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Australia raises the stakes in global grab for gambling dollars

14 April, 2015

Australian casino giants are placing all bets on overseas gamblers as the industry gears up for the opening of three new mega-casinos in the next five years, in response to burgeoning wealth in Asian nations and a boom in spending by high-rolling gamblers.

The Australian casino industry is forecast to enjoy revenue growth of 10.3 per cent between 2014-15 and 2019-20, to reach $6.2 billion, most of which will likely be driven by Asian gamblers.

Increasing the number of casinos in Australia by 23.0 per cent, IBISWorld believes the opening of these new casinos is reflective of strength in an industry being bolstered by high levels of domestic spending as well as increasing levels of foreign gambling dollars.

The proposals for the new casinos are set to follow the global trend of resort-style casinos and hotels, rather than simply offering gaming services. China's gambling hub in Macau is indicative of this shift, and many global casino operators have sought to establish joint ventures in Macau. US-based Las Vegas Sands Corporation owns several casinos and hotels in Macau, and Australia's largest player, Crown Resorts, also has a joint venture in this region.

"No new casinos have opened in Australia since Accor Casino Investments opened the Reef Hotel Casino in Cairns in January 1996," said IBISWorld senior industry analyst Spencer Little. "This is all set to change, as the effects on the mid to high end of the gambling market will be significant, and will include increased competition and improved revenue flows, not to mention resulting benefits for local tourism and hospitality."

Existing Australian casinos

Over the past five years, the Australian casinos industry has grown modestly due to high levels of per capita gambling expenditure, and rising discretionary income. A 2013 study in The Economist found that Australian gamblers spend more money on gambling services than any other country, with adults on average losing over $1,000 per annum. Casino gaming activities accounted for the second-largest share of these losses, at just under $200 per resident adult.

Crown Resorts is the industry's largest player. Crown Melbourne has been in operation since 1994, and Crown Perth was upgraded and rebranded under the Crown name in 2012. Echo Entertainment Group has also grown over the past five years, with its three casinos in Sydney, Brisbane and the Gold Coast all performing well.

Echo Entertainment also operated Jupiters casino in Townsville, QLD, before selling the smaller establishment to Colonial Leisure Group in October 2014, in a move to consolidate its asset base and focus on core markets.

"The industry's two largest players have asserted their dominance and increased their control over the market over the past five years, in large part due to increased expenditure on marketing" said Little. "Crown Resorts benefited from the rebranding of the Perth casino in 2012. It has also sought to develop new hotels and expand its accommodation facilities to attract more wealthy international visitors. Echo Entertainment Group has employed a similar strategy."

New casino proposals

While these established players have dominated the industry for more than a decade, IBISWorld expects that the planned opening of three new mega-casinos will shake up the industry over the next five years. The Aquis Great Barrier Reef Resort is estimated to cost $8.2 billion and is planned to be located just north of Cairns, while a Chinese consortium has plans to build a $7.5 billion resort on the Gold Coast.

"These two new mega-casinos are expected to be operational by 2018-19," said Little. "Both groups have signalled their intention to build luxurious, resort-style casinos to attract wealthy VIP gamblers from South-East Asia."

Crown Resorts has received approval to build a new casino in Barangaroo in Sydney's Darling Harbour. Crown has been granted a restricted gaming licence for this casino, where only table games such as blackjack, poker and roulette can be offered.

"Crown's purchase of a restricted gaming licence for the new casino suggests that the company is set to target wealthy tourists who gamble on high-stakes table games," said Little.

Global competition

The success of these new casino developments will depend on global competition from gaming hubs within the Asia-Pacific region. While the new mega-casinos in Australia will target wealthy Asian tourists, the popularity of casinos in Macau, for example, may limit the number of international tourists visiting the new casinos.

The Japanese Government is considering lifting its ban on casino gambling, which would create further regional competition for Australia's new and existing casinos.

"Macau, with its 33 casinos, is a particularly high-growth market," said Little. "The region has attracted an increasing number of international high rollers and tourists to its luxury casinos. Macau has surpassed Las Vegas in revenue over the past five years, which is a colossal achievement," he concluded.

Once considered the heavyweights of the global casinos industry, traditional gaming destinations such as Las Vegas and Atlantic City in the United States and Monte Carlo in Europe are losing ground to gaming regions in Asia. Despite this competition, Australia's three new casinos and existing operations are all expected to benefit from additional gambling tourists visiting the region over the next five years.

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