Almost two years to the day since he first stepped into the daunting role of Crown Resorts CEO, Ciarán Carruthers explains how he and his team managed to lift the company from its knees to help it return to suitability in the eyes of regulators in Victoria and NSW.
Andrew W Scott: Thanks for speaking with us, Ciarán. We interviewed you two years ago when you first took on the job as Crown Resorts CEO. You recently announced you will depart by year’s end – looking back, how do you feel about what you’ve accomplished?
Ciarán Carruthers: I’m incredibly proud. Two years ago, I knew that the challenge ahead was going to be formidable, with a lot of work to be done, much of it pioneering. The level of remediation and transformation that was required, and particularly under the scrutiny from regulators, the media, the public, our team members and our own shareholder (Blackstone), there had never been anything in this kind of spotlight before. I knew it was going to be hard work, albeit without fully understanding and comprehending just how challenging it was going to be.
We submitted over 10,000 pages of documentation to the regulators, including 770 deliverables packs across compliance, risk, AML (anti-money laundering), CTF (counter-terrorism financing), responsible gaming – a tremendous amount of work. I was always confident in terms of the quality of the team that we had – many of whom were here when we joined and many we brought through over the journey – and the commitment from the shareholder to fund what was going to be required. Blackstone made an AU$200 million investment around the remediation and transformation work. It was made very clear to me on day one that priorities one, two and three were suitability. The long-term viability of the business required us to be suitable in all three states. We were also looking into transformation of guest and team member engagement, and a large part of that involved the cultural piece.
Nobody fully understood just how much was going to be involved, and it’s been a real challenge. I couldn’t be prouder of what the team has achieved, and the associated resilience. We’ve come out the other end with a much stronger team and corporate culture. I’m extremely proud.
AWS: How would you describe the difference between the Crown Resorts of today and the Crown Resorts of two years ago?
CC: Two years ago the team were traumatized and confused. Now they are a lot more optimistic and hopeful. They are cognizant of what’s been achieved, of the hard work and pioneering nature of that work. The culture is now very much focused not just on ticking boxes but doing the right thing, and genuinely wanting to do the right thing and leading our industry across Australia.
We have come from a company that was, to use the Royal Commission’s words, focused on profit over compliance to one that is very much focused on both profit and compliance. A business that wants to provide fun and entertainment for our guests while understanding we need to be compliant and profitable to succeed. It’s an entirely different business, and the one core attribute that really supports all of it is the cultural transformation. We are still on that journey because you never really complete cultural transformation and you certainly don’t do it within a prescribed timeline.
The approach has changed dramatically, now we focus on the enterprise as a whole, not just the casino, with restaurants, bars and hotel rooms and an experience that’s open to anybody and everybody that wants to just be entertained as long as you’re old enough.
AWS: There was no real playbook for the situation you found yourself in when you arrived at Crown. How did you go about formulating the strategy to return to suitability?
CC: There certainly wasn’t a playbook and trust me, I looked to see if I could find one. In my early days at [Macau gaming concessionaire] Galaxy, there were three people and all we had was a name, a blank sheet of paper and a pencil, and we built the business up from there.
Obviously, that’s a very different approach, developing a brand-new company. Crown was a very established brand, so it was about trying to understand what happened beyond just the Royal Commission findings. There was a root cause analysis that looked into what occurred and why it occurred. Was it a case of flawed or ignored processes? Was there a governance structure in place? Was it flawed or ignored? What drove the culture, the values? We all understood the profit-over-compliance problems, but how did they evolve and take hold within the business?
I still have all the printouts of the Royal Commissions and inquiries across three states on my desk. We looked through processes, determined what needed to be thrown out, what needed to be rebuilt and what was fine. We examined the level of oversight and reporting in place to allow the company to see the impact of our changes, rather than just assuming it was working.
That took an inordinate amount of man hours and resources to go through, developing and discussing with external consultants, then building out strategies for dealing with the Royal Commission regulatory requirements to ensure we had policies in place to meet those requirements. We set ourselves benchmarks around AML/CTF, harm minimization and developing a culture.
And all the checklists, governance, processes and frameworks in the world would be meaningless if we didn’t have a team of 20,000 people who believed in it all.
We brought in incredible people around FinCrime and harm minimization like [public health research expert] Jamie Wiebe. Many of these teams were from outside our industry, because it wasn’t something that sat in our industry as a real strength before.
If you look at the FinCrime space – two years ago we weren’t trusted by Australian law enforcement to play a pivotal role in the fight against money laundering and terrorism financing. Now we sit as the vice chair on the Fintel Alliance alongside the chair AUSTRAC. That’s a significant change, because they believe in the processes that we built and the ethos behind it. They believe we’re not just checking off boxes and that this is genuinely how Crown runs its business.
There was a significant amount of learning for our industry regarding how it was all formulated and supported and how it was driven to succeed by the senior executive leadership team.
We had to execute and drive forward at a pace set for us by the Royal Commission. Some of these timelines were incredibly short, particularly for work never done before, for technologies that didn’t exist before. How do you build out technologies, understand them, meet all of the compliance requirements and also meet guest expectations that the gaming experience is fun and entertaining? And without unintended consequences around guest experience? How do you ensure guest impact is minimized while meeting the letter and spirit of the law and regulations?
AWS: Two of the biggest changes from a technology perspective have been the requirement to implement mandatory carded play and of course cashless play. How has that process been for you?
CC: Mandatory carded play was rolled out across all our electronic gaming machines in Melbourne in December last year, and we have around 9% of all the poker machines in Victoria. We’re the only venue required to have mandatory carded play, although I do believe that’s going to change soon across the rest of the state.
The recommendation was introduced to protect those vulnerable to harm, so clearly it needs to roll out across all machines in the state. The minister has made that commitment previously.
The initial response for us? We had about 13% of foot traffic and slightly more in business volume just not coming into the property. We created a significant program to encourage people to sign up because not everybody is a member of the rewards programs in any casino, particularly the casual guest coming in every now and again, or from interstate or internationally, so that lack of a level playing field – the addition of friction points for the more casual guest – created commercial issues for us.
On the first evening in December when that occurred, guests had to queue up for 30 or 40 minutes, so they would say, “Why bother? I was only going to be here for an hour anyhow and I’m not coming back again for four to six weeks.”
But over time we had more and more signing up. Some of that business returned because we have so much more to offer than just the machines, in terms of bars, restaurants and entertainment. A big part of our drive repositioning our brand is a reminder that we are an integrated resort, not just a casino.
It had a material impact on the business, and while that has softened, we’re still below where we were, even in the rollout to mandatory carded play, let alone where we were in 2019.
There were also additional costs for running the AML requirements, the responsible gambling requirements, the additional staff to manage new processes. That obviously impacts margins. But we’re seeing improvement with the restructure of our cost base that’s been rolled out over the last six to nine months, with a greater than doubling of our margin across the entire business. And there’s still room for improvement.
A lot of that will come through as a result of economic uplift because this is cyclical. We will see a return to a better economy across the eastern [Australian] states and that will flow into the business. Table games mandatory carded play will roll out by the end of 2025. The impact of that, again, is going to be significant.
We’re the largest single site employer in Victoria, as we are in Perth. We are a pivotal player in the interstate and international tourism industries, working with government and tourism bodies to position ourselves to be that level of attraction.
These regulations are well-intended to ensure protection from money being laundered or the criminal element being guests.
In Sydney, we’ve been mandatory carded with membership since opening, but we rolled out cashless a while ago, which is having an impact. We don’t have slot machines in Sydney, so we’re not impacted by the lack of a level playing field to the same degree, other than we don’t have machines and everyone else does, which is significant. We are watching the impacts of cashless on the behavior of Star’s guests very closely – their property is similar in size to ourselves in Melbourne – with a $5,000 cash limit which eventually drops to a $1,000 cash limit.
Cashless is just what we do now. I can’t remember the last time I dipped into my pocket and paid for something with a note. Now you just use your phone to scan for everything. You don’t even use a card anymore. So that’s just becoming more and more of the norm, and you see that more so in Asia than you do even here in Australia.
It obviously has a commercial impact on us, but these are in place for good reason. But the lack of a level playing field with the other pokies venues in New South Wales is an issue, particularly around the harm minimization piece.
AWS: All of the hard work has indeed paid off because you’ve returned to suitability in Melbourne and Sydney. What difference has that made to the business both from an operational standpoint and also for morale?
CC: Morale is an interesting point and I’ll come back to that in a moment. Operationally, we’re still very heavily monitored and regulated. It’s just changed from having a monitor on our business in Sydney that we’re engaging with on a day-to-day basis. But even before it wasn’t a case of, “Here’s a decision we want to make, are you okay with it?” and having to get approval. To use a colloquial term, they wanted to watch how the sausage was being made but they didn’t want to tell us how to make it. And the model in Victoria was very clear: “If you are found suitable, then I will exit your business, but I need to be comfortable how you go about making decisions so once I’m not here, you’ll continue making decisions that way. If I’m telling you what to do all the time and then I go, now what?”
It was very much “observe and report” rather than “dictate and tell”, but still very labor intensive. You don’t put 10,000 pages of documentation together in that level of detail in such pioneering work without consuming a huge amount of labor hours with external consultants and a lot of back and forth and debate and discussion. We would propose how we thought we should resolve [an issue] and then get great feedback from external consultants and monitors.
It was frustrating, with guys working ridiculous hours. That had an impact on morale given the burnout and the frustration and sometimes, being so deep in it, not knowing if you were making progress.
I’ll be honest, speaking personally, it’s only really in the last couple of weeks when I announced my decision [to depart Crown] that I’ve looked back and realized, “Wow, we’ve actually done a fair bit over the last couple of years.”
Regarding regaining suitability, we kind of high-fived in the office when the announcement was made and then got straight into the next issue to be dealt with that particular day, so no great change in terms of how we run a business day-to-day, other than there’s a mountain of remediation work that is no longer required, so we can focus that time back on business restructuring and more critically building up the brand, building up the guest expectation, improving across those areas. We’re getting back to the business of running an entertainment resort – not waking up in the morning thinking about what compliance issues to resolve today. That’s having a material impact on morale and sense of achievement because we’re not in the remediation transformation business. That’s not what we do for a living. We create experiences and memories for people who want to be entertained, with the casino at the core of it but not the be all and end all.
As we’ve gone through this restructure, through the COVID years and coming out of the Royal Commissions to a really challenged economy, a lot of additional costs have been baked into the business, so the financial performance has not been there. Now, despite the weak economy, we’ve greater than doubled the margin. People are starting to see the numbers come through. We’re nowhere near where we need to be, but we can see the pathway, we’re making progress, and we can see the direction ahead.
AWS: There have also been some major executive appointments in recent months, most notably David Tsai who was initially appointed CEO of Crown Perth but will step in as interim CEO of Crown Resorts upon your departure. And Stanford Le is your new CEO at Crown Sydney. What do they bring to Crown?
CC: David’s been with us for a year-and-a-half now. He did an incredible job in Perth and brings a great deal of international and multi-property experience from his time at MGM. He lives and breathes our cultures and values because they’re aligned with his own.
Stanford also has great experience across large scale integrated resorts out of Asia and has played a significant leadership role in his existing property [Seattle’s Snoqualmie Casino] up there in Washington state. So, again, a great international lens to what Crown needs to do moving forward. That was the approach of Blackstone when they brought many of us in from Macau, from the US and elsewhere when they first took over.
We’ve appointed some great local Victorians. Louise [Tebbutt, Chief People and Culture Officer] is about to start and Nicole [Pelchen], the head of IT, is another Victorian who’s just about to start, and Gemma [Allman, Chief Government Relations Officer] who’s Melburnian and has come back after many years overseas in big government relations roles for the likes of ExxonMobil.
These people have a real passion for and understanding of the brand, what it used to stand for and what they believe it still should stand for. They are very passionate about seeing ongoing resurgence of the brand, the values and the business culture, as well as bringing a great deal of international exposure. Many come from outside industries, bringing a new perspective into what we have done historically and how some of that can be done differently.
It’s an exciting time. David, in his acting role, has got an incredible team and as the business evolves and moves forward, they’re going to be incredibly successful.
AWS: Crown is now open again for international business. How have the restrictions you now face affected the marketing of Crown and particularly the international segment?
CC: We got back into the premium market, albeit slowly, in the middle of last year for Sydney and Melbourne. It’s not available in Perth. We have competitive commission programs in place. Obviously, there are requirements that you don’t have in other international markets and across Asia which potentially make it less competitive for those making a trip just for gambling.
But when you look at our products and service, and the competitive commission rates for high-net-worth individuals traveling through Australia, particularly Sydney and Melbourne, for reasons other than just a gambling trip – seeing family, on business or just on a leisure trip – we’re seeing quite a bit of interest. If you’re coming to Australia anyway and you enjoy the entertainment of a good punt, then we are really the best and only game in town.
It’s a fantastic environment in Crown Sydney. Yes, on the initial trip there are some additional KYC (Know Your Customer) hurdles, but once that’s done, you’re able to book trips into the future. It’s similar in Melbourne. Obviously, the way it’s marketed and promoted is very different to the past. There are no groups, no junket business, but we engage with some of the premium players we previously had. I think there is an incorrect belief that we don’t do any kind of international commission-based play anymore. We just don’t deal with groups or junkets. And we have strict KYC processes in place, which is great for our business, the communities, and the punters themselves who are coming through. They have an understanding of who they are playing with on the casino floor.
We’re seeing gradual progress [with international play] but there’s still a bigger opportunity. To be frank, if you go back to pre-Royal Commission days, only about 10% of the bottom line of Crown was being generated from the international business anyway – massive volume, small margins.
Getting back to having a local interstate international tourism business is going to be critical to our success, as well as continuing to add to our offering to ensure we have a very robust, attractive and compelling program for those international guests travelling to Australia who enjoy a punt. It’s a successful move, but it’s slow and steady progress.
AWS: Crown for many years was a proud centerpiece of Melbourne life, and then it wasn’t. How have you been trying to reclaim that standing in the Melbourne community specifically?
CC: We’ve had success with sporting and event entity partnerships. Taylor Swift and the UFC are great examples. There’s Golf Australia, some of the major sporting codes and associating Crown with good times, entertainment, sports and live music. That’s a key part of our marketing strategy.
Two years ago, many of the people we now partner with probably wouldn’t have even taken a phone call from Crown, but that has changed dramatically. And that will continue to grow and develop in the future.
AWS: What’s next for Ciarán Carruthers?
CC: Play with my motorcycles, travel, chill and relax.
