Last year, for the first time, Australia welcomed more than 1 million Chinese visitors, many of them eager to try their luck whilst on trips for business, visiting relatives or seeing sights.
Chinese gamers, particularly high rollers, have buoyed Australian casinos even as Macau’s “VIP” gambling revenue has been cut in half.
The Chinese governments anticorruption crackdown that’s devastated Macau may have initially helped Australia, but the game is changing. Now, just like casinos elsewhere, they are shifting to resort attractions for a wider market, with rivals Crown Resorts and Star Entertainment Group leading the chase.
The groundwork for this battle was laid in a three-year run during which the key Aussie casino operators racked up 58% gains in their “international commission business” betting volume to A$121.6 billion by the fiscal year 2015 ending that June.
Morgan Stanley estimates that by then, Australia had 8% of the world VIP gambling revenue or casino win.
“Players from all Asia regions, and in particular Chinese players at all levels, have provided the growth in the market and made up for any falls from local players in what’s been a tough Australian economy in recent years,” says Global Market Advisors partner Shaun McCamley, formerly a senior casino executive in Australia and east Asia.
In the 12 months to June 2016, China surpassed neighbouring New Zealand as Australia’s leading source of visitors. China also leads in visitor spending, up 38% last year to A$8.9 billion.
Growing ties are a factor: Chinese immigration and students in Australian universities, property purchases and closer business links bolstered by a bilateral free-trade agreement in force since December. And tourist-friendly policies include easing visa rules and choosing China for a trial program allowing travellers to purchase expedited entry processing at airports.
So the stage is set for a renewed battle for gambling revenues as part of a wider “integrated resorts” competition. The image of a safe place with outdoor beauty, good food and wine, and plenty of water sports is powerful in China. “In other parts of the world, destinations talk about building nongaming attractions. In Australia we have them in place naturally,” a Star spokesman says.
Crown leads Australia’s casino market in part because it actively pursued Asian gamblers from the launch of Crown Melbourne in 1993.
Crown says more than a third of its Australian revenue comes from international visitors, including “a significant proportion from China.” Marketing consultant Sudhir Kale, also a professor at the Gold Coast’s Bond University, says a good 60% of players at Crown Melbourne are Asian, predominantly ethnic Chinese, (though this can include domestic residents), and among its top 200 players, only one is not Asian.
Crown is investing $2.8 billion in its Australian properties, including a “six-star” hotel opening later this year at Crown Perth. Crown Melbourne, currently with 1,600 rooms, plans to add 400 “to meet future visitor demand, particularly from Chinese,” the company told FORBES ASIA. In June, Crown received final government approval for a $2.8 billion resort at Barangaroo, expected to open in 2021, with frontline staff who speak Mandarin.
Star made notable inroads into the Asian VIP market after the elevation of insider Matt Bekier to CEO in early 2014, with former Macau executive Greg Hawkins becoming The Star’s general manager in Sydney.
Last year Star beat Crown in a contest to redevelop Brisbane’s Queen’s Wharf district, home to Star’s Treasury Casino, located in a historic building that restricts expansion and hospitality options. The A$3 billion project includes moving the casino to a curved waterfront complex that evokes comparisons with Singapore’s iconic Marina Bay Sands.
Perhaps as important, Star’s Brisbane partners are Hong Kong billionaire Cheng Yu-tung’s Chow Tai Fook Enterprises–a private arm of the family conglomerate that includes the jewellery retailer and hotels – and Far East Consortium, also of Hong Kong and a property developer with a “Chinese wallet” strategy that’s very active in Australia.
“The Chinese partnership is of enormous import for Star, not only for access to capital but for networks in China,” consultant Kale says. Thanks to Far East’s links to leading mainland tour agency China Travel Service, Star is negotiating travel deals with CTS and seeking its advice on hotel branding for upcoming projects.
Star’s Jupiters Gold Coast, 70km south of Brisbane, is undergoing an A$345 million face-lift that includes refurbishing its nearly 600 rooms and building an all-suite hotel to open in 2018, aimed at raising Jupiters’ international appeal. That investment plan came as Queensland’s government offered new casino licenses for multibillion-dollar integrated resort projects.
In 2014, Queensland selected China’s state-linked ASF Group’s A$7.5 billion Broadwater, centred on a cruise ship terminal in Gold Coast, and Aquis, an A$8.2 billion project near Cairns and the Great Barrier Reef in far northern Queensland.
Aquis is the brainchild of Tony Fung, former chairman of Hong Kong’s Sun Hung Kai Securities and scion of another property-development fortune. Both resort proposals have faced environmental and other challenges, including the recent slowdown in VIP revenue on which they’d depend.
“Australia’s Chinese-VIP-player market has definitely contracted over the last 8 to 12 months as a direct result of China’s anticorruption drive,” consultant McCamley reports after chairing the Gaming, Racing & Wagering Australia conference in Sydney in August.
For the fiscal year 2016 Crown reported VIP revenue fell 7%. Morgan Stanley says Australia’s VIP revenue declined in the last six months of 2015 and expects no better than mid-single-digit growth this year.
But that just inspires companies to reach for a wider Chinese clientele. While evaluating its Cairns options, including a downsized resort sans casino, Aquis Entertainment, listed in Australia, gave its Casino Canberra an A$14 million makeover and has proposed an A$307 million gambling resort for the Australian capital. “Asia is a key market” for that project, Aquis executive director Jessica Mellor says.
ASF has removed the cruise terminal and relocated its proposed gambling resort site. Reportedly, advised that a local partner could help win regulatory approval, ASF opened talks with Crown about operating the casino, a 15-minute drive from rival Star’s Jupiters.