Crown Resorts transformation may take over five years; CEO praises Daniel Andrews
Australia’s biggest casino operator’s sprawling Melbourne resort is tired and showing its age. Chairman Bill McBeath says it will take years to turn the complex around.
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Crown Resorts chair Bill McBeath says the company’s transformation could take longer than five years, while it needs to be mindful about spending the money to complete it as the economy slows.
But the Las Vegas veteran – who led the turnaround of The Cosmopolitan – says Crown’s new owner Blackstone has the patience to restore the company, formerly backed by James Packer, to its true five-star status.
In a joint interview, chief executive Ciaran Carruthers also paid tribute to former Victorian Premier Daniel Andrews, who resigned after nine years in the job on Wednesday, saying he was a “great steward of the state”.
Mr Carruthers said he and his team would work with the new government to ensure the revitalisation of Crown, which remains Victoria’s biggest single site employer.
Mr McBeath – on his fifth visit to Australia in two years – said customers would be at the centre of Crown’s rejuvenation as the gaming group sought to regain the trust of governments and regulators after three bruising inquiries in three states left it fighting to retain its casino licences.
Crown would need to lift its standards across every customer touchpoint, polishing not just its gaming floors but restaurants, hotel rooms, shops and broader entertainment offerings – and took a swipe at the Packer era’s lack of capital expenditure.
It has been 13 years since Crown’s flagship Melbourne casino opened a new restaurant, with the sprawling resort “showing its age”. This compares with a new restaurant opening in Las Vegas about every two weeks, not only creating a sense of excitement for customers but giving them a reason to come back.
“We know how to fix compliance issues. I’ve lived my life as a key licensing employee in most regulated marketplaces in the world. So we know how to do it,” Mr McBeath said.
“The easiest part of finding the spark is putting the shine back on the Crown brand by re-engaging and building the trust with the consumer, and you can‘t do it by just showing them the old Crown. You have to give people compelling reasons to come back and try.
“It’s unfortunate that the previous ownership didn’t reinvest on the maintenance side. But there’s just a bunch of things that Ciaran and his team have been doing that don’t cost a lot of money that make the place feel better and look better.”
Blackstone, which took over Crown last year for $8.9bn, used its substantial coffers to turnaround another Las Vegas casino, The Cosmopolitan, which it bought from Deutsche Bank for $US1.73bn ($2.7bn) in 2014.
When Blackstone bought the Cosmo out, it had the oldest gaming machines and tables on the Strip. Mr McBeath came in as part of the deal.
“The first thing I did was say we have to spend $US500m and Blackstone was like ‘OK’. I laid out the strategic plan and the rest is history.”
The gamble paid off with Blackstone selling The Cosmopolitan for $US5.65bn in 2021.
But Mr McBeath said the Crown transformation was not about “replicating Las Vegas, cheesy or non-cheesy”.
A key factor of the speed of Crown’s turnaround is a slowing economy with household budgets crunched after the Reserve Bank’s most aggressive series of interest rate hikes in 30 years.
Crown posted a near $1bn loss last year and has paid $700m in fines levied from regulators after three inquiries, including a royal commission.
“It’s timing and appropriate capital deployment because we’re in a very tough macroeconomic environment, and dealing with remediation and all that,” Mr McBeath said, adding it may take longer than five years to complete. “This is a big investment for Blackstone and we’re committed to its ultimate success.”
It is not just budget restraints affecting Crown’s overhaul, Mr McBeath said. “Someone comes to the Crown for a five-star experience. They don’t want to hear a jackhammer in the hallway,” he said. “We just can’t close the building and do it. And so it has to be a very thoughtful, strategic rollout of capital deployment and mitigate the damage to guest experiences.”
Australia’s first Ghost Donkey – a mescal and tequila bar that was founded in New York – is set to open at Crown Melbourne on October 20.
“It’s a small component, but it’s the first of a number. There are a number of other brands that we’re looking at, again, but the focus being on restaurants and bars,” Mr Carruthers said.
“The last new restaurant opened 13 years ago and there’s been no real capex spent in this place apart from a few pockets of the building that were very much targeted at the primarily mainland Chinese VIP casino guest. There‘s been no investment in the building and she’s showing her age.”
Mr Carruthers said the physical transformation of Crown was one thing, with the company also requiring a cultural reset.
“To really change the mindset of leadership and management, change the mindset of the group as a whole, you don’t do that in a 12-month window.
“You don’t do that to any stipulated time frame. That’s a multi- year ongoing, never-ending journey. And we’re well down the way on that.”
It comes as Crown is effectively on probation, having until next year to prove that it is a suitable Victorian casino licence holder.
Mr Carruthers praised Mr Andrews’ leadership and said the company would look to work closely with his successor.
“Dan has been a great steward of the state for a long time and we wish him well whatever his next venture might be, and will continue to work with whichever government entity individual takes his place.
“We’ve had a great relationship historically with the state of Victoria as a single largest employer in the state, a credible tourist beacon, what we did in terms of Southbank and the revitalisation of this 30 years ago.
“We lost a lot of that over the last couple of years, and we need to rebuild the trust again.
“And we‘ll do the same thing with the new (government) team that comes in, whenever that gets announced and whoever that might be.”
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