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Echo Seeks Bigger Brisbane Casino as Packer Threatens in Sydney
Echo Entertainment Group Ltd. (EGP), facing a challenge to its exclusive Sydney casino license from billionaire James Packer’s Crown Ltd., wants a bigger site in Queensland’s state capital to target Asian gamblers.
Echo’s existing casinos in the state, in Brisbane, the Gold Coast and Townsville, are too small to attract overseas tourists, Chief Executive Officer John Redmond said in a phone interview yesterday. Echo is in talks with Queensland’s government about the Brisbane relocation, and the plan is a key priority for the year to June, it said in a presentation.
Both Packer and Redmond are banking on Australia emulating the performance of Singapore, where large resorts opened by Genting Singapore Plc (GENS) and Las Vegas Sands Corp. (LVS) had $5.2 billion in sales last year. Echo wants to expand its Queensland sites as Packer develops plans for a A$1.3 billion ($1.2 billion) Sydney casino tower to attract high-rolling gamblers who wagered A$23.8 billion at Echo’s gaming tables last year.
“We don’t have a compelling enough offering to attract people” to Echo’s sites in the Gold Coast and Brisbane, where its hotel is housed inside the sandstone former state Treasury building, Redmond said. “You need to build or develop something at a scale that allows you to compete with the rest of the world.”
Queensland, the nation’s most indebted state with a deficit forecast at A$7.7 billion for the 12 months ending June, is considering proposals for new casino resorts in the Gold Coast and Cairns as a mining boom slows.
The state government is studying a project proposed by Hong Kong-based businessman Tony Fung for a A$4.2 billion resort in Cairns on the Great Barrier Reef with nine luxury hotels and 1,200 apartments. It’s also shortlisted bidders for a resort and cruise ship terminal to add A$750 million of annual tourism revenue to the Gold Coast.
The Gold Coast market isn’t big enough to support an additional casino, Redmond, a former co-CEO at MGM Resorts International (MGM), said in an interview in April.
Revenue from Echo’s Queensland properties, which also include a casino and conference center in the Great Barrier Reef port of Townsville, fell 3.3 percent in the 12 months ended June amid weak consumer sentiment, the company said.
The amount bet by VIP gamblers, high-rolling tourists who receive perks and free travel in return for wagering tens of thousands of dollars per trip, dropped 19 percent to A$1.88 billion during the year at its sites in the state, according to the presentation. At the company’s Star property in Sydney, VIP wagers rose 29 percent to A$22 billion.
The company was discussing internally how it would adjust its spending plans in response to the threat from Crown, Redmond said. Crown’s Sydney casino project, at the Barangaroo development west of the city’s main business district, was last month moved to the third stage of a state government approval process, beating off competition from an Echo proposal to expand its Star site.
The company aims to reduce costs by about A$60 million by the end of next year as it seeks cash to fund capital spending.
With careful cost control, it’s possible to build a resort for the Brisbane-Gold Coast region comparable to a A$2 billion investment for about A$700 million, Redmond said on a conference call in February.
Echo has set up a Hong Kong-based subsidiary to buy items such as cutlery and furniture direct from China at a lower cost, Redmond said.
“This stuff doesn’t bother me,” he said. “I’ve spent my entire career in the most competitive market in the world.”
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