Softer economic conditions in China, coupled with the ongoing government crackdown on conspicuous spending, have resulted in a “softening” in VIP turnover across casino resorts in the Asia-Pacific region, including Australia’s Crown Resorts casinos.
On Wednesday, the Australian-listed casino operator reported a 12.2% drop in VIP play turnover across its resorts in the six months ending December 31, 2018, to A$19.9 billion (US$14.24 billion). VIP revenue in Crown’s Melbourne resort was down 11.2%, with a turnover of A$17.3 billion (US$12.38 billion), while Crown Perth reported an 18.5% decline with a turnover of A$2.6 billion (US$1.86 billion).
Crown Melbourne’s earnings before interest, tax, depreciation and amortization (EBITDA) dropped by 3.2% due to the “unfavourable variance” from the casino resort’s VIP program. The property’s main floor revenue, however, rose 2% to A$630.7 million (US$451.33 million), thanks to higher table games revenue (up 2.7%) and gaming machine revenue (up 0.9%).
In Perth, EBITDA fell 8.6% to A$117.6 million (US$841.55 million), along with table game revenue (down 5.2%). Gaming machine and non-gaming revenues were slightly up at 0.7% and 1.8% respectively. Overall, Crown’s total normalized revenue rose 0.9% to A$194.1 million (US$138.9 million).
Crown Executive Chairman John Alexander attributed the drop in VIP turnover to “a soft November and December.” He was quoted by Australian media outlets as saying, “Chinese people, like Australian people, are suddenly feeling a bit poorer than they were a couple of years ago. It all goes to spending patterns.”
As part of its redevelopment plan, Crown Resorts had set out to promote itself as the ultimate gambling destination for rich Asian gamblers. The plan got off to a strong start, but the Chinese government’s crackdown on foreign gambling companies resulted a drop in popularity—and revenue—for the Australian casino operator.
Alexander, however, pointed out that Crown’s Chinese visitors were also weighed down by the “macro factors that we all read about in China.” This includes the Chinese economy’s slowdown, crackdown on spending as well as “further regulation around money transfers.”
And it’s not just the Australian resorts that are affected by the “softening” in VIP turnover, according to Crown CFO Ken Barton. Macau and Singapore were similarly afflicted, experiencing declines in VIP turnover in recent months. According to Barton, “It’s indicative of what we are seeing across the VIP market more broadly.”
The recent dip in VIP revenue appeared to be not a concern for the Australian casino operator, which is also building a VIP-only casino, hotel and apartment project in Sydney. The Barangaroo project is scheduled to be opened in 2021, and Alexander points out, “Two years is a huge amount of time in this particular business… it can change very quickly.”