It’s no secret that China’s economy is slowing down. The trade war with the US lowered China’s CSI 300 Index by a quarter of its value last year. This economy drop is having some unexpected consequences, particularly on Australia’s casino industry.
For many years, casinos in Australia have relied on high-rollers from China to boost its revenue. These players are few and far between nowadays, and some of the biggest casinos operating in Australia are feeling the impact.
Australia has boasted a strong gambling industry for years. There are numerous land-based casinos spread around the country, the biggest of which is Crown Resorts. This company, owned by billionaire James Packer, is well-known to offer “VIP” packages to wealthy Chinese gamblers. These players have played an important role in bringing revenue to Crown Resorts.
Of course, gambling marketing toward Chinese citizens is strictly prohibited. Almost all forms of gambling are completely banned inside the Republic of China, with the notable exception of Macau. Thousands of high-rollers have flocked to Australia to bet inside casinos legally.
As their economy slows down, more of these high-rollers are choosing to hold onto their money. The lack of big spenders here is now making a serious impact. Revenue figures are down for Australia’s casino industry, and it’s unclear whether this trend will change anytime soon.
The figures here are a little surprising. As we mentioned, casinos like Crown Resorts rely heavily on their VIP programs. This company told investors that revenue from their VIP’s was down by more than 12% to just $19.9 billion in the final six months of 2018. Crown’s after-tax profit from this period last year was just $191.1 million.
This revenue fell short of most analyst’s forecasts. Predictions were that Crown would earn up to $221 in the final six months of 2018. Gambling analyst David Fabris cites a lack of high-rollers as the reason for this decline.
“Overall, the result missed on softer-than-expected VIP within the Australian casinos,” he told the media.
The revenue figures from 2018 represent less than a 1% rise in revenue from the same period the year before. Crown Resorts share prices have plummeted by more than 20% since 2018. Australia’s casino industry is being hit hard, yet other nearby markets are flourishing.
The gambling industry in China is changing rapidly. Macau has been the gambling hub in Asia for many years, yet several countries here are beginning to adopt more lenient laws to open up their markets. Japan, in particular, has completely changed its stance on casino gambling and is now allowing casino resorts in four different cities.
Cambodia is also investing heavily in its casino industry. A huge number of casinos here are popping up in the former backpacker city of Sihanoukville.
The Philippines is one of the most successful countries in Asia when it comes to the casino industry. Casino revenue here will grow by 9% by the end of 2019, according to analysts.
Australia’s casino industry is definitely struggling right now. Crown is scheduled to open a VIP-only style casino in Sydney by 2021. There is fear that the lack of high-rollers here will continue for years. Ken Barton, CFO of Crown, isn’t too concerned.
“Two years is a huge amount of time in this particular business,” he told the media. “We look at longer-term trends … and it’s still a very substantial VIP market across the region.”
The success of Australian casinos will somewhat depend on the status of the Chinese economy. Time will tell whether or not this industry can bounce back.
Do you think Australia’s casino industry will recover by the end of the year? Let us know what you think in the comment section below!
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