Larry Mullin, Chief Executive of Tabcorp’s Casinos Division, outlines his company’s ambitious plan to elevate its four Australian properties
The Borgata Hotel Casino & Spa, Atlantic City’s highest grossing casino, opened in July 2003, injecting fresh blood into a decidedly stale market that had not seen a new resort opening since the 1990 unveiling of Trump Taj Mahal.
Larry Mullin—who served as the Borgata’s President and Chief Operating Officer before assuming his current role as Chief Executive of Tabcorp’s Casinos Division in February 2009—was pivotal to establishing the Borgata as one of the premier entertainment destinations in the US.
Mr Mullin points out that prior to the Borgata’s opening, table gaming revenues in Atlantic City had fallen for fifteen years, largely as a result of the arrival of competition from new and better resorts in Las Vegas. Even though Atlantic City is a mere one- to two-hour drive away for 22 million people in New York, Philadelphia and Washington D.C., many of the potential patrons from those cities were opting to fly four or five hours by plane to Vegas, rather than drive to Atlantic City.
Mr Mullin responded by introducing “more non-gaming and more entertainment to get people excited about what we felt was still a good experience.” He established a reputation for having “a real passion for entertainment and for the delivery of great customer service,” as Tabcorp Holdings Ltd CEO Elmer Funke Kupper noted on Mr Mullin’s appointment.
Adding sparkle
The jewel in the crown of Tabcorp’s Casinos Division is Star City Hotel & Casino, located in Sydney in the state of New South Wales. Star City, Australia’s second largest casino after James Packer’s Crown Casino in Melbourne, opened in September 1995, and was originally owned by Showboat Inc. Showboat was acquired in 1998 by Harrah’s, which subsequently sold the property to Tabcorp in 1999. the only casino allowed to operate in Sydney, and was granted a 12-year extension of its exclusive licence in 2008.
Soon after the licence extension, Star City embarked on a major refurbishment project dubbed ‘Project Star,’ scheduled for completion at the end of this year with the latest budget amounting to nearly A$1 billion (US$1 billion). The scheme encompasses a new 5-star hotel, more restaurants and bars and improved gaming and entertainment facilities, including a 3,000-seat multi-purpose entertainment venue for major international acts, trade shows, exhibitions and conferences. Star City also plans to buy a fleet of private jets to fly in top players and convert its own piece of harbor frontage into a wharf for luxury cruisers. Additionally, while the original casino entrance built by Showboat faces away from the harbour, the refurb will also re-orient the entrance towards the harbour, and the main gaming floor and high-end restaurants will face the Sydney skyline, adding to the property’s allure.
Tabcorp’s Casinos Division operates three other properties in the state of Queensland: Jupiters Hotel & Casino on the Gold Coast; Treasury Casino & Hotel in Brisbane and Jupiters Townsville in the north of the state. Last month, the company announced it would invest A$625 million upgrading the facilities at the three Queensland casinos. “Most of that will be on non-gaming,” comments Mr Mullin. “Seventy-five percent of that spend is going to be on hotel and restaurants and nightlife and pools and entertainment centres that we believe will complement what we’re doing here [at Star City] for a customer that might be a domestic customer or an international customer. If they want to come to Sydney and play for a while, and then they want to have a change of scenery, we can move them to one of these other markets that are also great resorts, and we can do it pretty seamlessly. We’re going to be working now to address our properties in those markets to get ready to complement what’s going to come here by the end of this year.”
Are you not entertained?
On 15th December, Star City hosted an invitation-only Bon Jovi concert for its most valued customers at its current 2,000-seat theatre, with the likes of ‘Gladiator’ star Russell Crowe in attendance. The uniquely intimate Bon Jovi performance stood in marked contrast to the U2 stadium concert held in Sydney earlier that week, crammed with an estimated 100,000 people. It is also typical of the outstanding entertainment experiences Mr Mullin delivered during his time at the Borgata, and plans to feature on an ongoing basis at Star City.
As Mr Mullin explains, “our biggest business is gambling. And the type of offering that gets people excited about that and what I’ve seen around the world is people look for entertainment. If it’s only about the gambling, the gambling could get boring. We want to offer a diverse product offering, so that people have many different things to do while they’re here.” At the Borgata, Mr Mullin arranged top-notch entertainment experiences “to draw people from New York, Philadelphia, Washington D.C., where they have many different kinds of entertainment—sports, live entertainment, Broadway; all types of things that give people the opportunity to have great experiences. So we needed to get something that was very compelling that allowed you to see nightlife, restaurants and these big shows coming in regularly, that you might see at Madison Square Garden or in Philadelphia or Washington on a touring concert. We would bring that in a much smaller, intimate venue, and you have your weekend or midweek night out to go to a nice restaurant, go see a show, maybe enjoy the spa. And the gambling, obviously, was another form of entertainment that was the only entertainment before we spent US$1.7 billion [at the Borgata].”
The Borgata investment was a hefty one, but it clearly paid dividends, and Mr Mullin believes the same will hold true for the planned investment by Tabcorp’s Casinos Division in its four properties.
Mr Mullin believes the investment in upgrading Tabcorp’s four casinos will easily be recouped by helping to increase the Casinos Division’s 20% share of the Australian VIP market (with the rest going to Crown).That market amounted to A$24.7 billion in rolling chip volume in the twelve months to June 2010. “It’s a very profitable segment that we don’t get our fair share of, both domestically as well as internationally. The [Australian] VIP market has been growing at about 12.5% per annum for the past five years, and it’s a market that’s still continuing to grow at double digits. We believe with this type of product we’ll give ourselves a better chance to grab some market share. And I believe in the end it will be growing the market as a whole, because, Crown, who have done a much better long-term job of that, have been the only one pulling all the effort [having invested A$1 billion in updating and expanding its facilities over the past four years, and planning to invest a further A$800 million].We hope with our efforts, the pie will get bigger.”
The Macau effect
It appears the explosion of gambling capacity in Macau has actually benefited the Australian high roller market by expanding the pool of VIPs—particularly from mainland China—in the region. Mr Mullin agrees “Macau has helped grow the market here for internationals.”
Although there were early signs that the arrival of Singapore’s two casino resorts in the first half of 2010 was negatively impacting Australia’s VIP gaming turnover, this could be a short-lived phenomenon, and Tabcorp’s Casinos Division believes that ultimately, Australia’s international VIP play will not be cannibalised by either Macau or Singapore.
Mr Mullin acknowledges that the glitzy new properties emerging in Macau and Singapore have been a wake-up call for the Australian casino market, but he says he welcomes the competition. “What I like about having competition is it forces you to improve everything you’re doing. And we’re going through a big recheck here. I think part of the issue with this [the Australian] market is it had gotten complacent, more from a product standpoint in the VIP business or the type of business you see up in Asia. We haven’t been competitive with the product we offer to those customers. So even though we’re in a great location here in a city such as Sydney, we just haven’t had the offerings to complement that visit. What’s happened in Singapore and Macau and that part of the world is they’ve significantly put new product in over the last five years.
“So now we are going to make sure we offer the international customer the best suite experience in the city, and also give them a VIP experience with the gaming area. We needed to improve all that so we can compete with places like Macau and Singapore, offering the same type of product or better, but sitting here in Sydney, in one of the best resort cities in the world.”
Pros and cons
Australia’s casinos clearly face a more favourable tax regime on international VIP play than their Macau counterparts—and hence have the flexibility to offer more attractive rebate programmes to international VIPs. In New South Wales, the gaming gross on overseas VIPs checking in a minimum of A$75,000 at the state’s casinos is taxed at just 10% (inclusive of GST). The equivalent tax rate in Queensland is also 10%, though the minimum check in to qualify is lower, at A$50,000. By contrast, all VIP play in Macau is taxed at just under 40% of the gross. VIP play in Singapore is taxed at just a shade more than in NSW and Queensland at 12% (split between a 5% tax on the VIP gross and a 7% goods and services tax).
Mr Mullin recognises the importance of casino operators raising product and service standards. “One of the great advantages we have here is we’re in a great climate with a beautiful city and other attractions, but that only goes so far. At the end of the day, a customer has the ability to go to many different places. From our research, the first thing they’re looking for is quality product. But then, also service.
As for service, although the cost of labour in Macau and the rest of Asia is significantly lower than in Australia, allowing a higher staff to customer ratio, Mr Mullin feels Australia’s better-educated workforce is able to offer customers a more “fun, fast and focused experience.” Still, he cautions that even in Australia, it is important not to overthink processes and impose excessive regulations, so that staff can express themselves to customers, and customers don’t feel “they’re just dealing with robots.”
Mr Mullin advises: “Allow the employee to be an entertaining part of that process and encourage them to have fun with the customer, as long as it does not negatively impact the integrity of the game [in the gaming area]. And in the non-gaming area, encourage them even more so.
“If you look at where customers have to interact with staff, what matters at the end of the day is you want the customers to walk away and say: ‘I’m going back because any time I had a problem, it was resolved quickly, and where there was an expectation, they exceeded it.’
“We’re trying to look at every process we have and see how we can change those processes to make it more easy for employees to have fun. Do we have the right managers in place? Have we made this too complicated or are we not giving enough support? All those little things add up to what ends up being the customer experience that you offer here.”
Acquisition rumours
In October, Tabcorp Holdings Ltd announced it planned to spin off its Casinos Division into a separate company from its betting shops as it raises A$430 million in an entitlement offer. Investors will get a share in each company on a 1-for-1 basis, in a split expected to be completed in July 2011.
Since the announcement, there have been rumours that Tabcorp’s Casinos Division could be acquired following the spin-off, with James Packer singled out as the most likely buyer. Asked to comment on the rumours, Mr Mullin replied to Inside Asian Gaming: “I can’t even worry about that. What we look for is we make ourselves competitive for whoever might have an interest in investing with us. I’m very bullish on that. But all of the speculation—that’s going to sort itself out. At the end of the day, the customers shouldn’t be affected by that, and that’s our focus—the customers.”