James Packer won’t realise his dream of building the world’s best hotel in Sydney unless a casino is attached to it, says casino operator Crown.
And Crown wants to utilise the existing sole casino licence in NSW currently held until 2019 by rival gaming company Echo Entertainment Group, which operates Sydney’s The Star casino.
Crown’s executive chairman Mr Packer recently revealed he wanted to build a luxury hotel at the harbourside Barangaroo development in Sydney, including an attached gambling room for high rollers.
Crown has applied to regulators to lift its stake in hostile target Echo to 25 per cent, from its current 10 per cent interest, which chief executive Rowen Craigie said he was confident of getting.
However he admitted there was work to do, with a two-year time limit on its exclusive deal with Barangaroo’s developer Lend Lease.
“In Australia, the economics of developing five or six star luxury hotels, whether in Perth, Sydney or anywhere else, without a gaming component to cross-subsidise those economics – you’re not going to see those developments in this country,” he told reporters on Friday.
“In the last 20 years there hasn’t been any luxury hotel of scale that hasn’t been associated with a casino.
“We’ve made it clear for Barangaroo Sydney to get a six star luxury hotel, we need to have a VIP gaming component.”
Crown recently launched newspaper and TV advertisements both selling itself and speaking out against Echo, which resulted in the departure of its chairman John Story.
Mr Craigie said on Friday he would be seeing if new chairman John O’Neill held similar views to him about using Echo’s casino licence, but it’s unknown who would be operator.
The other option is seeking a second licence from the NSW government, who would then have to pay compensation to Echo.
Crown on Friday posted a full year net profit of $513.3 million for the year to June 30, a 53 per cent increase on the previous year.
That improvement in profit was driven by a 29 per cent lift in Macau – in which it has a one-third stake – where Crown’s profit share was $135.8 million.
The company also posted higher than average VIP win rates of 1.58 per cent, indicating the house was doing better than usual compared to the players at the baccarat tables.
If win rates had been at the theoretical 1.35 per cent level it would have posted a normalised profit of only $415 million.
However, Mr Craigie described the result as mixed, with ‘lower-end’ gaming and non-gaming revenue at Melbourne’s casino softening and higher end VIP activity in Macau slowing and actually shrinking by July.
Crown has become more dependent on lower-margin organised junket tours for Chinese gamblers, involving middlemen, as opposed to individual premium players which can mean tardy payers or non-payers.
That is a result of a softening Chinese economy.
Crown declared a final dividend of 19 cents per share, 50 per cent franked, taking full year dividends to 37 cents.
Crown shares gave up early gains to finish up three cents at $8.56.
