Business decisions always come with potential risks, yet a lot of companies still push forward knowing that short term losses are needed if it hopes to realize long term gains. It’s even more important if this decision was made to possibly correct a previous foible.
That seems to be the sentiment Australian casino operator Echo Entertainment Group is taking after it announced plans that it was planning to invest AUD$1.5 billion (USD$1.42 billion) in its casino business in Queensland. But the cost attributed to this announcement caused some concerns from Echo’s investors, causing the company’s share to drop 6.7 percent to $2.38.
Currently, Echo Entertainment enjoys a casino monopoly in Queensland. But the price of being the only operator to do business in Queensland has given way for Echo to sit on its laurels with most of its gaming joints in the area getting more and more rusted as the days go by. This (prior) indifference quickly turned against the company after the state mentioned the possibility of opening the state to more operators, stripping Echo of its monopoly and more importantly, giving it more competition in a state that’s desperate to jumpstart its tourism sector.
A number of operators, including Echo’s biggest rival, Crown Ltd., have already expressed interest in acquiring a license in Queensland where it can once again step on its rival’s supposed stronghold and show it up with a bigger and more grandiose resort. It already happened in Sydney after Echo was granted government approval in July to build a casino inside its luxury hotel and residential development in Sydney and there’s no reason to bet against James Packer not taking advantage of another opportunity to bury its rival.
With the potential of seeing more competition in Queensland in the coming years, Echo is finally throwing its long overdue pre-emptive strike by spending all that money to revamp its Jupiters Hotel and Casino on the Gold Coast and the Treasury Casino in Brisbane.
It may be better late than never, but it doesn’t mean that ‘late’ was still the best option.
