Inside Asian Gaming

AUGUST 2018 INSIDE ASIAN GAMING 21 time, a role reversal that seemed entirely implausible just two years ago. Star confirmed its standing as the country’s newly preferred VIP gaming destination for international players when it announced an impressive 48% sequential increase in VIP turnover for the six months to 31 December 2017 to AU$30.9 billion – emphatically halting a year-long slide. By comparison, Crown – whose annual VIP turnover at its Melbourne and Perth properties fell 48.9% in FY17 as Chinese operations hit a brick wall – could only book 14% sequential improvement in 1H18 to AU$22.6 billion and now finds itself in the unfamiliar position of having to re-build turnover and compete for business with a newly invigorated rival. But more on that later. Crown’s woes began on 16 October 2016 as news broke that 19 Crown Resorts employees, including the company’s head of VIP operations Jason O’Connor, had been arrested during a series of targeted raids in mainland China on suspicion of “gambling related crimes”, specifically the running of direct VIP operations targeting Chinese high rollers. The lingering effects of China’s Crown crackdown are more than cosmetic at Star, which responded by switching its VIP focus to Southeast Asia and reducing the reliance on junkets. COVER STORY The stunning development made headlines around the globe – no doubt the very result China had intended – while the long eight- month wait between arrest and sentencing ensured the eyes of the world remained transfixed throughout. In the end, 16 of the 19 employees originally detained were jailed for between nine and 10 months each with Crown paying a total of AU$1.67 million in fines. The company’s lucrative Chinese VIP business ground to a halt. But it wasn’t just Crown taking a hit. Star, which turned over AU$49 billion in FY16 (compared to AU$65 billion by Crown), saw VIP fall to AU$39.7 billion over the ensuing 12 months after quietly winding back its own Chinese ambitions. Likewise, SKYCITY – which operates five integrated resorts in Australia and New Zealand including its flagship SKYCITY Auckland – experienced a 30% decline in VIP turnover in FY17 to AU$8.7 billion, stating in its earnings report that, “SKYCITY’s International Business was adversely impacted by increased restrictions on funds transfers and a reduced number of visits by larger customers during the period, particularly following the Crown arrests in 2Q17.” VIP turnover at SKYCITY’s Australian properties immediately climbed 27% in the six months following the release of all Crown employees. The timing of China’s Crown ambush even contributed to a decision by Hong Kong businessman Tony Fong’s Aquis Entertainment in April 2017 to scrap plans for a massive AU$8 billion casino resort in tropical far north Queensland, although Fung told The Australian he was “still incredibly bullish on Chinese tourism in the future,” and may eventually revisit the project. Aquis is currently planning an AU$330 million redevelopment of modest Casino Canberra – purchased for just AU$6 million in 2014 – which will include expansion of VIP gaming facilities if approved. Meanwhile, the lingering effects of China’s Crown crackdown are more than cosmetic at Star, which responded by switching its VIP focus to Southeast Asia and reducing the reliance on junkets – a good move according to JP Morgan’s Vice President, Equity Research – Gaming and Leisure, Donald Carducci. Star Entertainment Group CEO Matt Bekier