Australian casino operator Star Entertainment saw spend from its foreign VIP players fall by 49 per cent at The Star casino in Sydney as China’s economy slows and trade tensions with the United States prompts cautious spending on its gaming floor.
Turnover from international VIPs gamblers across The Star’s casinos fell 33 per cent in the six months to December 31 to $20.7bn.
Star Chief Executive Matt Bekier said there had been an obvious increase in ‘caution’ in the VIP international segment.
“The caution relates to uncertainty relating to the trade war between China and the US,” Mr Bekier said. “They just don’t take as much risk as they might have 12 months ago.”
Despite the downturn in international VIP spending, Star Entertainment reported record earnings, EBITDA, statutory NPAT and cash generation in its first half due to ‘high quality, broad-based growth drives strong domestic performance.’
Slots were up 6.3 per cent and tables up 6.4 per cent with all properties gaining market share with Sydney up 9.9 nine per cent and Queensland up 10.6 per cent. Gold Coast normalised gross revenue was up 22.6 per cent.
Chairman John O’Neill AO said: “1H FY2019 saw further pleasing progress in the execution of our plans. We are delivering continued growth in key segments of our business as well as exhibiting effective management of capital expenditure. Our existing and new customers are responding positively to the newly unveiled attractions which provides optimism for the future.
“The Group reported record statutory gross revenue, up five per cent, and record statutory EBITDA, up 65.9 per cent on pcp), supported by a high actual win rate in the International VIP Rebate business. The International VIP Rebate business experienced a high actual win rate of 1.62 per cent and low turn of 9.7 times, which was the lowest over the last five years.
There was a higher win rate in the International VIP Rebate business where slots revenue grew 9.9 per cent, increasing electronic gaming market share to a record 9.4 per cent, and table revenues grew 4.9 per cent supported by solid growth in the private gaming room. International VIP Rebate business front money was down 20 per cent with turnover down 49 per cent.
Mr. Bekier said: “1H FY2019 delivered solid growth in key segments, evidencing effective commissioning of investments and operational improvements. Sydney domestic revenues continue to grow strongly, with the effective transitioning of our highest value guests to Sovereign 1.5 a highlight as we upgrade and expand the Sovereign Resort.
“Pleasing growth in domestic and international volumes in the Gold Coast support our growth strategy and confidence in the long-term potential of that location. Construction of the first joint venture tower has commenced with scheduled completion in FY2022. The Queen’s Wharf Brisbane project remains on time and budget. Lump sum price contract negotiations for the core, shell and façade are expected to conclude in 4Q FY2019, resulting in a cumulative circa 60 per cent of the project’s total capital expenditure being contracted.
“The Group remains focused on executing our long-standing strategy of investing in privileged assets to drive visitation and earnings. Our partnership approach enables capital-efficient, de-risked growth, creating a network of sought after world-class resorts. Management priorities remain focused on execution – improving earnings, delivering on the next stage of our capital plans, commercialisation of our expanded joint venture with Hong Kong-based partners Chow Tai Fook Enterprises and Far East Consortium, and fully implementing an enhanced operating model.”