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You can find the current article at its original source at https://www.theguardian.com/commentisfree/2016/oct/19/after-chinas-crackdown-can-packers-barangaroo-casino-survive-without-pokies

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After China's crackdown, can Packer’s Barangaroo casino survive without pokies? After China's crackdown, can Packer’s Barangaroo casino survive without pokies?
(5 days later)
Sydneysiders should share billionaire casino magnate James Packer’s “deep concern” at the news that 18 Crown Casino employees have been detained in China, albeit for different reasons. While we should be concerned about the fate of Crown’s staff, this move also has implications for Crown’s Australian facilities, especially the casino currently being constructed on Sydney Harbour.Sydneysiders should share billionaire casino magnate James Packer’s “deep concern” at the news that 18 Crown Casino employees have been detained in China, albeit for different reasons. While we should be concerned about the fate of Crown’s staff, this move also has implications for Crown’s Australian facilities, especially the casino currently being constructed on Sydney Harbour.
The Barangaroo casino was marketed to the public in 2013 on the basis that it would attract VIP high-rollers from Asia. While detailed business modelling was never revealed to the public, Packer admitted at the time that “the economics on this project are tough” and that viability “involves Crown making some really significant assumptions along the line of tripling the value of international VIP business coming to Sydney”.The Barangaroo casino was marketed to the public in 2013 on the basis that it would attract VIP high-rollers from Asia. While detailed business modelling was never revealed to the public, Packer admitted at the time that “the economics on this project are tough” and that viability “involves Crown making some really significant assumptions along the line of tripling the value of international VIP business coming to Sydney”.
In 2013, at the height of the casino boom in Macau, this bold assumption held a veneer of plausibility. Yet since then, the Chinese government has enforced restrictions on Chinese gamblers taking large sums of money to Macau, a casino industry US diplomats described in leaked cables in 2009 as being “based on a formula that facilitates if not encourages money laundering.” As a result, high-roller gambling in Macau has plummeted to levels less than half those recorded in 2013.In 2013, at the height of the casino boom in Macau, this bold assumption held a veneer of plausibility. Yet since then, the Chinese government has enforced restrictions on Chinese gamblers taking large sums of money to Macau, a casino industry US diplomats described in leaked cables in 2009 as being “based on a formula that facilitates if not encourages money laundering.” As a result, high-roller gambling in Macau has plummeted to levels less than half those recorded in 2013.
Friday’s further crackdown by Chinese authorities threatens Packer’s ambitious plans for his Barangaroo casino. Markets are reportedly pricing in a 70% reduction in international high-roller gambling in Crown’s Australian casinos, at a time when the viability of the Sydney casino reportedly relies on a threefold increase in revenue from these customers. This is a problem for Crown as it needs to recoup the $2bn it is spending constructing the casino.Friday’s further crackdown by Chinese authorities threatens Packer’s ambitious plans for his Barangaroo casino. Markets are reportedly pricing in a 70% reduction in international high-roller gambling in Crown’s Australian casinos, at a time when the viability of the Sydney casino reportedly relies on a threefold increase in revenue from these customers. This is a problem for Crown as it needs to recoup the $2bn it is spending constructing the casino.
This latest crackdown by Chinese authorities should not come as a surprise. Independent observers have long predicted that Chinese officials are likely to increase their efforts to prevent Chinese capital from exiting the country through international casinos.This latest crackdown by Chinese authorities should not come as a surprise. Independent observers have long predicted that Chinese officials are likely to increase their efforts to prevent Chinese capital from exiting the country through international casinos.
And Crown has form when it comes to pushing the envelope on gambling promotions in mainland China. In 2007, for example, Packer’s joint-venture casino in Macau was launched with an advertisement featuring moviestar Chow Yun-fat, best known for his role in Crouching Tiger, Hidden Dragon. This absurd, cinematic advertisement featured coded references to gambling, and aired for only three days before it was banned Chinese authorities. Promoting gambling is banned in China, except for state-run lotteries.And Crown has form when it comes to pushing the envelope on gambling promotions in mainland China. In 2007, for example, Packer’s joint-venture casino in Macau was launched with an advertisement featuring moviestar Chow Yun-fat, best known for his role in Crouching Tiger, Hidden Dragon. This absurd, cinematic advertisement featured coded references to gambling, and aired for only three days before it was banned Chinese authorities. Promoting gambling is banned in China, except for state-run lotteries.
Questions may well be asked about Crown’s duty of care to its staff members, a corporation that stands accused of misleading and deceiving its customers.Questions may well be asked about Crown’s duty of care to its staff members, a corporation that stands accused of misleading and deceiving its customers.
If international revenues are falling, Crown will have little choice but to double down on local customers to prop up the viability of its Australian operations. In Sydney, this is likely to lead to increased pressure to legalise poker machines in the casino. While the restricted gaming license currently bans poker machines from Crown Sydney, such licenses can be changed. If international revenues are falling, Crown will have little choice but to double down on local customers to prop up the viability of its Australian operations. In Sydney, this is likely to lead to increased pressure to legalise poker machines in the casino. While the restricted gaming licence currently bans poker machines from Crown Sydney, such licences can be changed.
While Crown has apparently had little success in persuading Chinese government officials to tolerate its gambling business, Packer has demonstrated his ability to influence Australian governments time after time. Whether it be the approval of the Sydney casino itself, which required government intervention to by-pass the tender process, or the extraordinary license concessions and reduced tax rate for Crown Melbourne announced in 2014, Packer has repeatedly secured special treatment for his Australian casinos. While Crown has apparently had little success in persuading Chinese government officials to tolerate its gambling business, Packer has demonstrated his ability to influence Australian governments time after time. Whether it be the approval of the Sydney casino itself, which required government intervention to bypass the tender process, or the extraordinary licence concessions and reduced tax rate for Crown Melbourne announced in 2014, Packer has repeatedly secured special treatment for his Australian casinos.
Packer retains a bevy of well-connected advisers – some of them former politicians – who lobby for regulatory conditions favourable to Crown’s business. Labor powerbrokers Mark Arbib and Karl Bitar both draw paychecks from Packer, with recent Senate retiring Stephen Conroy reportedly approached to join the lobbying effort. And former Liberal minister, Helen Coonan, currently sits on Crown’s board. Packer retains a bevy of well-connected advisers – some of them former politicians – who lobby for regulatory conditions favourable to Crown’s business. Labor powerbrokers Mark Arbib and Karl Bitar both draw paycheques from Packer, with the newly retired senator Stephen Conroy reportedly approached to join the lobbying effort. A former Liberal minister, Helen Coonan, sits on Crown’s board.
And as the recent backflip on the greyhound racing ban in NSW demonstrates, even poorly organised and managed gambling industries have a good chance of overturning unfavourable regulations.And as the recent backflip on the greyhound racing ban in NSW demonstrates, even poorly organised and managed gambling industries have a good chance of overturning unfavourable regulations.
If Crown Sydney is granted poker machine licenses, it would hardly be the first time an Australian casino gained acceptance by opening without pokies before renegotiating license agreements down the track. The casinos in Adelaide, Hobart, Darwin, Alice Springs, and Launceston all followed this routine, while Canberra Casino looks to be the latest to join these ranks with a strong likelihood that a re-elected Labor government will grant 200 poker machine licenses. If Crown Sydney is granted poker machine licences, it would hardly be the first time an Australian casino gained acceptance by opening without pokies before renegotiating licence agreements down the track. The casinos in Adelaide, Hobart, Darwin, Alice Springs, and Launceston all followed this routine, while Canberra Casino looks to be the latest to join these ranks with a strong likelihood that a re-elected Labor government will grant 200 poker machine licences.
If Barangaroo casino requires local gamblers to underwrite its viability, it will exact a toll of suffering from the Sydney community. According to the Productivity Commission, over 42% of money lost on poker machines and 11% on table games comes from problem gamblers. Repaying 10%-42% of the $2bn outlaid to build a harbourside tower is a heavy burden for a small group to bear. If Barangaroo casino requires local gamblers to underwrite its viability, it will exact a toll of suffering from the Sydney community. According to the Productivity Commission, more than 42% of money lost on poker machines and 11% on table games comes from problem gamblers. Repaying 10%-42% of the $2bn outlaid to build a harbourside tower is a heavy burden for a small group to bear.