Shares skyrocket on news
James Packer’s Crown Resorts Ltd. has lost its bid to develop a new casino resort in Brisbane, capital of Queensland, Australia. Echo Entertainment Group, which already has a casino in the riverfront city and a monopoly on gaming in the market until 2019, fended off its rival to win the second license. On the news, shares of Echo stock gained 3.5 percent to A$5.01 (US$3.65), its highest level since a June 2011 initial public offering, reported Bloomberg News. The stock has risen 32 percent this year.
Echo will hold 50 percent of the Destination Brisbane Consortium. Chow Tai Fook Enterprises Ltd. and Far East Consortium International Ltd. each will have a 25 percent stake. All three will invest capital in the A$1.5 billion ($1.1 billion) Brisbane resort. Echo CEO Matt Bekier said the result “will be an asset for this state that will compete with anything in Macau, Singapore or other destinations around the world.”
Crown Resorts had partnered with Greenland Investment in its proposal. It hoped to repeat the 2013 triumph in which it ended Echo’s monopoly in Sydney by winning the right to develop a new casino on Sydney Harbor, across from Echo’s Star resort. Crown recently received approval to begin construction, with opening slated for 2019, when the Echo agreement expires.
According to Reuters, Echo said it will rely on its investment partners to bring high rollers from China to Australia’s third-largest city, giving VIPs a new alternative to Macau and Singapore. Bekier said Echo currently derives about 30 percent of its Sydney revenue from Chinese high rollers.
“Chow Tai Fook has very deep relationships with Macau-based junkets,” he added, “and they have a special incentive for bringing additional volume of VIP business to Australia that we don’t currently see.”
An unnamed analyst told the news service that Echo will “take a greater share of the VIP dollars that come into Australia once (the new resort) opens up. It is going to be a pretty impressive property.”
According to the Australian Financial Review, developers were intent on downplaying typical casino glitz in designing the riverfront resort, which is expected to be complete in 2020.
“If you take Marina Bay Sands in Singapore, there is a similar sort of concept going on, and that is to downplay the entry to the casino and up-play the entry to the resort,” said Cottee Parker architects Rob Cottee. “That’s what government wanted here.”
Destination Brisbane’s Queen’s Wharf project will be built on 7.8 hectares (19 acres) of public real estate into 2,000 apartments, 1,100 hotel rooms and more than 20,000 square meters (215,000 square feet) of retail space. “It is really an inversion of the traditional gaming idea, which is that you used to go through gaming to get to everything else but now the gaming is being wrapped by all these other things,” Cottee said.
Echo Chairman John O’Neill called the project “potentially transformational for both Brisbane and Echo Entertainment.
“Our commitment to South East Queensland is evident in the scale and quality of what we’re proposing, including the relocation of our headquarters to Queensland at the appropriate time,” he said in a statement.
Echo will receive a fee for operating the integrated resort. Echo’s partners will receive fees for any VIP business that they directly refer to the casino, according to Tuesday’s statement.
Echo will relocate its headquarters to Brisbane to oversee the project, which could create 3,000 construction jobs and 8,000 permanent jobs.
According to the Courier Mail newspaper, James Packer’s “11th-hour gamble,” the announcement that he would buy up at least 1,500 poker machines in the market to stock his planned resort project, did not go down well with Clubs Queensland, which backed the incumbent Echo. “Those licenses are not for sale,” said Tell Clubs Queensland head Doug Flockhart said before the announcement. “Tell Mr. Packer he’s dreaming.”
Also prior to the announcement, underworld figures were reportedly told to avoid Echo’s Gold Coast property, the Jupiters Hotel & Casino, because their presence might hurt Echo’s chances to win the second Brisbane license.
According to the Sydney Morning Herald, in the run-up to licensure, Echo “temporarily scaled back” a VIP program that brings interstate high rollers “including underworld figures, their business associates and friends” to Jupiters with offers of complementary transportation, free meals and gambling credits.
An Echo Entertainment spokesman denied the allegation and said, “We do not provide information on past or present guests.” The company also threatened legal action if the allegations hurt the company’s license bid. But one high roller, who was not identified, told the newspaper, “I’ve been going to Jupiters for more than a decade, but now they don’t want to know me because things have to stay ‘low key’ until the license is sorted.”
Queensland Premier Annastacia Palaszczuk said the Queen’s Wharf development will make Brisbane “a premium tourist destination.”
Echo currently runs Sydney’s Star, Jupiters on the Gold Coast, and the Treasury Casino in Brisbane.
