Crown Resorts’ 2018 revenues report sent company shares plummeting this week, due to a weak play from the Chinese VIP sector. Crown Resorts is the top casino company in Australia, but has faced troubles in the past few years.

Net profits for Crown in the final six months of 2018 were US$139.2 million, which represented a nominal 0.9% increase. Normalized revenue adjusted for expanses, though, fell by 1.2% to $1 billion.

Crown shares opened on Wednesday at AU$8.76, but they lost 5.25% to AU$8.30 during the day’s trading. It was the largest single-day decline in Crown shares in over two years.

A company spokesman blamed a drop in Asian high rollers to its properties. Ken Barton, the Chief Financial Officer of Crown Resorts, told investors in a conference call, “People at the premium end have been coming to the property in the same numbers, but spending less. We’re seeing casual restaurants doing better than premium restaurants.”

Chinese Economic Slowdown

Entrenchment by Chinese high rollers seems to be the biggest factor. As China’s economy slows, its wealthiest residents are likely to spend less on discretionary expenses. While VIPs from China still visit Australia, they dial back their betting on high stakes baccarat.

China’s economic slowdown comes from several factors, but the ongoing tariff war with the United States continues to affect the economy. The yuan has weakened over the past year. Meanwhile, the Chinese domestic economy — especially the real estate sector — is thought to be facing troubles.

Recently, China’s economic overseers announced 6.9% GDP growth for 2018. While 6.9% would be astounding for most western countries, it was the lowest total for China in 20 years. Furthermore, even Beijing officials have admitted in the past China overstates its GDP growth each year (and officials might not know the real figure), so the total is likely far below the amount given.

Crown’s Problems in China

Crown Resorts has its own issues with the Chinese gaming market. The companies continues to feel the effect a 2016 advertising scandal in China, when 17 of its employees were arrested by Shanghai police for an illegal ad campaign.

Gaming companies are allowed to advertise in China, but they cannot advertise their resorts. Instead, their commercials and billboards can mention only tourism to a particular city. A handful of Australian executives and 14 Chinese nationals were detained because they crossed the boundaries allowed.

After 8 to 9 months of detention, Crown secured the release of its seventeen employees with time served and a AU$1.5 million fine. Nearly two years later, though, the scandal continues to hurt business from the Chinese sector.

Crown Resorts Holdings

It is a huge problem, because Crown’s business model has been based on Asian high rollers. The most important segment of customers declined over the past 3 years. Crown Melbourne is the major destination for Chinese high rollers, though some visit Crown Perth.

The company also owns (50% of) a casino in the United Kingdom, Crown London Aspinalls, which is more dependant on business from the UK and the European continent. Crown Resorts also owns 50% of Betfair Australasia Pty Lt, an online betting exchange.

Crown Barangaroo’s High Rollers

In 2021, the Crown Barangaroo will open in Sydney Harbour. Sometimes called the Crown Sydney, the integrated casino resort — by New South Wales law — will be open only to high rollers. When Crown Resorts won the license for the Sydney casino, it was seen as a tremendous coup, because it ended the long casino monopoly for Star Sydney, which was owned by Echo Entertainment (Tabcorp).

The intervening years means the Crown Sydney will open at a time that Asian high rollers could be spending less on their foreign baccarat trips, while Crown might be hamstrung in attracting those high rollers to their multi-billion dollar casino.

James Packer’s Shares of Crown

James Packer, the son of the late Aussie media mogul Kerry Packer, owns 47% of Crown Resorts, which operates Crown Melbourne, Crown Perth, and two other integrated resorts. James Packer left the Crown board of directors last year to rest and recover from mental health issues.

About the Author
April Bergman avatar
April Bergman

April Bergman was a longtime news blogger for BOC. She wrote gaming news posts from January 2013 until September 2018. April also wrote slot reviews, strategy articles, and online casino reviews for the site.

April Bergman began in the online gaming industry in August 2010. From 2010 to 2013, she managed evergreen content for several top online casino. Her duties included developing and maintaining multiple websites in the gaming space. When not writing about online gambling, April loves horse racing, travel, photography, and gardening. She's began in the business as a devoted poker players and spent several years as a card game editor on the now-defunct DMOZ. These days, she lives with her husband and two children in the Toronto metropolitan area.

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April Bergman was a longtime news blogger for BOC. She wrote gaming news posts from January 2013 until September 2018. April also wrote slot reviews, strategy articles, and online casino reviews for the site.

April Bergman began in the online gaming industry in August 2010. From 2010 to 2013, she managed evergreen content for several top online casino. Her duties included developing and maintaining multiple websites in the gaming space. When not writing about online gambling, April loves horse racing, travel, photography, and gardening. She's began in the business as a devoted poker players and spent several years as a card game editor on the now-defunct DMOZ. These days, she lives with her husband and two children in the Toronto metropolitan area.

READ MORE
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