Crown Perth Baccarat Revenues Down 24% over Three Years
Crown Perth casino saw a massive decline in baccarat revenues this year, despite a $470 million renovation of the casino’s renovation. Baccarat revenues dropped 24% over the past three years, which has led to a 10% drop in revenues over the 12 months from June 30, 2017 to June 30, 2018.
Western Australia’s Gaming and Wagering Commission issued the report, which shows a tremendous decline in Asian high rollers to the Crown Perth over the past three years. Several factors are given for the drop-off in revenues, but none was bigger than the 2016 arrest of 18 Crown Resorts employees in China.
After Shanghai investigators ruled Crown’s advertising department in China had backed illegal advertisements, 18 employees of the ad department were detained by the Chinese government. Ultimately, the employees spent 9 to 10 months in Chinese custody, before Crown Resorts negotiated their release.
Ultimately, Crown had to pay a $1.5 million fine and sold the remainder of its assets in Macau’s Melco Crown casino company, which renamed itself Melco Resorts & Entertainment. Melco Crown had been a huge factor in Crown Resorts’ rise over the previous ten years.
Crown Stopped Advertising in China
Jason O’Connor, VP of VIP Operations, was the highest ranking Crown executive charged in the incident. Besides leaving the Macau market, Crown also had to stop marketing to the Chinese mainland.
Chinese law does not allow casino companies to advertise individual casino resorts, but they do allow companies to advertise destination cities. Perth no longer received Crown advertisements in China.
Crown Sydney: A High Roller Casino
The numbers from Crown Perth raise alarms for the Crown Sydney, a $1.1 billion casino in the Barangaroo section of Syndey. Crown Resorts won a license from the New South Wales government after agreeing to restrict gambling in the casino only to VIP high rollers.
At the time, Asian high rollers were the fastest growing gambling demographic in the world. China’s economy had experienced a boom unlike any seen in history, which had fueled Macau’s rise to the number one casino destination in the world.
Clampdown on Chinese High Rollers
That was before the anti-corruption crackdown which damaged revenues in Macau by as much as 40% to 45%. Less reported is the fact that many other casino destinations were affected by the crackdown on conspicuous consumption among China’s wealthy elite.
Las Vegas baccarat revenues declined by as much as 20% in the months after the crackdown in Macau, because Chinese officials were concerned about capital flight. Any Chinese high roller leaving the country might be suspected of planning to flee the country before investigators detained them. While many high rollers continued to visit Australian casinos like Crown Perth, enough were dissuaded from doing so that it harmed revenues in the VIP sector.
Baccarat Revenues Are Key
Baccarat revenues are most affected by a decline of Asian high rollers, because baccarat is their game of choice. Baccarat has a house edge as low as 1.06%, making it the casino table game with no strategy required that has the lowest house edge.
Many Chinese high rollers consider the fact baccarat is a game of pure chance to be a good thing. Baccarat players tend to study the tables before joining the game, trying to find the energy flow (chi) at each table. When they believe they’ve found the best table or can sense which side to back, they join the game.
James Packer’s Troubles
The arrests in China led to a return to Crown Resorts for James Packer, after he left the company during his engagement with Mariah Carey. James Packer returned in December 2016, announcing that Crown would focus on Australian operations. Projects in the Philippines and Las Vegas were dropped, which cut off another couple of potential revenue streams for the company.
For a time, it appeared that Packer’s return would boost the company’s fortunes. Packer announced he would focus on the project in Barangaroo, which he deemed the pivotal resort for Crown’s future success. Then earlier this year, James Packer left the company a second time — this time to move to Boston due to “mental health reasons“. His octogenarian mother flew to the United States to see her ailing son.
Weeks later, James Packer left the Boston hospital and moved to his mansion in Argentina. Months later, he moved to Cabo San Lucas, Mexico — a place known for its beaches, bars, and nightlife. Many hoped the change of scenery would usher in a time of calm.
Crown Resorts’ various financial hits do not appear to have dampened the former CEO’s spirits, though he still owns 47% of Crown. Recently, James Packer purchased a home in Los Angeles for $80 million (the home once belonged to Danny Devito). The Aussie billionaire wanted to be nearer to his three children, who live with his former wife in Los Angeles.
Crown Resorts’ Uncertain Future
Crown Resorts faces an uncertain future. It still is the biggest casino company in Australia, but the basic foundation the company built over the past 5 years appears to be shaky at the moment. Crown Perth’s revenues still are among the best in the country, but companies build multi-billion dollar resorts based on leveraging. Big investments need to be paid off.
Which is why it is disturbing that Crown Perth has lost a significant amount of VIP revenues after nearly a half-billion dollar renovation. Western Australia’s Point-of-Consumption Tax could not have come at a worse time.
Of course, the casino industry is unpredictable. Four years ago, Crown looked to be the best-placed of all Australian gambling companies. Its fortunes have waned, but they could swing back in the other direction, based on the next set of unpredictable economic events.