Casinos operator Crown Resorts says tax rates on high-roller play at its Melbourne casino are making the facility uncompetitive with other casinos in Australia and Asia.
Crown Resorts chief executive Rowen Craigie said the Melbourne casino would suffer if the rates were not reduced.
“Melbourne will be trying to compete with one hand behind its back relative to the other casinos,” Mr Craigie told reporters on Friday.
Mr Craigie said the super tax affecting the Melbourne casino had been in place since it had started operating, but it was increasing each year.
Crown is in talks with the Victorian government about the competitiveness of the Melbourne casino licence and the associated tax rates.
“The Melbourne property is certainly of a quality standard that makes it competitive with the properties in Macau and Singapore, but we have a set of tax arrangements in Melbourne that are unique to Crown Melbourne,” Mr Craigie said.
“And that’s namely the imposition of a super tax on the VIP (high roller) business.”
Mr Craigie said that other casinos in Australia, Macau and Singapore have a flat rate of tax, but in Melbourne the more VIP business that Crown attracts, the tax rate increases.
“The effect of that at the moment is that Crown Melbourne is paying an effective tax rate on VIP play of about 14 per cent, which compares to the 10 per cent in NSW,” he said.
“That higher tax rate inhibits Crown Melbourne’s ability to use marketing and other incentives to attract VIP players.
Crown on Friday reported a 111.6 per cent rise in net profit for the six months to December 31 to $382.4 million as it reaped more money from its joint-venture casino-resort operations in Macau and won more money from VIP gamblers.
Excluding the variance in the theoretical win rate on the VIP program and some costs associated with the Macau joint-venture, Melco Crown Entertainment, “normalised” net profit rose 29.4 per cent to $315 million.
But normalised revenue and earnings at Crown’s Australian properties in Melbourne and Perth fell sharply and were below expectations.
VIP turnover fell 25.6 per cent to $23 billion, and main floor gaming revenue fell 0.6 per cent to $757.7 million.
VIP turnover at Crown Melbourne fell 33.1 per cent to $16.2 billion.
Mr Craigie said Crown’s casinos in Melbourne and Perth had been affected by weak consumer sentiment and issues in the local economies in Melbourne and Perth.
Turnover amongst VIP players was below expectations, particularly in Melbourne, which Mr Craigie said reflected the particular competitive challenges facing the Melbourne property.
But Crown’ s joint-venture casino operations in Macau – Melco Crown Entertainment – achieved record results, and was the major contributor to Crown’s profit growth.
Mr Craigie said the focus now would be to improve revenue growth, cost control and margins at the casino-resorts in Melbourne and Perth, manage the development of a new hotel at the Perth property and the proposed casino-resort in Sydney, and help Melco Crown Entertainment with its development projects in Macau.
At 1240 AEDT, Crown’s shares were down 66 cents at $16.57.
