Long-awaited opening of Crown Resorts’ new AU$2.2 billion casino resort in Barangaroo near Sydney happened Monday, but casino operations did not commence as the Independent Liquor and Gaming Authority (ILGA) blocked the ASX-listed company from opening its casino until a final decision regarding its casino license is reached.
ILGA Final Decision Pending
Following on Crown’s admission that money laundering might have taken place through its high-roller bank accounts, the year-long ILGA inquiry into the operator’s suitability to hold a casino license ordered the operator to postpone the casino opening, until former Supreme Court judge Patricia Bergin‘s final report.
And while the general perception is that the February 1 report may very well decide the fate of the massive investment, some analysts believe the writing for the casino which relied in its plans heavily on Chinese high-rollers is already on the wall and the report could only serve to limit the damage.
From the moment of its inception in 2018, the new casino resort was defined by Crown’s main shareholder James Packer as a high-roller members-only venue, emphasizing the opportunity from China, promising to deliver the New South Wales (NSW) government AU$1 billion in tax revenue in the first 15 years of operation.
Packer’s claims that the casino would triple the value of VIP gaming business coming into Sydney turned out to be inflated, an admission he made in front of the inquiry members in his hearing in October.
“Clearly that’s wrong but that’s what I believed at the time.”
Packer explained that according to the original business plan, the VIP segment was expected to contribute to only a third of the new casino’s earnings, while its 6-star hotel and hospitality operations were projected to generate the balance to cover construction costs, including AU$800 million from sales of luxury apartments in the tower.
“The upside in Crown Sydney was from the international VIP business.”
Since the 2016 arrest of 19 Crown’s employees in China, the operator’s access to the country’s high-rollers was limited through junket companies only, but after some media reports revealed Crown’s junket partners were closely linked to Chinese organized crime, Crown pledged to never work with junkets before a licensing regime is implemented by regulators.
And while Crown is anxiously awaiting Bergin’s report, China effectively cut all access from foreign gambling operators to its residents, having introduced an amendment to its criminal law targeting companies organizing travels for Chinese nationals outside of the country’s borders for gambling purposes, with provisions for violations of up to 10 years jail time.
It seems now that one-third from international VIP gamblers should be recovered from the local market, targeting lower-tier players, instead of competing with The Star for high-end gamblers. And Crown’s table games limit of AU$25 suggests exactly that, hinting that the operator knew from the very beginning that the high-roller idea would never materialize.
Should ILGA decide to strip Crown off its casino license, other scenarios as for the Sydney property, so for the company as a whole would come into play, including being acquired by its domestic rival The Star Entertainment Group.