James Packer’s casino behemoth Crown Resorts has faced a decline in Chinese high roller’s spending, at a time when the Chinese economy marks its slowest growth in about thirty years.
As revealed by the casino operator’s Executive Chairman John Alexander, the challenging economic conditions in China and stricter regulation on conspicuous consumption there have led to a decline in the so-called VIP gamblers at the Melbourne and Perth casino venues of the gambling giant. Mr Alexander explained that these economic effects make Chinese people feel poorer than they had been several years ago, so logically, their spending patterns changed.
As revealed by the company on Wednesday, the high-roller turnover generated by the Australian locations of Crown Resorts suffered a 12.2% decline in the second half of the year ended on December 31st, 2018, reaching AU$19.9 billion. The giant’s biggest customers spent less money in both Crown Melbourne and Crown Perth, with the Melbourne property’s VIP revenue declining by 11.2%, and the Perth casino seeing an 18.5% high-roller revenue drop.
The Australian casino operator reported that the smaller number of high-roller gamblers from China, who visit Australia on a regular basis and spend large amounts in local casinos, the group’s turnover could be volatile in any one half. Apart from that, the Executive Chairman of the group explained that the overall slowdown in the Chinese economy would probably have a negative impact on the Chinese visitors of the Crown Resorts’ casinos.
According to Mr Alexander, however, the drop in VIP revenue was not a concern, as Crown Resorts is still intending to open a VIP-focused venue, including a casino, hotel and apartment project in Sydney’s Barangaroo precinct. The facility is set to start operation in 2021.
Challenging Economic Conditions Make Uncertainty Grow
For some time now, gambling operators worldwide have been hit by growing uncertainty regarding the future of their international high-roller programs aimed at primarily attracting Chinese gamblers who often play baccarat.
Now, Crown Resorts, which is currently the largest casino operator in Australia, has been hit by the same difficulties. The slower economic growth in China, the ongoing trade tensions with the US, as well as the Government’s crackdown on conspicuous consumption have fuelled fears that the number of wealthy Chinese gamblers visiting Australia could be reduced, which would lead to a decline in the high-roller revenue on which local casino operators have been relying lately.
Unfortunately, it is not Chinese high rollers who are spending less. For the time being, Australia seems to be affected by a larger decline in the Asian VIP market, as Singapore’s high roller turnover declined by about 14% in the quarter ending on December 31st, 2018. Macau also saw a drop in recent months.
As revealed by Mr Alexander, the brand’s casino property in Sydney was intending to focus on attracting local high rollers.
The Melbourne and Perth properties of the gambling giant saw a 3.2% decline in their earnings before interest, tax, depreciation and amortisation because of the declining high-roller turnover. However, a slight increase in the company’s revenue generated from gambling machines, table games and non-gaming lines.