Inside Asian Gaming

July 2013 | INSIDE ASIAN GAMING 13 But in attempting to assess Crown Sydney’s prospects against this reputed underperformance on the part of The Star it helps to remember that VIP accounts at most for about 35% of Australian casino revenues, if that—and this is“VIP”rather broadly defined, as the project’s proposed minimums show—and Australia accounts for only about 3%of the AsianVIPmarket. Analyst Sacha Krien at CLSA believes Crown Sydney can boost this by $500million a year, which in two years would lift the country’s share to 4%. But what will be the impact of increased competition elsewhere in the region? The Philippines will likely be home to four new integrated resorts in Manila by the time Sydney opens, and South Korea will have expanded at some level, and Taiwan and very possibly Japan will have opened up. Crown doesn’t like the cannibalization discussion and succeeded in beating it back in NSW by claiming that far from slicing Sydney’s pie thinner it will improve VIP revenue at The Star by 15% within three years. Mr Green doesn’t think it will be an issue either. “I think it runs against history,” he says. “If you look at markets that have been liberalized, the liberalization process tends to grow markets over restricted-supply markets, and Sydney is restricted in terms of table supply.” Crown is forecasting $1.4 billion in incremental gaming tax for NSW in Crown Sydney’s first 10 years of full operation, a period it calculates as commencing in 2022. Its submission to the state includes a guarantee of $1 billion in incremental tax over the first 15 years. The government, seizing on the public relations value of this, made its approval contingent on it and included it in its 4th July announcement to the media. What this will mean two decades from now, or how it would be enforced, is anybody’s guess. As it stands, Crown Sydney will have to make good on it without benefit of the monopoly its operating company has always enjoyed in Melbourne. New South Wales figures to win however it turns out. “I look at it as a competitive situation between two operators, one of whom has an extraordinarily better track record than the other,” says Mr Green. “Government can only gain.” “What Sydney gets from this chronically flawed process won’t be what David Murray’s committee outlined. All that really happened was Echo’s Star monopoly being bumped into a ditch.” continent contributing more than half Australia’s projected growth in international travel. Forty-two percent of that is expected to come from China. By 2020, more than 1 million Chinese will be coming annually and contributing to the economy somewhere between $7 billion and $9 billion. In anticipation, “Industry and governments need to deepen consumer understanding, strengthen distribution, develop tailored marketing campaigns, and appropriate product, as well as relevant policy frameworks,” says Tourism Australia, a federal government agency charged with promoting the country. The agency has trained 6,000 travel specialists in mainland China to target potential visitors. In April, former Prime Minister Julia Gillard traveled with a high- level delegation to the country’s No. 1 trading partner to lay the groundwork for an annual trade and tourism fair and to make the Australian dollar only the third currency (after the US dollar and the yen) to be traded directly against the yuan. In May, the country’s second-largest department store chain, David Jones, launched a partnership with UnionPay, China’s leading payment card provider. For consumer sectors such as gaming and retail, it’s more than the sheer numbers, it’s the spending that makes China the brass ring. Its citizens contributed 17.5% of Australia’s total inbound visitor expenditure in the year ended 31st March, contributing almost $3.8 billion to the economy. They outspend all inbound markets, collectively and per capita (A$7,036), the latter at almost double the average of all international arrivals. Tourism Australia expects the Chinese this year will generate about 20% of the growth in visitor expenditure across the board, international and domestic. They already lead all nations in terms of visitor nights, they spend the most on stuff ($1,206), they’re second in entertainment spending ($204) and fifth in spending on restaurants and accommodation ($2,169). And they’re decidedly more interested in casinos than kangaroos.Their gambling spend per trip—$506 on average for the year ended 31st March—exceeds everyone else’s. The only countries that come close are Asian, and one of them is Hong Kong, which is third at $390, just behind Singapore at $400.