Job cuts as Crown seeks to bankroll Sydney resort
Sources close to Crown said redundancies were on the way for administration, marketing and back-office staff. It is believed the job losses are triggered by a desire to cut costs at the James Packer-chaired company, which reported "mixed" results for its Melbourne and Perth complexes through 2012.
Crown spokesman Gary O'Neill said the company "continually reviews its activities" and these "reviews may lead to some positions being abolished and some new positions being created".
"While these reviews are still ongoing, any reduction in positions is currently expected to be less than 50, which represents less than 0.8 per cent of Crown's employees in Melbourne. Total employment at Crown Melbourne has been steadily increasing - for example, it increased last year by more than 200 persons and over the past five years has increased by more than 1000 persons."
Crown's Melbourne and Perth resorts employed more than 14,400 people in 2012, including 8800 in Melbourne, its annual report said.
Crown Melbourne brought in $1.84 billion of the company's $2.73 billion revenue last year.
Crown chief executive Rowen Craigie said that during 2012 the company "saw reasonable revenue growth at both properties, although in some areas this was offset by higher operating costs.
"At Crown Melbourne, in particular, we saw a softening of activity in some segments of main-floor gaming and non-gaming operations in the second half of the year, as well as the effects on operating margins of disruption due to refurbishments."
Last week, Crown sold at a loss its 10 per cent stake in rival casino operator Echo Entertainment Group, which has an exclusive casino licence for Sydney.
Mr Packer is now expected to focus his efforts on building a $1 billion-plus, six-star hotel resort in Sydney's Barangaroo precinct, comprising gaming rooms for high-rollers, a hotel resort and apartments. Crown says the project will create more than 2000 jobs.
But Deutsche Bank analysts Mark Wilson and Daniel Pi said last week they did not believe Crown would make an economic return on the ambitious project, as the anticipated capex has increased to $1.2 billion to $1.5 billion, notwithstanding that the costs could be defrayed by the sale of 80 apartments.
"At a capital cost of $550 million, we estimate that Crown will have to generate $23 billion in VIP turnover, which is what [rival] Star is currently rolling, and would require an increase in the Australian market of 30 per cent," the analysts said.
Frequently Asked Questions about this Article…
Crown has confirmed planned redundancies for administration, marketing and back-office staff as part of a cost-cutting push. The company said regular reviews of its activities could lead to some positions being abolished and some created, and the move follows mixed financial results at its Melbourne and Perth resorts in 2012 and higher operating costs.
Crown says any reduction in positions is currently expected to be less than 50 roles, which represents under 0.8% of Crown’s employees in Melbourne. The company also noted overall employment at Crown Melbourne has risen—by more than 200 people in the last year and over 1,000 in the past five years.
Crown Melbourne is a major revenue generator: in the last reporting year it contributed $1.84 billion of Crown’s $2.73 billion total revenue, making it the company’s largest single-site revenue source.
James Packer and Crown plan to build a $1 billion-plus, six-star hotel resort in Sydney’s Barangaroo precinct. The project is expected to include gaming rooms for high-rollers, a luxury hotel resort and apartments, and Crown says it would create more than 2,000 jobs.
Yes. Last week Crown sold at a loss its 10% stake in rival Echo Entertainment Group, which holds the exclusive casino licence for Sydney.
Deutsche Bank analysts Mark Wilson and Daniel Pi expressed scepticism that Crown would make an economic return on the Barangaroo project. They noted capital expenditure estimates had risen to $1.2–$1.5 billion, though some costs might be offset by selling about 80 apartments. Their analysis referenced earlier assumptions that very large VIP turnover would be required to justify the investment.
Crown’s CEO Rowen Craigie said the company saw reasonable revenue growth at both properties in 2012, but that this was offset in some areas by higher operating costs. At Crown Melbourne there was a softening of activity in some main-floor gaming and non-gaming segments in the second half of the year, and refurbishments disrupted operating margins.
The developments suggest Crown is trimming costs while reallocating focus and capital toward a large Barangaroo resort project. The expected job cuts are small relative to its workforce, but Crown remains highly dependent on Crown Melbourne for revenue. Analysts’ doubts about the resort’s economics and rising capex estimates highlight project risk that investors should watch alongside operational performance at existing resorts.
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