Echo and Crown battle for BrisVegas

Local investors think Crown has the upper hand in Brisbane, and the market doesn't seem big enough for two operators.

The recent exodus of high-roller players from the casinos of Macau has been a boon to both Echo Entertainment and Crown in Australia, driving VIP revenues up by 40 per cent for each of the bitter rivals in the first half of the calendar year.

The influx of big-spending Asian players is an indicator of how much is at stake for the Australian gaming groups in the next few months, when the fate of the Queen’s Wharf development in Brisbane will be decided.

Echo and James Packer’s Crown have both lined up consortium partners with deep pockets and significant Asian links and are due to put in fully fledged proposals for the entertainment precinct and resort by the end of the month.

The two sides have been whittled down from a field of eight earlier this year. The Newman government is expected to award the new casino licence just before the next state election, likely to be held in March.

While Echo may hold the advantage of incumbency in Brisbane, where it runs the Treasury Casino and Hotel, its track record in the city has been mediocre by some accounts and won’t necessarily work in its favour. Revenues from Queensland fell 4 per cent in the year to June.

Echo, led by new chief executive and former CFO Matt Bekier, wants to turn the cramped quarters of the heritage Treasury building into a hotel and retail complex and move and expand the casino to the nearby Queen’s Wharf.

The group has established relationships with the state government due to its three existing casino licences in Queensland, including Jupiters on the Gold Coast and Townsville, which could prove helpful.

It has partnered for the $1 billion-plus Queen’s Wharf development with heavyweights Chow Tai Fook Enterprises and Far East Consortium, both Hong Kong listed property developers with strong hospitality and retail interests across Asia and developments including the $3.3 billion Trump Place in New York.

Echo would contribute 50 per cent of the capital and act as the operator of the resort, with each partner contributing 25 per cent.

But Echo is still reeling from the blow delivered by James Packer’s Crown, which successfully challenged Echo’s monopoly in Sydney and won the Barangaroo contract this year after breezing through the usually onerous approvals process. The probity check took just three months, the fastest in the state’s history.

Once Barangaroo opens with its high-end allure in about five years’ time, it will be hard work for two operators to make a decent return on assets without cannibalising the customer base.

Echo has already invested large sums -- upwards of $800 million -- in its renovation of Star City casino for a disappointing return. It will be left with its drab Pyrmont facility and a Sydney customer base focused on pokies.

The market in Brisbane does not seem large enough to support two operators, even with an added boost from international players. If Crown were to win Queen’s Wharf, it would hack into Echo’s returns at Treasury.

Analysts at CLSA have pared back Crown’s chances in Brisbane after its joint venture partner for the project, the Chinese state-owned enterprise Greenland Holdings, had its growing debt pile downgraded by ratings agency Standard & Poor’s on Friday.

But local investors believe Crown still has the upper hand, given its long-standing access to high VIP volumes in Melbourne and the fact that Greenland remains a strong partner despite the ratings downgrade.

They argue that Crown’s advantage with Asian players can be transported across markets and will deliver a range of destinations along the eastern seaboard for Asian tourists.

The Queensland government wants to drive tourism to provide a long-term boost to the economy with Queen’s Wharf, and has said the tourism potential will be a key factor in awarding an integrated resort licence.

Echo will need to play its home-town advantage in Brisbane to the hilt to ensure it does not limp away as the second-time loser in the epic battle with its larger rival.