Crown Sydney revenue affected by loss of VIP market, analysts say
Fitch Ratings says Crown Sydney’s return on investment will be slower than initially expected due to the loss of the Chinese VIP market and competition from The Star for the premium mass market.
Australia.- In a new report titled “What Investors Need to Know: Australian Gaming,” Fitch Ratings says Crown Sydney’s return on investment will be slower than expected.
According to analysts, the loss of the Chinese VIP market and competition from The Star Sydney, which already offers mass premium gaming in Sydney’s Barangaroo district, will cause slow returns for Crown Sydney.
They said: “This market is already serviced by The Star in Sydney and, while the new offering may attract players and increase the market size in Sydney, we do not believe any potential step-up will be enough to see both casinos operate without some cannibalisation of revenue.”
Crown Resorts’ Barangaroo casino licence is still on hold after the ILGA’s inquiry in February found Crown to be “quite unsuitable” to hold a licence for the new casino. Non-gaming facilities at the property have opened, with a liquor licence now extended until October 2021.
In May, the ILGA said that if Crown Resorts continues taking steps to address the findings of the ILGA’s inquiry into the operator, it may be able to retain its gaming licence and open its casino at its venue in Sydney’s Barangaroo district by October.
However, when it’s finally granted, the licence is due to allow the casino operator to generate revenue from VIP and premium players only, so it cannot run slot machines, which are the main revenue driver for Australian casinos
Crown must pay AU$12.5m to cover the cost of the ILGA inquiry and must pay an annual Casino Supervisory Levy of AU$5m for fiscal years 2021 and 2022.
Star Entertainment and Crown Resorts possible merger
Crown Resorts CEO Steve McCann has met with The Star Entertainment CEO Matt Bekier to talk about a potential merger of the two casino operators.
In May, The Star Entertainment made an unsolicited non-binding offer of AU$12bn (US$9.4bn) for Crown Resorts.
Although more details of the virtual meeting have not been released, according to local media, McCann may be willing to work on a deal and may have asked Star to provide more details about its offer.
Star Entertainment previously said the fusion would deliver between AU$150m to AU$200m of cost synergies per annum with an estimated net value of AU$2bn.
It’s been suggested that The Star Entertainment could help Crown Resorts solve its regulatory problems faster than Blackstone or Oaktree thanks to its experience as a casino operator in Australia.
