It has been a tough week for the largest casino operator in Australia, and according to analysts, things are about to get even worse.
Crown Resorts Ltd has been found to have been seeking positive presence in local media with full-page advertisements to respond to a series of articles alleging it to have made links with junket operators supporting its high-roller operations and organised crime, Chinese influence operations, etc. In its advertisements in the local media, Crown Resorts has called the reports a “deceitful campaign”, as the company no longer has any relationship with junket operators.
However, experts claim that the problems with the VIP business of the Australian casino company are much deeper than the ones suggested in media reports. Analysts say that it is not only the current scandal and the ongoing Government investigations which have tarnished the reputation of Crown Resorts, but the high-roller business of the company itself is failing.
In the past, wealthy gamblers with special preference to the game of baccarat brought huge amounts of money into the casino operations of Crown Resorts, wagering AU$10,000 a hand or so. What the VIP gambling operations stand out for is not only the fact that the business provides liquidity for the entire casino, but also that it delivers a massive return on capital.
Crown’s Largest Rival Star Entertainment Seems to Be Winning the War
At the time when Crown Resorts’ operations flourished in 2013 and 2014, the company’s VIP business marked a massive growth. As explained by analysts the Macau gambling hub could not accommodate all tourists who were willing to place bets on various casino games.
This helped Australia take advantage of the high-roller gamblers who in one way or another did not get to Macau, bringing its VIP gambling business growth to double-digit rates. At the time, the major competition in Australia was between Crown Resorts and its rival casino company Star Entertainment Group Ltd., with the two operators being aimed to get permission to build a new casino venue situated on the shores of Sydney Harbour – an area which Star Entertainment had thought to be protected from becoming subject to competition by the then-existing license agreements.
Crown Resorts won the battle for the casino, but it lately seems that it is losing the war with its largest opponent.
Currently, Star Entertainment is making expenses related to the revamp of its Sydney- and Queensland-based resorts. As considered by analysts, this spending has undermined the betting pool’s dominance of the largest casino company. Back in 2011, the overall value of high-roller bets placed at Crown-branded casinos in Melbourne and Perth was more than three times bigger than the equivalent turnover generated by Star Entertainment. Since 2017, it is Star Entertainment that has been holding the lead, with its performance being helped by the arrests of Crown employees in China in 2016.
Moreover, the growth of the betting pool itself has slowed down and eventually, stopped. According to reports, high-roller bets placed at the two competitors’ casinos over the 12 months through December 2018 suffered a 15% decline from the peak they reached in the 2015 fiscal year. On the other hand, the economic slowdown in China appears to be one of the reasons why mainland VIP gamblers have become more cautious and avoid spending large amounts of money on foreign gambling operations.
Even though Crown Resorts has not remained without attractions, its high-roller business’ problems are not expected to simply go away, especially considering the regulatory setbacks the company is currently facing.