Star Entertainment said this week that a drop in VIP revenues and an unwillingness to “take risks” by marketing itself to Chinese high rollers will force it to pivot its focus on other regions.
The company, which operates The Star, Sydney’s only licensed casino, announced that turnover from international VIP clients had dropped 27 percent in November and December, thanks largely to the arrest of 18 Crown Resorts staff members late last year.
The employees were detained allegedly for marketing Crown Resorts’ services to high rollers on the Chinese mainland, and remain in custody.
Eighty percent of Star’s VIP business has traditionally come from China and Hong Kong, but the arrests have spread jitters through the industry. In an earnings call this week, Star CEO Matt Bekier said there was now more “uncertainty” about marketing services to China.
“We’re being a lot more cautious,” said Bekier. “We’re not taking any risks. We continue to assess the North Asian VIP business as the China situation develops. We are executing our strategy of diversifying our international revenues.”
“Diversifying,” in this case, means becoming less reliant on Chinese VIP business, said Bekier, who is looking to South Asia, Thailand in particular, to provide blue-chip clientele.
The Star expects its international VIP turnover from China to fall to 50 per cent, which it hopes will be offset by an increase from South Asia to 25 per cent. Another 25 percent will come from South Asia’s “mass premium” segment, which, presumably, is the one just below high rollers.
Macau Crackdown Subsides
Star isn’t the only casino company reducing its exposure to China. In the wake of the its employees’ arrests, Crown’s James Packer decreased his company’s stake in Macau by selling $800 million of its shares in Melco-Crown, a joint-enterprise with Macau casino magnate Lawrence Ho, back to the company.
This week Australian jobs website Seek said it is in talks to buy Packer’s stake in Zhaopin Ltd, China’s biggest careers platform, in a deal which would further reduce Packer’s investments China.
Packer wants to focus on projects closer to home, but his partner in Melco-Crown was bullish on Macau’s prospects in an earnings call this week. Ho believes that Beijing’s anti-corruption crackdown, which sent the enclave into a 25-month downward revenue spiral, has eased over the past few months.
“The anti-corruption and anti-extravagant crackdown in China has subsided,” he said. “So our customers and the people who really did nothing wrong over these years, they don’t have a fear of coming to Macau, so we are seeing that, and I think that is by far in a way the main reason for the recovery.’’