney will have more than just a city rival in the The Star to deal with after 2018 saw the Australian casino sector suffer reduced consumer spending, in part due to a drop off in Chinese visitors.

Since mid-2018 to year end, the share value of Crown Resorts and Star Entertainment Group fell by approximately 20 per cent.

Crown’s share price went from $14.32 to $11.58, with $2 billion wiped off its market value, according to Casino Review.

The Star Group fell from $5.16 to $4.07.

Australia’s third largest operator Sky City experienced a 15 per cent drop.

It is unclear whether a second Sydney casino will help or hinder the local VIP market.

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.

Less Chinese gamblers has had an impact across the country

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.”

The market consensus is that Crown’s newest venture in Sydney will feature 125 VIP gaming tables.

Analysts believe that if each table at Crown Sydney can generate $2 million, the casino will generate an uplift of $250 million a year.

“Whether this is all market growth or taken from Star Sydney will be a key questions,” Mr Carducci said.

The New South Wales government’s stance on poker machine licenses may go a long way to deciding just how big Crown’s profits will be.

The state’s premier, Gladys Berejiklian, has repeatedly ruled out the option of poker machines at the new Sydney casino, but that has not prevented Crown from continuing to lobby the government.

“Barangaroo is becoming a larger part of the conversation as analysts are now starting to consider how to factor it into their numbers and its impact on both Sydney and Star in 2019,” Mr Carducci said.

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.

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