Aussie Casino Tourism Reeling After China Arrests

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Monday, October 17th, 2016 | Written by Lucy Brown

Australia’s land-based casinos are thriving, but it’s not because Aussies have developed a sudden passion for gambling. Instead, the country has now become a major gambling tourist destination for wealthy Asian business people who once frequented many of Macau’s numerous casinos. At the end of last week, however, the upward surge in Asian casino visitors seems to have finally reached a major stumbling block after 18 Crown Resorts Limited employees working in China were arrested for “suspected gambling crimes” and encouraging the country’s citizens to travel and gamble abroad.

The Good Times

Between 2015 and 2016, the number of Asian tourists visiting Australian casinos doubled to 2.36 million people, with Asian high-rollers subsequently accounting for a huge 95% of the gambling venue’s VIP segment. There are a number of reasons why Australian cities are now gambling hot spots for Asians, and especially the Chinese, so let’s take a look at them:

1. Tourism 2020

Australia has been carrying out a major push to encourage all types of tourism through an initiative called Tourism 2020. The government has been marketing the appeal of Australian vacations in various locations around the world, and given the proximity of Asia to Australia, the region has been one of the most heavily targeted as a part of the campaign. Asian tourists are now visiting Australia for all types of leisure travel, and many make at least one visit to the casinos during their stays.

2. Macau’s Woes

In 2014, China began an anti-corruption crackdown, targeting wealthy business people who the government claims were involved in illicit activities. Many of these individuals were VIPs at casinos in Macau, and as a result of the crackdown, casinos in Macau subsequently saw their gross gaming revenues plummet. Up until then, VIPs had accounted for more than half of all of the casinos’ revenues, and for the following 26 months their monthly revenues fell. Meanwhile, many of the VIPs have found Australia to be a less hostile place to gamble.

3. Gaming-Friendly Laws

Australia is a welcoming environment for players, as their casino laws are relaxed. The country encourages high rollers to win and lose as much as they desire without closely monitoring the sources of the funds being used. In Macau, on the other hand, high rollers are placed under scrutiny, and those gamblers placing huge bets may find themselves being investigated, even if they have done nothing wrong.

4. Rise in Income

Despite economic woes throughout most of the world, a section of Chinese society has been able to maintain a very high standard of living. Even among the middle class in the country, there is plenty of disposable income available for fun at casinos.

5. Non-Gaming Opportunities

Macau is making an effort to become more of a resort destination, but China’s only legal gambling destination does not boast all of the tourism opportunities that Australia has to offer. Chinese tourists can visit the Great Barrier Reef, the Sydney Opera House, The Great Ocean Road and the Outback all while enjoying a gambling trip, with the huge variety of things to do having made Australia a very appealing destination.

6. Package Specials

Australian casinos are doing all they can to attract Chinese players. Most casinos, for instance, have Chinese-speaking dealers at some of their tables, so those who do not speak English can still have a great experience. Attractive VIP packages that include luxury accommodations, in-house credit, meals and entertainment are making planning casino vacations more affordable and simpler.

Therein Lies The Problem

While China is not opposed to its citizens traveling to overseas for vacations, the country is opposed to foreign operators bypassing its anti-corruption campaign by offshoring them to overseas jurisdictions. In 2015, for instance, thirteen South Korean casino managers were placed under arrest in China after they were found to have been courting Chinese gamblers with numerous gambling incentives, including free tours, accommodation and sexual services.

The most recent example of a Chinese mass detention involves 18 employees from one of Australia’s largest casino companies, Crown Resorts Limited, which owns a 27% holding in Melco Crown Entertainment in Macau, as well as owning Australia’s Crown Casinos in Melbourne and Perth. One of the highest profile Crown employees recently arrested in China was Jason O’Connor, Executive General Manager of international VIP services, who was tasked with encouraging overseas ‘high rollers’ to visit Australia’s Crown Casinos. The Chinese government prohibits marketing gambling activities on the mainland, and according to some analysts Crown appears have misread the enforcement climate.

Following the arrests, shares in Crown Casino are currently down by a whopping 14% to $11.15, with the situation likely to deteriorate further as a “new layer of regulatory risk” affects its ‘international business’ model which previously went after Chinese gamblers. As Citi analyst Rohan Sundram recently commented:

“As a result, we have lowered our near-term VIP growth outlook for Crown and now forecast an 8 per cent year-on-year decline in VIP revenue 2017, from a previous forecast of a 3.5 per cent increase.”