Macau in 20th month of decline
Australian casino operators Star Entertainment says it has benefited from the slump in Macau’s gaming industry, particularly at its Sydney resort, where most tourists enter the country.
Star Sydney Managing Director Greg Hawkins told the Sydney Morning Herald that 20 consecutive months of recession in Macau have made “longer-haul destinations like Australia” more appealing to Chinese high rollers. To boost the demand, Star has added new VIP gaming salons, the Darling and Astral Tower.
“We’ve seen some strong growth over the past couple of years coming into our Sydney property,” Hawkins said. “Word of mouth does grow, and I think that’s driving interest … in conjunction with some of the slowdown in Macau as well.”
Macau continues to struggle due to the fallout from an anti-corruption campaign launched in summer 2014 by Chinese President Xi Jinping. Revenues tumbled 21.4 percent in January on a year-on-year basis.
Investment banking firm CLSA has estimated that Australia has more than doubled its share of the Asian VIP market from 3.3 percent in 2010 to 6.8 percent by the end of 2015. However, both Star Entertainment and its chief rival, Crown Resorts have been unable to replicate the “explosive VIP growth” of 2014-15, reported the Herald; Star’s VIP business almost doubled during that period following an $870 million renovation of its Sydney flagship. But the company’s international VIP revenue dropped 33.8 per cent in the four-month period that ended October 31.
Looking ahead, UBS forecasts a 2 percent decline in VIP revenue to $306 million, but says stronger domestic play could lift the company’s overall revenue 4 percent to $1.2 billion when Star releases half-year results on February 16.
“Our capital commitment over the last three years—we’ve developed both hotel, gaming and restaurant environments—have dramatically improved our offering,” observed Hawkins. “We’re getting that feedback from our customers as well that the gap has closed to some extent in terms of Sydney versus (Crown Resorts in) Melbourne.
“It’s a continual focus for us and an ongoing journey. But I think we are on a dramatic improvement path.”
The Macau Daily Times reported that Star Sydney did big business during the Chinese New Year celebration earlier this month. And from now until 2020, Morgan Stanley forecasts a 15 percent increase in compound annual growth for Chinese tourism in Australia; that growth could jump to 17 percent from 2020 to 2025. The analysts also predict that spending by Chinese tourists will rise from AU$5 billion (US$3.5 billion) to AU$13 billion by 2020.
Opinions differ about the potential of the tourist market, the Herald also reported that both Australian and New Zealand gaming operators will “bulk up their share of VIP clients this year.”
