Sydney readying for Star and Crown duels

Crown Resorts latest venue is set to shake up Sydney’s casino sector when it opens in in Barangaroo in 2021, and wealthy Asian visitors currently heading for The Star will likely be in the company’s sights.

However, Crown Sydney will have more than just a city rival with which to contend. 2018 saw the Australian casino sector suffer reduced consumer spending prompted, in part, by China’s faltering growth.
Since mid-2018 to December, the share value of Crown Resorts and Star Entertainment Group, Australia’s two largest operators, fell by around 20 percent. Crown went from $14.32 to $11.58, around $2bn of its market value. Star fell from $5.16 to $4.07, while SkyCity, the country’s third-largest operator, experienced a 15 percent drop.
It is unclear whether a second Sydney casino will be able to grow the VIP market or will cannibalise visitors from Star’s property.
The market consensus is that Crown will have around 125 VIP gaming tables at its Barangaroo casino. Analysts suggest that if each table at Crown Sydney can generate
$2m, the casino could generate an uplift of $250m EBITDA a year.
“Whether this is all market growth or taken from Star Sydney will be a key question,” said Donald Carducci, gaming industry analyst with JP Morgan.
Success may also hinge on whether the New South Wales’ government relaxes its position on licences for VIP poker machines. The state’s premier, Gladys Berejiklian, has repeatedly ruled out poker machines at the new Sydney casino but that has not prevented Crown from continuing to lobby the government.
“Barangaroo is becoming a larger part of the conversation as analysts are now starting to consider how to factor it into their numbers and its impact on both Sydney and Star in 2019,” Carducci continued.
In 2018, Crown Melbourne grew (mainly Asian) top-end VIP revenue by an impressive 73 percent to $591m. It is equally possible this growth could suffer as Crown Sydney joins the fray.
“If you have two casinos in Sydney, it likely makes Melbourne a little less attractive,” Carducci added. “Crown Melbourne may suffer as a result of a preference for Sydney as the first port of call for Australian inbound gamblers.”