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Australia's Queensland Dives Into Asian Gaming With Splashy Casino Resort Plans
Muhammad CohenContributor
I cover casinos and travel in Asia.
Best known for the sun, surf and the Great Barrier Reef, Queensland hopes to make waves in the Asian gaming market with big plans for casino resorts. State Premier Campbell Newman, facing a tough reelection campaign next year, is leading the headlong dive in gaming with plans for three new multibillion dollar integrated resorts (IRs) as a cure for Queensland's economic, employment and state revenue woes.
Queensland already has four casinos, more than any other Australian state, and an additional 45,000 gaming machines in 1,270 pubs, hotels and clubs often run by community organizations, such as veterans associations. Revenue numbers have been weak in recent years. Mineral exports, a mainstay of the state economy, have been hit by lower demand from China following the 2008 global slowdown. Tourism, another key pillar, has fallen as a strong local dollar encouraged Australians to take their holidays abroad and discouraged overseas visitors from choosing to vacation there. A 10% drop in the Australian dollar's value should help reverse those effects, but Queensland must still contend with the sluggish national and regional economy plus state debt in the vicinity of $75 billion.
Queensland isn't clowning around with plans for three casino resorts on the doorstep of the Great... [+] Barrier Reef that could cost $15 billion. (Photo credit: Wikipedia)
Looking longingly at Singapore's success boosting tourism with its IRs, state officials hope to revive growth by granting three new casino licenses, one in Brisbane, one in nearby Gold Coast and one in the more remote northern part of the state dubbed regional Queensland. The IRs should be "iconic," Premier Newman says. "We're not just looking for a hotel and some shops."
In a song heard across the gaming world, Queensland is counting on Chinese tourists to fill those new IRs. Chinese tourism has been growing steadily for Australia overall and for Queensland, becoming the number two source of visitors behind neighboring New Zealand. All four of the remaining shortlisted contenders for Queensland's licenses have strong China connections.
In Brisbane, Australia's third largest city, James Packer's Crown Resorts hopes to repeat its success in Sydney, where it won a license to compete with smaller rival Echo, bidding to protect its exclusive in Queensland's capital. Echo currently runs Brisbane's Treasury casino in a landmark building that constrains its ability to make changes. The current casino is adjacent to the site for the new IR, part of a wider urban redevelopment scheme called Queen's Wharf Brisbane. The government has thrown a news blackout over bidders to prevent public disclosure of their proposals.
In June, Echo teamed with another shortlisted Brisbane bidder, a partnership of Hong Kong developer Far Eastern Consortium and Chow Tai Fook, controlled by Cheng Yu Tung, a key player in Macau's gaming scene. The billionaire made his first fortune with Chow Tai Fook Jewelry, then began investing in Hong Kong property, founding New World Development in the 1970s. In 1982, he bought a 10% stake in the parent company of Stanley Ho's gaming empire. Earlier this year, Cheng bought a major share in Macau junket promoter Suncity Group for nearly a billion dollars.
Cheng gives Echo a link to mainland high rollers through the Macau junket network that it needs to compete with Crown, a partner in Melco Crown, operator of Macau's City of Dreams. On its own, Crown has been singularly successful in tapping the Asian market at its flagship Melbourne resort. For good measure, Crown has partnered for the Brisbane project with mainland China developer Greenland.
In Gold Coast, the resort area about an hour's drive south of Brisbane, the government has granted a provisional license to ASF Group, a Chinese investment specialist in Australian project, working with two major state-owned Chinese construction firms. The $4.2 billion Broadwater Marine IR project includes a cruise ship terminal and marina.
In regional Queensland, the state government has tapped Hong Kong billionaire Tony Fung, who has extensive experience developing property in Hong Kong, mainland China and Queensland, for Aquis, a resort on the outskirts of Cairns, on the doorstep of the Great Barrier Reef. The $4 billion first phase would have 4,000 hotel rooms and a casino with hundreds of tables and machines, and the full project, with 7,500 rooms plus more than 1,000 luxury residences, is budgeted near $8 billion. Fung has also bought the Reef Casino in Cairns. "Our goal is to introduce a whole new generation of Australian and international visitors to Cairns and far north Queensland and get them coming back for more," Fung, the son of Sun Hung Kai Group co-founder Fung King-hey, says.
Not everyone is sold on the idea of new IRs for Queensland. "I haven't really heard what the business rationale of the bidders is to justify those levels of investment," Ovion Partners managing director Peter Klugsberger says. "Who are the target customers? Just to mention 'Chinese tourists' is a bit vague." The Sydney based consultant and former Marina Bay Sands gaming executive believes the resorts can't succeed without "mountain loads" of Chinese mass market players or top end VIPs willing to fly six to 10 hours to reach Queensland.
"Queensland tried many years ago to capitalize on Japanese tourism, which did not succeed to any marked extent," Newpage Consulting principal David Green, once an Australian state gaming regulator, says. "Note the politics of foreign ownership is still a dynamic that needs to be understood," he warns. Queensland is the birthplace of anti-immigrant, anti-Aboriginal politician Pauline Hanson.
"Brisbane is a decent opportunity," an Australian gaming executive speaking on condition of anonymity believes. "There's no reason [Crown] Perth should be performing better than Brisbane." As for the rest of Queensland, "I'm not sure the others will go ahead." Crown, which reportedly seeks 13% return on invested capital, passed on opportunities beyond Brisbane, choosing instead to take a second shot at Las Vegas. The bidders outside Brisbane have never run casinos. There's plenty of talent out there to help, but the absence of interest from major international operators, who are all over Japan's proposed casino legalization as they were in Singapore, speaks volumes about the relative quality of the Queensland gaming market.
GamePlan Consulting founder Sudhir Kale studied the south Queensland market for the state government. Based on 2012 figures and projections for organic market growth, he concluded there was room for "one large resort or two smaller ones." But the government wants two world class IRs there, plus one more to the north. If all go forward, developers could find themselves playing losing hands.
For more about Queensland's casino ambitions click here.
Muhammad Cohen
As editor at large for Inside Asian Gaming following nearly a decade as a special correspondent for Macau Business magazine, I cover the casino business in Macau and
As editor at large for Inside Asian Gaming following nearly a decade as a special correspondent for Macau Business magazine, I cover the casino business in Macau and throughout Asia. I'm also a contributor to Asia Times, This Week in Asia from the South China Morning Post andand The Guardian. After writing in the US for The New York Times, Washington Post, Sports Illustrated and others, I joined CNN as a news writer and producer in Washington, then moved to Hong Kong in 1995 (for six months, I thought) as a producer with CNBC. In Hong Kong, I returned to print at Bloomberg as a regional business editor, worked as an editor at both Hong Kong English language dailies and headed Asia-wide media relations for a top US multinational. I'm also the author of Hong Kong On Air, a novel set during the 1997 handover about TV news, love, betrayal, high finance and cheap lingerie, and founder of Writing Clinic, where writing gets better. You can follow me via my website www.muhammadcohen.com, on Facebook and Twitter @MuhammadCohen.