The leaders of China’s government probably don’t watch College Game Day, but they just sent a message to casino developers straight from Lee Corso: Not so fast, my friend.
At least, that appears to be the message implicit in the detention of 18 Crown Resorts employees who, as of this writing, seem likely to be charged with violating Chinese law by marketing to gamblers on Chinese soil.
All around the Pacific, from frigid Vladivostok in Far East Russia to the tropical climes of America’s own Northern Marianas territory in the South Pacific, casinos are being developed aimed at luring Chinese high rollers.
The developments have been inspired by Macau. Initially, to tap into the huge Chinese market revealed by the enormously successful mega resorts of Macau. More recently, junket operators have begun offering the new markets as alternatives to Macau and the obstacles created by China’s anti-corruption campaign that turned the city’s boom into a bust.
In Crown’s case, the company is building a $1 billion-plus casino in Sydney focused exclusively on Asian high rollers.
But the projects are proliferating in Cambodia, the Philippines, South Korea and, as mentioned, the Northern Marianas and Russia.
Now, the Chinese government appears to be saying, not so fast.
The move against the Crown employees caused stocks of Asian casino companies to sell off.
But the action should not have been a surprise. The Chinese government had made publicly clear that it wouldn’t allow other countries to, in effect, poach Chinese players.
To back that up, last year marketing executives of Korean casino operators Paradise Co and Grand Korea Leisure were arrested on similar charges.
That hurt Chinese VIP play for those companies, but did not register on investors’ Richter scales. Crown Resorts has a much higher profile, and now investors are paying attention.
The question, of course, is whether the Crown and Korean incidents are isolated to them or are they the start of government efforts to keep gamblers at home.
Long-time readers of this column know that we long ago warned about the risks of relying on the Communist Chinese government, noting that gambling is anathema to the Communist ideology.
At the time, Macau was flying high and such concerns were dismissed by those who wanted to see a rosy future. The Chinese are pragmatic and really had become peculiar kinds of capitalists, the bulls said, and market penetration of Mainland China was a tiny fraction, they added.
Then came the anti-corruption campaign, and it persevered, and evolved and persevered some more until Macau’s casino industry was cut in half. That continued even in the face of developers committing billions of dollars in new investment. So much for the Communists being capitalists.
It would not be surprising if the moves against casino marketing on Chinese soil aren’t just the first effort in trying to keep gamblers at home. After all, it makes little sense for the government to slash the casino industry in its own Special Administrative Region just to shoo gamblers away so other countries can profit off of them.
The promise of casino empires throughout the Pacific already contain flaws that could diminish the dreams. The Russian Far East is forbiddingly cold; the new Philippines casinos are underperforming and the country’s government is uncertain; Korea doesn’t let its nationals gamble in casinos, a ban that keeps out companies like Las Vegas Sands; and the Northern Marianas don’t have enough population to staff mega resorts.
Meanwhile, the Chinese government has become overtly supportive of Macau, perhaps as an object lesson to much more democratic Hong Kong about the benefits of not causing political friction.
Ironically, sustained efforts by the Chinese government to prevent surrounding countries from poaching its gamblers could benefit Macau. After all, if going to Australia or Korea is going to be a hassle, then there’s no place like home.
