The Star looks to profit from Macau slump Media Man Int

The Star looks to profit from Macau slump - 8th February 2016

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by Perry Williams

Casino operator The Star Entertainment Group is cashing in on the VIP slump in Macau, as more high-rollers desert the world's largest gaming hub to gamble in Australia.

Greg Hawkins, the former Crown Resorts executive who heads The Star's Sydney casino, said it was reaping the rewards as word of mouth spreads about the company's high-end casino offerings particularly at its Sydney casino.

"I think with the trend of 20 consecutive months of decline in Macau you've seen some of the longer-haul destinations like Australia have benefited from some of that slowdown in Macau," Mr Hawkins said.

"We've seen some strong growth over the past couple of years coming into our Sydney property. I think word of mouth does grow and I think that's driving interest at that level in conjunction with some of the slowdown in Macau as well."

Macau's casino revenue has been slammed following an anti-corruption drive by the Chinese government aimed at stamping out illicit money laundering and the flight of capital from the mainland.

Revenues fell by 21.4 per cent in January from a year earlier, marking a 20th straight month of declines. That prolonged fall has piled pressure on some of the gambling industry's biggest names including James Packer's Crown Resorts – which has a stake in the Melco Crown joint venture – to engineer a turnaround in the former Portuguese colony.

CLSA estimates Australia's share of the Asian VIP market more than doubled to 6.8 per cent by the end of the 2015 financial year from just 3.3 per cent in 2010.

Despite that growth, both The Star and Crown have found it tough going in the last year to repeat the sort of explosive VIP growth of 2014-15.

The Star's VIP business almost doubled in 2014-15 after an $870 million upgrade to its Sydney flagship casino finally began to attract more high rollers.

VIPs on a winning streak

But The Star's international VIP rebate revenue, which is what high rollers lose, slumped a massive 33.8 per cent in the four months ended October 31, although the casino operator blamed much of the slump on an abnormally low win rate for the house. Smoothing out the volatility associated with high rollers, VIP revenue fell 8.1 per cent.

UBS expects a 2 per cent decline in VIP revenue in the 2016 financial year to $306 million split between a 8 per cent decline in the first half and 4 per cent growth in the second half.

It tips a strong 9 per cent surge in domestic revenue will lift the company's overall revenue by 4 per cent to $1.2 billion when it releases its half year interim results on February 16.

The Star recently poached a new head of VIP, John Chong, from its arch rival Crown. The executive will be based in Macau to help drive business over to Australia.

Mr Hawkins said he is pleased with the overall trend which is helping it to close the gap on Crown's Melbourne casino.

"Our capital commitment over the last three years – we've developed both hotel, gaming and restaurant environments – have dramatically improved our offering and we're getting that feedback from our customers as well that the gap has closed to some extent in terms of Sydney versus Melbourne," said Mr Hawkins.

"It's a continual focus for us and an ongoing journey. But I think we are on a dramatic improvement path."

(The Sydney Morning Herald)