Asian high-roller retreat hits profits at Packer's Crown
Billionaire James Packer's casino giant Crown Resorts has experienced a steep decline in the number of wealthy high-roller gamblers coming from Asia, driving down the company's profits over the past six months.
Crown, Australia's largest casino operator, told investors on Wednesday that turnover from its so-called "VIP program" had shrunk 12.2 per cent to $19.9 billion. At Crown's flagship casino in Melbourne's Southbank, turnover from foreign VIP gamblers was down 11.2 per cent, to $17.3 billion.
The company's "normalised" after-tax profit, which removes the volatility of high-roller win rates, had risen less than 1 per cent to $194.1 million, missing analyst forecasts. Macquarie had expected first-half profits of $203 million, while JPMorgan had expected $221 million.
"Crown's Australian operations' first-half result reflected mixed trading conditions," executive chairman John Alexander said. "VIP program play turnover across Crown's Australian resorts ... was down 12.2 per cent after a soft November and December."
The global gambling sector has been gripped by growing uncertainty about the fortunes of their lucrative international high-roller programs where top-end punters, often playing baccarat, can turn over hundreds of thousands of dollars a hand and millions of dollars an hour.
Softening economic growth in China and simmering trade tensions between China and the United States have fuelled fears of a possible pullback in volumes of wealthy Chinese gamblers visiting Australia, and a downturn in VIP revenue, on which casino operators have become increasingly reliant.
Foreign high-roller volumes across all Australian casinos crashed in 2016-17 after the Chinese government embarked on an anti-gambling crackdown and jailed 19 Crown staff for illegal marketing activities on the Chinese mainland. Foreign VIP turnover partly recovered in recent times, but has remained volatile and has failed to return to pre-2016 levels.
Overall the Australian casino sector faced a turbulent 2018, with a downturn in consumer spending and China's slowest economic growth rate in nearly three decades contributing to sharp share price falls, shedding billions of dollars in value. Since mid-2018, Crown shares have tumbled nearly 15 per cent.
Crown Resorts, whose biggest shareholder is Mr Packer, operates venues in Melbourne and Perth, and is constructing a new high-end casino and hotel in Sydney's Barangaroo, due for completion in 2021.