Gold Coast integrated resort concept
Glass-fronted skyscrapers, super yachts and shopping precincts bustling with wealthy tourists – this is the vision for Australia’s latest A$3bn (USD2.3b) casino resort.
“The project includes five- and six-star hotels, theatres, a beach club and a host of entertainment,” says Louis Chien, director of ASF, a Sino-Australian company backing the project. “The casino is the catalyst that makes the resort work.”
ASF’s resort on the Gold Coast is one of A$10bn-plus in casino investments planned in Australia, which is counting on Asian punters to help its economy transition from mining-led expansion to growth in services, such as tourism.
But the arrest in China four months ago of 18 employees of Crown Resorts, Australia’s biggest casino operator, has sent shockwaves through the sector, and raised questions over whether all the proposed casinos will be built.
Crown warned last month that VIP turnover for its Australian resorts, which are heavily dependent on Chinese gamblers, fell 45 percent in the first 23 weeks of fiscal 2017. That drove a 12 percent decline in total revenue at these resorts in the same period between July 1 and December 11 2016. Investors get updates from rivals Star Entertainment and SkyCity next month.
“A lot of these ambitious plans were conceived prior to the crackdown on corruption by the Chinese authorities, which has hit casino revenues in Macau and elsewhere,” says Sudhir Kale, an expert on gambling and casino markets at Bond University. “Some of the Australian projects are likely to struggle to raise finance.”
One of the most ambitious – an A$8bn casino resort near Cairns proposed by Aquis Australia, a company controlled by Hong Kong billionaire Tony Fung and his son Justin – has already been put on hold.
“The financial landscape has changed,” says Justin Fung, Aquis chief executive. “Beijing has been a bit stricter about allowing access of money into Macau and the ability to raise funds for a project like this is directly impacted.”
Aquis, which already has a casino in Canberra, says the Australian gaming sector will prosper as long as it focuses on domestic and international “premium mass market” punters rather than on VIP high rollers – those who tend to bet at least A$10,000 a hand.
China has been has been targeting gambling ever since President Xi Jinping came to power in 2012, part of a crackdown on corrupt officials suspected of using overseas casinos to launder cash. More recently, Beijing also has been battling to stem capital flight from China as part of controls designed to stabilise its currency.
In October Chinese police arrested 18 Crown employees, including the head of the company’s VIP International team, on suspicion of “gambling-related” crimes. Direct marketing of gambling to Chinese nationals is illegal in mainland China, but some companies market resort and tourism services where their casinos are located.
The big fall in VIP revenues at Crown has prompted concerns over the viability of its planned A$2bn Sydney casino – a 71-storey harbourside skyscraper adjacent to an existing casino run by Star.
James Packer, Crown’s Australian billionaire chief, initially marketed the Sydney resort to authorities as a VIP hub aimed at attracting wealthy travellers, mainly from China. It opted to exclude poker machines and low-gambling limit tables, which are big earners but have been linked by critics to gambling addiction.
Mr Packer’s 2012 proposal divided the city’s political and architectural establishment, resulting in a delay amid a lengthy planning and appeals process before a final court challenge was dismissed before Christmas.
Graeme Ferguson, analyst at rating agency S&P, says it is too early to assess the long-term implications of the recent fall in VIP revenues. But he notes that Asia Pacific is an “increasingly crowded marketplace for Chinese VIPs looking to have a bit of a flutter” thanks to new casinos opening in Australia, Macau and the Philippines.
Gross gaming revenues in Macau, the world’s biggest gaming center, declined for 26 consecutive months to August 2016 following the Chinese crackdown, though have since begun to show signs of modest recovery.
Crown says it is committed to Sydney. Last month the group sold more than half its stake in Macau-based Melco Crown Entertainment for A$1.6bn and pledged to focus on developing its Australian properties.
Most of the planned casino projects rely on apartment sales linked to the resorts to co-fund development. Brisbane’s A$3bn Queen’s Wharf development, which is backed by Star Entertainment, Hong Kong-based Chow Tai Fook and the Australian arm of Far East Consortium, includes plans to build three residential towers blocks.
Australia’s apartment market is booming – prices jumped 10 per cent last year – and that has helped solidify investor optimism about casino resorts. But some analysts are predicting a slowdown in demand, which could hit development plans.
ASF, which is partnering with two state-owned Chinese companies on the Gold Coast project, remains confident.
“It is a short-term blip and over the next year things will calm down,” says Mr Chien. “This is the Asian century and we are targeting a long-term Asian tourism boom.” Jamie Smyth, Financial Times
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