Kerry Packer was once the world’s biggest and most famous casino gambler. But he often told his son he didn’t take risks in business. James, on the other hand, hardly ever plays the tables, but is happy to lay down billions of dollars of his own money to build new casinos around the world.
His new plan to build a six-star Crown Towers casino/hotel on Perth’s Burswood peninsula for $568 million is just the latest example. But it’s not the only place he’ll be spending money. He’s also planning a $1 billion luxury casino/hotel for high rollers in Sydney as a joint venture with the owners of The Star casino, and is in talks with Belle Corporation in the Philippines to build and run a $580 million casino in their new Manila resort.
And Packer’s chances of hitting the jackpot are looking better and better.
Yesterday, Crown secured approval from the Western Australian government for the Perth hotel. This morning, it announced an agreement with Lend Lease to have the new Sydney casino in the Barangaroo redevelopment. And today also, James got the thumbs-up from the ACCC to raise $1 billion in cash by selling his share of Foxtel and Fox Sports to the Murdochs’ News Ltd.
Really, it couldn’t be going better. Even the owners of The Star, Echo Entertainment, have rolled over, the Packer camp is claiming, and are now saying they’re happy to let him have their licence for the new Sydney casino and be part of a joint venture. So it’s looking more and more like it will happen.
But its not home and hosed yet: sources close to Echo told The Power Index this morning that there are no joint venture arrangements in place and the company would do everything to protect the exclusivity and value of its casino licence for shareholders.
So why the rapid burst of spending from Packer? And why does Australia suddenly look so attractive?
Strangely enough, the answer to both questions may lie in Macau, where Packer’s two casinos, the City of Dreams and Altira, have recently started to mint money after many years of losses. Packer’s joint venture with the Ho family, Melco Crown, is now pulling in revenue of around $1 billion a quarter and churning out around a fifth of that, or $200 million a quarter in cash and $100 million in after-tax profit. So it’s time to start spending some of that money and putting it to work.
But it’s getting harder for Packer and his fellow casino operators to invest in Macau. Melco-Crown’s recently-acquired Studio City development, which has been on the drawing board for five years and would be even bigger than the City of Dreams, has still not got government approval for the 400 gaming tables it needs to make the project viable. And officials are making it clear that they want to slow the pace of growth. There is also talk of restricting the number of visitors to the former colony.
Consequently, casino operators like Las Vegas Sands, Wynn Resorts and Crown are looking to spend their money elsewhere.
Packer’s pitch for spending billions in Australia is that the country needs the tourist dollars and jobs that new casinos will bring. And this may well be true, given that so many other Australian businesses seem to be struggling. But his real motives are perhaps a bit less altruistic. One of the great attractions to Crown of bringing in more Asian high rollers is that it spreads the risk of having a whale like James’s dad break the bank by winning $10 million in a night. The other of course is that Crown makes a motza from this business and would love to have more of it. Certainly, it has proved to be more recession proof than just about any other economic activity.
We can only hope that James’s new ventures will spread the wealth around, rather than taking money off those who can’t afford to lose. Maybe the multi-billionaire tycoon should re-read his own Melco-Crown’s annual report, which promises faithfully to: “Share our resources with the less fortunate in society and encourage our staff to engage in community services to spread laughter, love and care.”
We really love that. Ha ha ha. It’s even got us going.