Inside Asian Gaming

December 2013 | INSIDE ASIAN GAMING 9 COVER STORY retains the city’s sole license. Brisbane cannot support two, he says. Echo said the same thing, at least initially, in defense of its Sydney monopoly at The Star, which it has largely rebuilt at a cost of close to $900 million, and Mr Packer rode right over it in winning approval from New South Wales for a competing luxury resort with gambling on Darling Harbour. It opens when Echo’s exclusivity expires in 2019. Unquestionably, the Queensland market is soft, and it has taken a toll on Echo corporate-wide, dragging down underlying profit in FY2013 by more than 15% against last year. Consumers in the country’s third- largest economy have been pulling back amid a general slowdown in the aftermath of the global recession. The machine gaming market statewide is worth about $2 billion, but Echo’s three casinos capture only about 14% of it. Up in Cairns there is the 128-room Reef Hotel Casino, part- owned by Casinos Austria International. It contains around 530 slots and EGMs and 40 or so table games and generates about $20 million a year in total. The lion’s share of the local spend is going to the clubs and pubs, a substantial industry in which Queensland, like the rest of Australia, is rather unique in the world. There are some 1,250 locations across the state providing around 40,000 machines for the locals. What Echo got in total revenues out of Queensland in the year through June—its Jupiter-branded resorts included, one in Gold Coast, one farther north on the Coral Sea in Townsville—was $643.6 million. That’s a decline of 3.3%. The gaming side was down about 4%. The EBITDA hit for the year totaled 15.2%. Weakness was apparent in the mass market, with slot revenue falling 2.5% against the previous year, and in VIP, where volumes were down a telling 19%. “We don’t have a compelling enough offer to attract people,” is how Mr Redmond explains it. “You need to build or develop something at a scale that allows you to compete with the rest of the world.” This is Mr Packer’s case for Brisbane precisely. It’s the same argument that got him into Sydney. Few would be surprised if it doesn’t win him Brisbane too. Basically, it’s why he’s spent the last decade divesting the family of the media empire Kerry and Frank Packer spent more than half a century amassing—“a long journey, but for me a necessary one,” as he justified it in a speech in Canberra last October before a friendly audience of tourism, aviation and transport leaders. “When I look at business opportunities over the coming decade,”he told them,“I see Australian tourism as one of the industries that will benefit most from the booming middle class in China and across Asia.” For the powers that be in Queensland that had to sound very much like music, as doubtless it did to their counterparts earlier this year in New South Wales. Ideas by the Billions Queensland is a resource-rich state that has always depended on exports of minerals, agricultural products and tourism, and they’ve all been down more than up the last five years. The strong Australian dollar hasn’t helped. And it is the most indebted state in Australia as a result, with a current deficit estimated at more than $7 billion. Gross state product grew only 0.2% in 2010-11, a periodmarred by widespread flooding and a Category 5 cyclone. The economy bounced back to 4% growth last year, but overseas sales, of mining products particularly, were down year on year, residential construction has fallen by double digits, and growth in household consumption has been tepid, tracking at less than 1%. Mr Redmond is doing a pretty straightforward job in confronting government with the reality of what the state is not. Then there’s Mr Packer offering them a vision, however vague, of what it can become. So he comes off as a big-idea guy, and they’ve been popping up all over Queensland lately. Hong Kong financier Tony Fung wants to build a $4 billion resort with a man-made lake, a reef lagoon and the world’s largest aquarium on a patch of Treasury Hotel & Casino in Brisbane The Reef Hotel Casino, Cairns Jupiters Hotel & Casino on the Gold Coast