Crown Resorts, the casino giant by James Packer is suffering from a sharp drop in spending because the Chinese high-rollers are appearing in smaller numbers. The slowdown in the Chinese economy is affecting the Crown’s revenues as the country experiences its slowest growth in almost thirty years.
John Alexander, the chief executive of Crown Resorts who are building Australia’s tallest skyscraper, said that the Chinese people are feeling a bit poorer than a couple of years ago, just like the Australians. He noted on Wednesday that it all goes to spending patterns. Gambling operators worldwide are working in uncertain circumstances as they depended extensively on high-rolling punters from China, who are fond of playing baccarat. They could turn hundreds of thousands of dollars a hand and millions of dollars every hour.
Apart from the slowdown in the Chinese economy, the government’s crackdown on conspicuous consumption isn’t helping the gamblers. The country is also feeling the effects of simmering trade tensions with the United States, which are leading to a likely downturn in the volume of wealthy Chinese gamblers visiting Australia. This would also lead to a loss of VIP revenue, which had become a significant source of income for the casinos.
Crown VIP program has experienced a 12.2 percent decline in its turnover to $19.9 billion, which dented the company’s profits for six months ending December 31. At Melbourne’s Southbank casino, Crown’s flagship location, VIP turnover was down by 11.2 percent to $17.3 billion.
Crown missed forecasts because of this as its normalized after-tax profit, removing the high-roller win rate volatility, had risen by less than 1 percent to $194.1 million. Experts like JP Morgan expected $221 million in normalized profits while Macquarie Research expected them to be $203 million for the first half. Macquarie’s senior gaming analyst David Fabris said that the disappointing results occurred because of the softer VIP turnover in Australian casinos.
Crown’s share prices slumped by 5 percent in morning trade, reaching $11.50. Fabris also said that he is cautious about the VIP program at the casino for the second half as well. The growth could decline by 16 percent as Chinese macro appear challenging and domestic growth is still low.
Foreign high-roller volumes crashed all across Australia in 2016-17 as the Chinese government is following an anti-gambling crackdown. It jailed 19 staff members of Crown for illegal gambling activities in the mainland. Though VIP turnover has increased in recent times, but it hasn’t been as good as pre-2016 times. The softening of revenues is being experienced all across the Asia Pacific region, according to Crown’s chief financial officer Ken Barton. He said that revenues have fallen in Singapore and Macau as well.
Crown Resorts is currently building a new high-end casino and hotel in Barangaroo in Sydney which is set to complete in 2021. The company is confident of the success of this multi-billion dollar project.