Australia’s Ailing VIP Segment to Rebound in 2020 Due to New Economic Sentiment in China: Analyst
Posted on: April 22, 2019, 02:30h.
Last updated on: April 22, 2019, 03:49h.
Australia’s casino sector is in the midst of VIP meltdown, although analysts predicted this week that recovery is in sight – just not until the next financial year.
The downturn in Chinese VIP spending at the country’s two top casino operators has been marked in recent months.
Crown Resorts announced in February that revenues from its VIP program fell 12.2 per cent over the six months to December 31, while at the Star’s casinos it was even worse: a 33 percent plunge over the same period, with revenues at its flagship Star Sydney casino down 49 percent.
It’s not so much that fewer of China’s super-wealthy gambling classes were making it to Aussie shores in 2018, just that they were spending — and betting — less when they got there. The theory is they’re unnerved by the slowing Chinese economy and the economic uncertainties surrounding the ongoing trade dispute with the United States.
But at least one analyst believes clear skies are in the offing. Macquarie Wealth Management said this week that it perceived a U-turn in economic sentiment in mainland China, which was “flowing into VIP confidence and driving an uptick in volumes.”
Macquarie said while it remained cautious on VIP volume in Australia for the rest of 2019, it was optimistic about a VIP recovery in 2020. It expects Macau – which is also suffering from weak high-roller play – to bottom in Q3 2019 and return to VIP growth, which will later spread Down Under.
Chinese VIPs Fell for Aussie Dollar
Australia was a major beneficiary of travel restrictions imposed by Beijing in 2014 on Chinese visiting Macau, as well as on the movement of money into the gambling hub from the mainland.
Many VIPs headed for Australia, which became an increasingly attractive destination for wealthy Chinese who were losing faith in the yuan, freaked out by the crackdown in Macau, and eager to shift their wealth offshore and into Australian dollars.
From 2012 to 2017, Chinese tourism doubled, and wealthy Chinese were not just splashing their cash at the baccarat tables of the Crown and Star, but also investing heavily in ventures in the country.
The VIP segment took a big hit in 2016 when 18 Crown staff were arrested in mainland China and prosecuted for marketing Crown’s services to Chinese citizens. The incident forced Crown and Star to step back from their extensive VIP marketing operations in China, stemming the flow of high-rolling clientele.
Great News for Crown Sydney
The VIP segment is vastly lucrative for casinos and relies on a lot of money being wagered by a few. High-rollers began to return in the wake of the Crown scandal but appeared to be spending more cautiously, which has been attributed to the aforementioned geopolitical fears.
But Macquarie’s optimistic take will be welcome news to the Australian casino sector – especially Crown whose Crown Sydney is scheduled to open in 2021. The casino was conceived at a time when the VIP segment was in glorious health and was designed very much with the Chinese high-roller in mind.
The news may also be greeted with interest by Wynn Resorts, which earlier this month proposed, then withdrew, a $7.1 billion offer to acquire Crown, but which many believe is still in the hunt for the Australian casino giant.
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