Star a stronger rival
International high rollers are flocking to Crown Resorts casinos, ending the slump that began in 2016, after a group of Crown employees were arrested in Mainland China for illegally promoting gambling.
The big spending “whales,” especially Chinese VIPs, shied away from Crown casinos for a time. Now they’re back, and Crown reports that VIP turnover was up almost 55 percent to more than $51 billion in the past financial year after being reduced by half the year before.
At Crown’s Melbourne Southbank casino, VIP revenue rose 73 percent to $591 million in the year to June 30 in what Crown Executive Chairman John Alexander called “a very good recovery,” reported the Sydney Morning Herald.
Crown Chief Financial Officer Ken Barton said it’s “pleasing to see that our customers have come back to us in 2018 at a rate which is now starting to look more like what we saw pre the China detentions” that began in October 2016.
Back then, following a broad-based sting operation, Chinese law enforcement picked up 19 Crown employees including Jason O’Connor, head of international VIP programs for Crown. For months, they were incarcerated in a Shanghai jail, reportedly in very unsavory conditions. O’Connor spent 10 months behind bars and then was deported. And though the Australian dubbed him the “unwitting star of Crown’s corporate horror movie,” O’Connor continues to work at the company, said Barton. The CFO would not elaborate on O’Connor’s role. Most of the other jailed employees left Crown after they were released.
Barton says Crown learned its lesson in China, has retreated from direct marketing activities in Asia, and plays it safe by relying on junket operators to reel in the whales. “Junkets have grown to be large and sophisticated,” he said. “They do have a business model that seems to work.”
The company also stated that its VIP program now has a “slightly different mix” of big-spending foreign customers. “We’ve taken a conservative view, we’ve got a new model, we’ve got a sales force that is comfortable with the new model,” Barton added.
Overall revenue at the Crown casinos in Melbourne and Perth was up 10.6 percent, accounts show. Following the results, Crown shares jumped more than 6.5 percent to $14.21 per share. Crown will pay a 30-cent dividend on October 5, the Herald reported.
Other operators in Australia have also enjoyed a recent bump in VIP business. SkyCity, for example, with casinos in Adelaide, Darwin and Auckland, just posted yearly turnover from foreign VIPs that soared 39 percent to nearly $12 billion.
And JP Morgan analyst David Carducci recently told Inside Asian Gaming that Star Entertainment Group could challenge Crown to become the country’s dominant VIP player. “When you look at where the two companies were in 2016 compared with 2018, they’ve basically flipped,” Carducci said. “In this half you’ll continue to see VIP growth, so we’ll most likely be back to the historic level of turnover.”
Star’s partnership with Hong Kong conglomerates Chow Tai Fook and Far East Consortium is a plus, the analyst added. “I think Star will continue to see strong VIP numbers, especially with their relationship with Chow Tai Fook and Far East Consortium.”
But Crown Resorts remains the dominant gaming operator Down Under. The company’s casinos in Melbourne and Perth will be joined by a third property at Barangaroo in Sydney Harbor in 2021. Former Chairman James Packer is the company’s largest shareholder through his private investment company, Consolidated Press Holdings, but continues to keep a low profile as he is treated for mental health issues including depression.
