Casino operators are optimistic about VIP gamblers and their return
Australian casinos are facing a decline in foreign high rollers reports per industry analysts. High roller players and VIP gamblers contribute to the majority of all revenues that a casino makes. Casinos across the world have paid special attention to Asian high rollers as they are known to spend millions at the casino tables. Australian casino industry depended heavily on foreign high rollers for a number of years but the trouble for Australia’s real casinos is that the Asian high-rollers are no longer flocking to casinos down under. This is mostly because of trade concerns as China’s economy slows down. However, with the potential of economic recovery, Australian casino operators are optimistic about the return of these wealthy gamblers.
Crown Resorts faces a sharp drop of VIP gamblers
Australian casinos like the Crown Resorts have been reporting a sharp drop in super-rich Chinese tourists who spend huge sums of money. As a result, Crown Resorts is also witnessing a dip in their revenues. It’s not just Australian casinos that are reporting a drop but also Macau’s casinos which is a prime destination of many Chinese VIP gamblers.
Analysts from Macquarie Wealth Management think that the market is set to reverse its fortunes as China’s economy recovers. This will hopefully lead to increased VIP confidence which will drive up VIP attendance and spending at the casinos.
In a statement, the Macquarie analysts said that they now include a VIP recovery in financial year 2020. While they remain cautious on second-half 2019 VIP volumes, with their view that Macau VIP bottoms in the June 2019 quarter, they are optimistic and now forecast a recovery.
Despite the confidence from gaming analysts, the numbers show that a lot of the high-rollers of yesteryear are showing a lot of restraint. Crown Resorts has revealed data to its investors that its VIP program dropped by 12.2 percent bringing in revenues of $19.9 billion which looks good but in reality is a lot lower than it was six months ago.
Crown Resorts is very dependent on foreign high rollers. The casino operator is currently developing its Barangaroo casino in Sydney’s harbourside which is schedules for opening in 2021 but it might be in trouble if the predicted return of high-rollers doesn’t come true.
The domestic business still accounts for more than 80 per cent of earnings before interest, tax, depreciation and amortization and is a higher quality business than VIP having greater earnings visibility and better margins.
Star Casino also shows a drop of VIPs
Besides Crown Casino, Star entertainment, the biggest rival to Crown Resorts is also showing a drop in its VIP gambling numbers. Data shows a 33 percent drop in the last six months, with its Sydney casino seeing a 49 percent drop in VIP attendance. Star Entertainment’s investors don’t have to worry though. The company is still pretty strong despite the hit to its profits as Start has casinos in Sydney, Brisbane, and the Gold Coast. Star Entertainment is less reliant on foreign VIP revenue as it focuses on the domestic market which brings in about 80 percent of its earnings.
The trade war between the U.S. and China didn’t help and the local casinos showed a slow growth rate over the last three decades. Some of the sluggishness was in the high-roller arena. Now they are making back some lost ground. As said above analysts with Macquarie Wealth Management are seeing a “U-turn” in the attitude toward mainland China. They see good news ahead by 2020 in the VIP segment. For now, they caution operators to have patience and await a full recovery.