Government Plays Casino Numbers Game In Australia’s Queensland

Star Entertainment and and its partners are investing US$3 billion in Queensland integrated resorts, including the icon Arc with its rooftop park at Queen’s Wharf Brisbane, and don’t think they need competition. (Image credit: Star Entertainment Group)Star Entertainment Group

Star Entertainment Group and the Queensland government are united in promoting the northeastern Australian state as a destination for international tourism, with integrated resorts as a catalyst. But they’re divided on the right number of integrated resorts. Star and its China-facing partners, currently investing upwards of A$4 billion (US$3.1 billion) to upgrade Brisbane and Gold Coast casino properties, think one IR per market is right. The government and some experts believe competition will drive better performance and see Gold Coast, Australia’s most popular domestic tourist destination, as a suitable test case.

In 2014, the Queensland government, heavily indebted and seeking for new jobs and revenue as its mining boom went bust, granted provisional gaming licenses to a pair of regional IR projects, Hong Kong investor Tony Fung’s A$8 billion Aquis in the state’s northeast near the Great Barrier Reef and mainland China’s ASF Group in Gold Coast, 60 kilometers south of Brisbane in the state’s southeast, bordering on New South Wales. A year later, Star and partners Chow Tai Fook Enterprises and Far East Consortium, both with deep China links, beat out Australia’s gaming market leader Crown Resorts and China’s state-owned Greenland for the massive Queen’s Wharf Brisbane IR project. So far, the only project to go forward is A$3 billion Queen’s Wharf, which includes repurposing the historic building housing Star’s Treasury Casino and moving the gaming to a new iconic tower unabashedly modeled on Singapore’s Marina Bay Sands.

Aquis abandoned a bid for Reef Casino in Cairns, near its IR site, and Fung, a former chairman of Hong Kong’s Sun Hung Kai Securities, returned his gaming license to the state. ASF ran into local opposition on its A$7 billion proposal that included a cruise terminal and has come back with a new site and scaled down A$3 million project that it says addresses residents’ concerns and environmental issues. The proposed IRs about 20 minutes away from newly rebranded Star Gold Coast, undergoing an A$850 million upgrade and expansion to more than 1,000 guest rooms, with a master plan to approach 4,000 keys.

ASF, an Australian arm of a China stated-linked enterprise, forecasts its IR will bring 10,000 jobs and 1.5 million incremental tourists to the region. ASF did not respond to inquiries about the project, but Queensland’s state government is an enthusiastic backer. “We firmly believe there is enough demand for a second casino,” Queensland Projects Chief Executive David Edwards says, “With theme parks, it’s proven that clustering drives visitation. We think that having a variety of offerings and a lift in offerings will grow the pie.”

He adds that ASF, with an Australian stock market listing and rich development experience in the country, would not undertake a project wasn’t viable. “Everyone in the tourism industry knows that the Gold Coast is a prized and exciting Australian location.”

“Across Australia, there is clear history and performance to indicate that one casino in each major city is sufficient,” Star’s Managing Director for Queensland Geoff Hogg says. “You would question whether there is sufficient sustainability in larger cities for two before you could definitely apply that to Brisbane and Gold Coast.” He doesn’t think the government has adequately assessed the viability of a second Gold Coast casino.

“If somehow we could make the Gold Coast a true casino hub, then we will be able to attract large numbers of interstate and international tourists,” Sudhir Kale, who teaches marketing at Gold Coast’s Bond University and lives in the area, says. But he harbors doubts about the ASF proposal. “I would be very surprised if the project is built. They have no committed casino operator [ASF’s long-running talks with Crown reportedly have broken off] or hotelier, and it is doubtful if they can attract the A$3 billion that they need to go ahead.”

A six-tower opening later this year is part of a makeover at newly rebranded Star Gold Coast that could add nearly 3,000 rooms. (Image credit: Star Entertainment Group)Star Entertainment Group

Queensland is gauging investor interest in the abandoned Aquis license and says it could do the same if the Gold Coast project doesn’t proceed. It has set out criteria for regional IR sites that include investment benchmarks, proximity to an international airport and a local catchment area of 150,000 people, as well established tourism infrastructure.

In February, Edwards visited potential investors and operators in Las Vegas and the northeast US. “All parties we met were keen to know more about our structures and Queensland’s regulatory processes, especially operators who do not have a presence in Macau who regard us – Queensland and Australia – as a springboard for Asian expansion,” he says. “Our closeness to Asia, improving 24-hour international flight access, safe environment, low sovereign risk and unquestioned climate and beauty are appealing to potential operators and tourists.” In March, he took the road show to Macau and Hong Kong and reported similar enthusiasm.

“I do not believe that the Queensland government is in any mood to seriously think of [more] casinos,” Kale says. “They will be up for election next year, and their natural tendency would be to stay clear of controversial decisions.”

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