Inside Asian Gaming

INSIDE ASIAN GAMING | September 2012 36 33 Larry Mullin CEO and Managing Director Echo Entertainment Group In October 2007, Tabcorp’s Casinos Division—spun off by the Australian betting giant last year to create Echo Entertainment— was granted a 12-year extension on its exclusive right to operate a casino in Sydney. Shortly thereafter, Tabcorp announced plans to completely make over its Star City casino, a down-market property that lagged far behind rival Crown Melbourne in drawing high rollers despite its location in the country’s largest and most cosmopolitan city. The bulk of the refurb, costing A$870 million (US$918 million) and encompassing a new five-star hotel, more restaurants and bars and improved gaming and entertainment facilities, came online under Echo last September, and the venue has been renamed The Star. The transformation notably includes the reorientation of the building to face Sydney Harbour and the city’s skyline and the conversion of its own piece of harbor frontage into a luxurymarina. In an attempt to drawmore international VIP players, Echo has also acquired private jets and equipped the villas at its new luxury hotel, The Darling, with their own private gaming salons. Larry Mullin was recruited in early 2009 to oversee the revamp, as well as an A$625million upgrade of Echo’s three casinos in Queensland. He is ideally suited to manage the company’s repositioning. In his previous role as president and COO of The Borgata in Atlantic City he led the effort to establish that property as one of the premier gaming destinations in the United States and inject fresh blood into what was then a decidedly stale gaming market. Roughly 80% of Echo’s investment in The Star is on non-gaming amenities, which according to Mr Mullin “create the energy that people who like to gamble feed off”. It’s that energy that helped establish The Borgata as Atlantic City’s top grossing casino, and to provide it, in addition to elegant surroundings and high-quality F&B, he believes it’s also vital to offer world-class entertainment. Mr Mullin—who has the likes of Bon Jovi and Elton John on his speed dial—was renowned for bringing a string of A-list performers to Atlantic City, and he has started doing the same at The Star. Echo’s mission to move its properties up-market and attract more high rollers— who now throughout the world are predominantly Chinese—is already paying dividends. Prior to themakeover, Echo’s share of the Australian VIP market had hovered around 20%, with Crown commanding the rest. Echo’s share of the VIP business has since risen to 36% on a normalized basis in the financial year ended 30th June. With Echo increasingly giving Crown a run for its VIP money, James Packer’s eagerness to take the company over may have a defensive rationale, at least in part. Earlier this year, The Star was hit with a fair bit of negative publicity relating to “leaks” purporting to reveal drug use among senior executives and general bad behavior, as well as the dismissal of its then-managing director following an internal investigation into allegations that he had sexually harassed two female managers at the casino. Although an investigation by the New South Wales gaming regulator exonerated The Star and its management, and concluded that the company’s internal investigation and subsequent dismissal of the MD had been conducted “promptly, properly and thoroughly,” the bad press has clearly had a deleterious effect on Echo’s business, especially in light of weak consumer demand in both its Australian and overseas markets, and tarnished an otherwise brilliant revival. “This year has been more challenging than anticipated,” Mr Mullin has acknowledged, “but with the inquiry behind us, a newmanaging director in charge at The Star, and our Sydney renovations close to completion, we look to the future with great optimism.” Asian Gaming 50 – 2012 over thepast twoyears. Hehadhis company’s share of the foreigners-only market back up to 50% in the second quarter of 2012 on a 25.7% year-on-year increase in revenue, while GKL’s share dropped to 42%. A big factor in Paradise’s favor is that it is relatively more reliant on Chinese visitors, while its competitors depend more on Japanese patrons whose consumer spending overseas has been battered by an overvalued yen. Paradise also enjoys an additional revenue stream from its ownership of the largest casino in Kenya, the Paradise Safari Park & Casino with 40 tables and around 100 slots. But Mr Chun’s biggest challenge may lie ahead if the government moves forward with an expected liberalization scheme tied to the 2015 expiration of Kangwon Land’s exclusive license to serve Korean nationals. It’s probable that at least one more license will be issued for the domestic market, and permission might also be granted for the development of up to five integrated resorts targeting the touristmarket—a significant trade-up from the relatively modest venues operated by Paradise and GKL. For Paradise it means both opportunity and risk. If it manages to secure a license to serve domestic players and/or the rights to build one or more of the IRs, the group’s commercial prospects would dramatically improve in the medium to long term. Set against that is the risk that the government could open the country to foreign casino companies with proven track records in running IRs—in the way Macau and Singapore did—which could pose a serious competitive threat to both Paradise and GKL. Then there is the external threat in the form of gaming expansion across Asia from Vietnam to the Philippines as well as the likelihood that Japan will eventually get around to legalizing casinos, which is likely to result in a drastic drop in Japanese players traveling to South Korea.