Chinese high rollers are due to return in force to Australian casinos according to an analyst team from Macquarie Wealth Management. The team described the coming shift as a “U-turn” that will bring a welcome VIP recovery.
The analysts said “VIP confidence” will “(drive) an uptick in volumes. We now include a VIP recovery in financial year 2020. While we remain cautious on second-half 2019 VIP volumes, with our view that Macau VIP bottoms in the June 2019 quarter, we are optimistic and now forecast a recovery.”
According to the Macau Daily Times, most Australian casinos have seen a decline in VIP patronage due to the ongoing trade war between the United States and China, which has substantially slowed the Chinese economy.
Star Entertainment and Crown Resorts have both reported big drops in the high-roller segment. Star saw its turnover from international VIPs plummet 33 percent in the last six months of 2018 for a total of $20.7 billion. The turnover was most dramatic at its Sydney casino, which saw a 49 percent decline.
Crown reported just $19.9 billion from the VIP segment, down 12.2 percent year-on-year during the same six-month period.
Macquarie said that Star’s three casinos, on the Gold Coast, in Sydney and in Brisbane, have an “attractive” future with the promise of strong domestic growth. The firm added, “The domestic business still accounts for more than 80 per cent of [earnings before interest, tax, depreciation and amortization and is a higher quality business than VIP having greater earnings visibility and better margins.”
Crown’s plan to open a VIP-only resort in Barangaroo might have been ill-timed without the predicted U-turn, the analyst team observed.
