Australia casinos just received a bit of good news from an industry analyst. As the gambling houses continue to compete for Asian high-roller clients, their efforts are paying off and analysts are now optimistic that a recovery could be only a few short months away.
Most of Australia’s casinos have seen a decline in Asian high-roller traffic due to the ongoing trade war between the U.S. and China, which has led to the latter’s slowest growth rate in the past 30 years. Star Entertainment and Crown Resorts have both reported a substantial decline in the high-roller segment, but have also continued to work hard at not losing more ground.
According to analysts with Macquarie Wealth Management, there has been a “U-turn” in the sentiment toward mainland China that the analysts see “flowing into VIP confidence and driving an uptick in volumes.” The analysts add, “We now include a VIP recovery in financial year 2020. While we remain cautious on [second-half 2019] VIP volumes, with our view that Macau VIP bottoms in the June 2019 quarter, we are optimistic and now forecast a recovery.”
The Star saw its turnover from international VIP gamblers drop 33% in the last six months of 2018, coming in at $20.7 billion. The turnover was greatest at its Sydney-based casino, which saw a 49% decline.
Crown has suffered, as well. The largest casino operator in Australia reported just $19.9 billion from the VIP segment, a reduction of 12.2% year-on-year during the same six-month period.
Despite the drop, The Star’s future still remains bright. Macquarie said that the company’s three casinos – on the Gold Coast and in Sydney and Brisbane – have an “attractive” future with the promise of strong domestic growth. The firm added, “The domestic business still accounts for more than 80 per cent of [earnings before interest, tax, depreciation and amortisation and is a higher quality business than VIP having greater earnings visibility and better margins.”
The decline could be more dire for Crown. It has plans to open a VIP-only resort in Barangaroo in 2021, but the negative market has now put those plans in jeopardy. Hopefully for the company, the recovery Macquarie predicts happens so that Crown can breathe a little easier.