Star Entertainment Group and its Asian partners are carrying out one of the largest investment and refurbishment programs in Australia’s integrated resort market, amidst projections for surging inbound tourism.
The company, along with Hong Kong-listed Chow Tai Fook Holdings and Far East Consortium, is investing at least $3.6 billion ($2.6 billion) to redevelop the Queen’s Wharf area in Central Brisbane, while it has also spent $850 million on upgrading and expanding the Star Gold Coast, formerly known as Jupiters.
This week, Star also announced it has formally applied for permission for a $500 million project to bring a Ritz-Carlton Hotel to Sydney on the site of its existing property in the city.
“Our focus is on partnering with the state government to drive domestic and international tourism to Queensland and Australia,” Geoff Hogg, managing director Queensland for Star, said in an interview with AGB. “There is currently not so much growth of the domestic market, but we are expecting a lot of growth for the state from overseas,” he said.
Total gambling expenditure in Australia for 2017 was up 3.9 percent at $23.65 billion, though casino revenue was largely flat, up just 0.4 percent at $5.19 billion.
Unveiling plans for the Ritz-Carlton Sydney project, Star CEO Matt Bekier noted that Australia gets about 8.5 million tourists a year now, though that figure is projected to rise to 15 million within a decade, led by the rapidly expanding wealthy Chinese middle class. China arrivals to Australia last year were up 12 percent to 1.3 million.
Hogg said the new properties will help the group meet this demand with a range of its own and international hotel brands to cater for different sectors of the market.
The Queen’s Wharf project is currently in the excavation stage, which is expected to continue until August next year. The first stage of the resort, which will feature hotels, bars and restaurants is on track to open in late 2022. An upmarket Rosewood Hotel is scheduled for completion in 2023, while a plan to upgrade the heritage buildings on the site and open a new Ritz-Carlton hotel and retail mall in the Treasury Brisbane will be finished in 2024. In total, the complex will house five hotels, increasing capacity by about 1,000 rooms.
“The key with an IR is to have a range of partners, it’s about a range of brands that complement each other and don’t compete,” he said, adding that each hotel group caters to a different segment and is able to leverage its own loyalty programs to bring in customers.
The existing casino in the Treasury Brisbane will be transferred to the new IR.
Hogg says the new casino floor will be very different from the feel of the existing property, which contains small rooms split on two floors. The new main floor will be open plan and all on one level. It will have about 2,500 gaming machines, an increase of about 5 percent from now and expects to have about 250 table games, although there is no cap.
The property is expected to cater for a higher number of tourism arrivals, but the company also expects support from the local community.
“The key is that what tourists are looking for is to engage in experiences that locals enjoy,” he said. “Therefore, there will be a significant focus on local food and wine and cuisine.”
The company is scheduled to report its full-year results on August 24, therefore Hogg was not able to comment on the revenue split between VIP and mass market, overseas business and local. However, he said, the mix is continuing to evolve “and will evolve a lot once Queen’s Wharf opens up.”
Rival Crown Resorts reported its results earlier this month, showing a strong rebound in VIP program play turnover, which gained 54.4 percent.
Visitor access to Queensland is expected to improve with the opening of a second runway at Brisbane airport in 2020, which Hogg says will give it the same capacity as Hong Kong, with no nighttime curfew on flights.
“Brisbane will be the gateway to Australia,” he said.
Given the optimistic outlook for growth, the Queensland government may seek to capitalize with the issue of two further IR licenses. The tendering process is already underway for a project in Cairns, with short-listed candidates due to provide their detailed expressions of interest proposals this month. The government has said multiple national and international firms are involved in the process, without giving names.
There has been considerable media talk about another new license for a project on the Gold Coast, though that has not yet progressed. Hogg said the government will need to consider carefully whether South East Queensland, where Star already has two IRs within an hour of each other, would be able to support a third.
The government has already said it doesn’t want any more slots, so if there was another IR, it would likely be tables only, he adds.
Industry experts say the Gold Coast could probably support another IR, which would provide stiff competition for Star, despite the recent upgrades.
“Gold Coast, where Star currently operates in, presents the best opportunity for an additional integrated casino resort. The local and regional day-trip market along with the overnight tourism market are large enough to support a second resort," said Andrew Klebanow, senior partner at Global Market Advisors.
“Cairns is a third proposed location for an integrated casino resort. Unfortunately, there already is a casino in that market, operated by Casinos Austria. The local population is not large enough to support a second casino so any developer would have to create a new market comprised of foreign visitors. A modern integrated casino resort would probably force The Reef Casino to close.”
“Any casino developer that chooses to enter these markets must also understand that the local population is already well served by a number of gambling options. Slot parlors and RSL’s can be found throughout Queensland and their customers are loyal. Those competitors must be factored into any analysis.”
As well as expansion, Star is also studying ways to improve operational efficiencies, including leveraging new technologies to better analyse casino data and improve on energy efficiency and recycling in its hotels.
The group is currently trialling a range of options, with some close to the implementation stage. Hogg said the technical division is currently focusing on the potential of RFID technology.
“Table games have always relied on people. Automating that process is a very effective tool.”
At the Star Gold Coast, work on a third hotel tower to house a Dorsett Hotel gets underway in the next few weeks, adding to the luxury Darling Hotel and the Star Grand.
Once completed, “they will be two great assets working together,” Hogg said of the Queensland properties.
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