By Alexandra Smith and Amelia McGuire
The future of the cash-strapped Star Sydney is even more precarious after its major gambling rival, Crown Resorts, was given the green light to operate its Barangaroo casino, whose foreign owners have poured millions of dollars into overhauling its battered business.
The NSW Independent Casino Commission on Tuesday deemed Blackstone-owned Crown Resorts suitable to hold its unrestricted licence, three years after it was disgraced by two royal commissions into its operations following extensive anti-money laundering and counterterrorism failings.
Crown Sydney has been deemed suitable to hold an unrestricted casino licence.Credit: Janie Barrett
However, the outlook is bleak for rival The Star Entertainment Group, which may be forced to close its Sydney operations in three months if it does not convince Adam Bell, SC, that it has reformed its culture in his inquiry into the casino operator’s business practice.
The Star is also facing significant cost pressures, with the company losing more than two-thirds of its value over the past 12 months and its financial outlook remaining bleak due to the lack of foreign high-rollers after COVID-19, increased regulatory costs and growing debt exposure.
It is also bracing for a multi-million dollar penalty from the financial watchdog, AUSTRAC.
Crown Resorts boss Ciaran Carruthers said Crown Sydney faced its own challenges, despite being deemed suitable to operate.
“We are taking a long hard look at the business. The current levels of demand are at a low level. We are focused on getting the business to be commercially viable long into the future.”
Crown has struggled to attract customers to its casino since it opened with strict restrictions in August 2022. It closed one of its two gaming floors one year into operations and made 275 people redundant last year, the bulk from its frontline gaming and casino support divisions.
Its margins lean heavily on its luxury hotel and its many restaurants, which are nearly always full. Blackstone bought Crown in 2022 for $8.9 billion.
“Blackstone’s backing was critical. Their funding was necessary to get us through what we knew would be a very expensive remediation program that required us to move mountains. They knew it was going to be an expensive journey which required a lot of heavy lifting,” Carruthers said.
The casino commission’s chief Phillip Crawford said Crown Sydney had proven itself suitable to hold its casino licence because it was now a “vastly different business” from the one examined by the Bergin inquiry, one of the royal commissions.
“It has also recognised the need to change its culture, to embrace concepts of sustainability and responsible gambling,” Crawford said.
Crown Resorts has spent more than $200 million on a remediation and compliance program across its three casinos over the past two years.
As the second Bell inquiry into The Star continued on Tuesday, Crawford said the commission had developed a “strong relationship” with Crown Sydney, Crown Resorts and Blackstone, “based on a desire to ensure Crown Sydney’s casinos operations are safe, responsible and compliant”.
Crawford last month said Crown had been more receptive to the need to reform its culture than The Star. Crown Resorts has spent more than $200 million on a remediation and compliance program across its three casinos over the past two years.
Its cash-strapped rival has spent about $68 million over the past six months on remediation and has already completed two capital raisings over the past year. It is required to make its thousands of poker machines cashless by August, which was the most expensive part of Crown Melbourne’s compliance costs.
Crawford said it was the job of economists to forecast whether Star and Crown could both survive in Sydney but added: “There’s no reason why a city as big as Sydney can’t have two casinos.”
Independent Sydney MP Alex Greenwich does not agree that Sydney should be home to two gambling giants. He said inquiries and investigations had raised “social, moral, and economic concerns associated with The Star”.
“Recent reforms that prevent revenue from the proceeds of crime and money laundering have greatly and rightly impacted profitability and viability,” Greenwich said.
Greenwich wants the Minns government, which has identified the housing shortage as the most pressing issue facing the state, to investigate converting the government-owned land currently occupied by The Star for “mixed social, affordable, transitional, essential worker and private housing, with new social infrastructure including schools”.
In a letter sent to Premier Chris Minns on Tuesday, Greenwich urged NSW Labor to “work with government agencies, the City of Sydney, community housing providers, homelessness services and property developers” on repurposing The Star site.
“We need to acknowledge that casinos have problematic business models that undermine
their future in Sydney,” Greenwich wrote.
“With The Star located on government-owned land close to transport, jobs and services, and in an area where essential workers and low-income earners are increasingly being priced out, the government should look at opportunities to better use this land.”