Crown Resorts’ rebound from restrictions and regulatory woes has been curbed by a tight hospitality employment market and a subdued Melbourne CBD midweek, but the company expects the renewal of interstate travel and the opening of its Sydney casino early next year to boost earnings.
New Crown chief executive Steven McCann talked up the group’s prospects and property development, including the potential for a fourth hotel in Melbourne, at an investor briefing on Monday amid an $8.5 billion takeover offer from Blackstone that Crown says undervalues its business.
Crown Casino’s performance in Melbourne was underwhelming. Credit: Jason South
“We’ve had continued challenges obviously through COVID 19. In terms of lockdown, that’s been the single biggest material in business performance. But today we have all three resorts open and operating and building momentum back to pre COVID levels,” Mr McCann said.
Crown has capped off a horror two years after an investigation by The Age, the Sydney Morning Herald and 60 Minutes into the company’s relationships with junket operators tied to powerful Asian crime syndicates sparked inquiries in Victoria, NSW and Western Australia. Those reviews sparked mass clear out of Crown’s management and board and led to NSW and Victorian imposing strict licence conditions on the company. The WA review is yet to report its findings.
On the company’s operations, Mr McCann said the group’s hotel offering in Sydney had been well-received by customers over the past month.
“Occupancy has progressively improved since reopening, averaging about 40 per cent since mid-November with higher occupancy on weekends and average room rates around twice the competitor set in the Sydney market,” Mr McCann said.
“We’re in frequent discussions with ILGA (Independent Liquor and Gaming Authority) and whilst no official opening date has been confirmed by the regulator, we are currently targeting gaming floor opening early in the new year.”
“Opening will be on a staged basis given current staffing levels, with further recruitment for gaming related roles required ahead of a full commencement of gaming operation,” he said.
Sydney Crown Casino Chairman Dr Ziggy Switkowski and CEO Steve Mc Cann.Credit: Renee Nowytarger
But while Crown waits on final permissions from ILGA to launch its Sydney casino, its key earnings centre, Crown Melbourne, was still suffering from the lack of people travelling into the city’s CBD.
Crown told investors that in the few weeks since Melbourne’s restrictions had been lifted its gaming revenue was at 75 per cent of pre-COVID levels, while hospitality revenue at 65 per cent of pre-pandemic levels.
“Any of you from Melbourne will see the CBD hasn’t come back anywhere near as hard as some of the other cities and is still pretty soft. We anticipate that it’s probably going to last through to Christmas and the New Year period,” Crown chief financial officer Alan McGregor told the briefing.
“We’ve also seen staff shortages ... right across the hospitality industry, which is impacting some areas of our business as well, most notably hotels and food and beverage.”
Crown recently announced a training partnership with the state government to get more staff working at its Melbourne property.
In Perth, main floor gaming revenue was down 8 per cent in full-year 2021 compared to a year earlier. Hospitality takings at its Burswood casino was up 31 per cent this year compared to full-year 2020.
The weakness in Crown’s local casino performance comes at a time when the group has wielded a scythe through its high roller business after allegations its casinos were being actively used by money launderers. Crown has now cut all partnerships with junket operators that brought in overseas punters and lost 10 per cent of its local high rollers after they refused to declare where they sourced their wealth.
Crown’s executive team also reiterated the casino group’s recent work in improving its balance sheet, including renegotiating the terms on its key debt facilities with its lenders and a waiver of covenant breaches. Those changes led to ratings agencies removing warnings and affirming ratings of Crown in October.
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