Inside Asian Gaming

inside asian gaming August 2014 30 In Focus For IR proponents, those numbers underline the need for game-changing properties to match options in the region, especially Macau and Singapore. “The introduction of integrated resort development casinos into Queensland will provide a new unique tourism and entertainment based product … a product that better positions Queensland to compete globally for the competitive international tourism market,” the Department of State Development says. “I think Chinese VIP customers will go to all the nice casinos and popular tourism destinations in Australia, such as the resorts in Cairns, Gold Coast and Brisbane,” Macau junket promoter, investor and consultant Tony Tong of Pacific Financial Services says. The government says Queensland casinos currently work with junket promoters. Gaming tax is 10% on junket play, compared with 20% on main-floor play including fully automated table games, and 30% on gaming machines. Junket promoters and representatives are subject to suitability checks by Queensland’s regulator, the Office of Liquor and Gaming Regulation. Mr Klugsberger warns that Queensland regulators can be “very tough,” but Mr Green believes the bigger issue for junkets will be credit. The government also must approve commission and/or revenue- share arrangements between casinos and the junkets. There are maximum commission rates for different games, from 1.112% for blackjack to 2.403% for roulette. For baccarat, the maximum commission is 2.25%. The tax and commission rates mean Queensland can offer compelling incentives to Macau junkets (the commission that can be offered to junkets on baccarat is capped at 1.25% in Macau). Granted a provisional gaming license in May, Aquis is submitting detailed plans to the government as the next step in the process. Separately, Mr Fung, the former chairman of Sun Hung Kai Securities, has moved to buy Cairns’ Reef Hotel Casino, with about 40 tables and 530 machines, from Casinos Austria International and Accor, along with Casinos Austria’s 20-table Casino Canberra in deals totaling $270 million. The Australia Competition and Consumer Commission has raised a red flag, concerned that Mr Fung will close Reef once Aquis opens. Mr Fung contends the properties will target different markets. “He got the casinos for a song,” Mr Kale says. “Reef’s revenue of $24 million is ridiculous for a property of that size. It should be three times as much.” He envisions Reef as a staging ground for Aquis to learn the market and generate cash flow as it seeks financing for the Yorkeys Knob project. Ovion Partners Managing Director Peter Klugsberger describes Casino Canberra as “a bit of a gem in disguise,” believing reasonable investment can make it profitable. Like Queensland’s other planned IRs, Aquis will be designed to target the Chinese market. “The Great Barrier Reef is quite famous among the high-end Chinese customers looking for beaches and diving,” junket investor and advisor Tony Tong of Pacific Financial Services says. But whether Mr Fung will take the final plunge is a “big unknown,” Mr Kale says. Aquis will need to rely on Chinese visitors for up to 90% of its business, an unprecedented figure for Queensland. “People laugh and think the guy has gone crazy. But he sounds confident, he’s not reckless,” Mr Kale says. “If Chinese tourism to Australia grows 20% a year, in two and a half years it will double.” Those numbers and the right strategies may be enough to keep Aquis in the swim. Tony Fung “Macau is definitely the most important stepping stone for casinos and junkets to legally market their services and products for foreign gaming destinations,” Mr Tong says. “Macau is also a key hub for payment and settlement as most VIP players and junket agents have accounts in various casinos and VIP clubs for easy payment settlement and commission arrangements.” The issue, according to one Queensland gaming executive who spoke on condition of anonymity, is “How do they convince a high roller to get on a plane in China or elsewhere in Asia and fly between six and 10 hours to Brisbane or Cairns when they have so many options evolving in Macau, Vietnam, Cambodia, Manila, Singapore that are closer and offer everything the Australian casinos do. The only way may be to buy the business, which puts pressure on the “One has to be careful not to be blinded by the IR mirage so they don’t end up like the Ho Tram property in Vietnam. They also believed the ‘Build it and they will come’ slogan, and so far nobody came.” Peter Klugsberger managing director, Ovion Partners