Packer reveals his towering Crown plan
A better sense of James Packer's reasons for pursuing influence over Echo Entertainment and the proposed $1 billion new high-roller facility within Sydney's Barangaroo development is emerging after his Crown Ltd announced yet another massive expansion of one of its existing casinos.
Two years ago Crown launched a $1 billion upgrade of its Melbourne casino and entertainment complex having struck a deal with the Victorian government that saw a big increase in its gaming capacity in exchange for an increase in the tax rate on its gaming machines.
A year later it struck a similar deal with the West Australian government to expand its gaming capacity by 250 machines and 50 tables, paying $20 million up-front and an increased tax rate on the extra machines. It then embarked on a $750 million upgrade of its Burswood complex.
Today Crown announced that it had struck another deal with the WA government, this time to build a new $568 million, 500-bed six star luxury hotel to add to the two existing hotels at the complex, as well as new convention, restaurant, bars and resort facilities.
It will pay the government $60 million for the land on which the hotel will be developed and will apply to the WA Gaming and Wagering Commission for approval for 500 extra gaming machines and 130 more tables. The WA government has agreed not to oppose the application.
The new hotel will be badged ‘'Crown Towers,'' as is the flagship hotel in Melbourne, with the two existing hotels to be re-named Crown Metropol Perth and Crown Promenade Perth, also bringing their brands into line with their Melbourne siblings.
That consistent branding, along with the massive $1.3 billion upgrading of Burswood that will have occurred once the latest development is completed, provides an insight into Packer's ambitions for Sydney.
Along with a Crown Towers-badged hotel in the Melco-Crown vehicle that contains interests in Macau casinos, Packer is clearly positioning his Australian properties and the Crown brand as very upmarket properties targeting Asian VIP gamblers in particular in competition with the giant new Singaporean complexes as well as Macau.
As a portfolio, however, the Australian business is obviously lacking a presence in Sydney and with Echo holding an exclusive licence to operate casinos in Sydney until 2019 he can't develop one in the near term without working with or through Echo.
Crown owns just under 10 per cent of Echo but has applied to the NSW Independent Liquor and Gaming Authority and the Queensland Office of Liquor and Gaming Regulation for permission to increase his interest beyond that level, the current limit for individual shareholdings. Crown's application includes a condition that it wouldn't acquire more than 25 per cent of Echo without seeking further approval.
Despite the initial hostilities which claimed the scalp of former Echo chairman John Story, Packer has signalled that he doesn't have any present intention of trying to acquire control of Echo but instead wants to cooperate with it (and use its licence) to develop the Barangaroo facility, which would be targeted at exactly the same elite VIP gamblers that the existing Crown complexes are directed at. Presumably the hotel at Barangaroo would be six-star and badged Crown Towers.
In other words the tilt at Echo is not about control of Echo per se but is about filling in the glaring gap in a portfolio of upmarket Australian gaming complexes whose brand can be marketed throughout the region.
Under new chairman John O'Neill, Echo has become more conciliatory and willing to talk to Crown and its other big new strategic shareholder, the Malaysian-controlled casino giant Genting. Whether Crown and Genting are rivals or potential allies is yet to emerge.
Echo is trying to break into the VIP gambling market but has had some early setbacks/losses. It could benefit from Crown's experience and expertise and more particularly its ability to direct VIP customers towards the proposed Barangaroo complex.
Like the several deals Crown has struck with the Victorian and WA governments, where it has provided concessions in return for extra gaming capacity, there ought to be at least the outline of a win-win deal within the Echo-Crown relationship.