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Published 08 July 2013 09:33, Updated 17 July 2013 11:15
Crown chairman James Packer told Channel Nine’s Financial Review Sunday that he has a unique perspective on the gambling industry because his father, the late Kerry Packer, was a high-roller.
James Packer believes Crown must triple Australia’s share of the international high-roller gambling market to deliver strong returns to investors on a proposed $1.3 billion casino and hotel project in Sydney.
In an exclusive interview with Financial Review Sunday on Channel Nine, the Crown Ltd chairman also ruled out a takeover of rival Echo Entertainment and said Crown Barangaroo would generate half its earnings from local players. But he dismissed suggestions that the company would target “mass-market” punters.
Packer conceded Crown’s target of tripling Australia’s current share of the international VIP gambler market was ambitious, but said he was confident the growth would not come by eating into the company’s VIP business in Melbourne and Perth. He also said that in that context, paying a higher-than-expected tax rate of 29 per cent in NSW would not be a huge problem.
“The economics on this project are tough,” Packer said. “It involves Crown making some really significant assumptions along the line of tripling the value of international VIP business coming to Sydney, so when your business case is you are going to triple the size of the market, by definition you are making a guess.
“That’s what we have to do to get an adequate rate of return.”
Packer said the growth would come from taking share from established casino hubs like Macau and Singapore, which have a combined 92 per cent hold on international VIP revenue, as well as emerging markets like the Philippines, where Crown will open a Manila casino in 2014 through its Melco Crown joint venture with Lawrence Ho.
“We don’t look at it and think that the business we hope to achieve in Sydney has to come from Melbourne or Perth,” he said. “We think Australia’s probably getting about 2.5 per cent of the Asian VIP business at the moment.
“And for this project to work for Crown, we probably have to take that 2.5 per cent market of the Asian VIP business share that Australia has at the moment to 4 per cent.”