Star Entertainment bets big on Gold Coast despite failed talks
Star is still planning to step up its investment in the Gold Coast despite ending talks with Queensland for a possible 30-year exclusive licence.
The Star Entertainment Group is still planning to step up its investment in the Gold Coast despite ending talks with the Queensland government for a possible 30-year exclusive casino licence in the region, according to Star chairman John O’Neill.
“We have confidence in the future of tourism in southeast Queensland and will continue to invest through our $2bn masterplan for the Gold Coast,” he said.
“We have refurbished the Star Grand Hotel (at Broadbeach), opened the Darling Hotel and have the Dorsett hotel and apartments tower under construction.”
He said the next tower in Star’s master plan for its Broadbeach site, which will include a five-star hotel, was also advanced on pre-sale for apartments.
It is understood the tower could be given the go-ahead by the end of the year.
Announcing the end of the talks on the weekend, Queensland’s state development Minister Kate Jones said “global market conditions” were “clearly impacting investment”.
But she said the Queensland government had “no intention of reviving the market process for a new integrated resort — including a second casino — on the Gold Coast”. Mr O’Neill said the indications from the government that it had no plans to revisit the plans for a second casino, if it were re-elected, gave Star at least four years of clear air to continue its investments on the Gold Coast and finish its development at Queen’s Wharf in Brisbane, which is expected to be opened in October 2022.
The Star has casinos in Sydney, Brisbane and the Gold Coast.
They are expected to benefit from the opening up of tourism between NSW and Queensland, which began last week, while its Melbourne-based rival Crown has been hit by the new lockdown measures imposed on the city last week.
The Star announced in May that it had raised $1.6bn in financing for the Queen’s Wharf project.
Mr O’Neill, who is also chairman of Queensland Airports, said traffic was already picking up significantly at Queensland’s airports.
“Southeast Queensland is a major beneficiary of the freedom to move across the borders,” he said.
“Places like Noosa, the Sunshine Coast, Brisbane and the Gold Coast will all benefit from this pent-up demand.
“People are dying to go somewhere and Queensland is ideal this time of year.” Mr O’Neill was one of the first leaders of a major ASX-listed company to visit Queensland since the reopening of the borders, travelling from Sydney to the Gold Coast for a press conference with Queensland State Development Minister Kate Jones.
He said this was the first time he had been able to travel to Queensland since early March.
The Star and the Queensland government have been in talks since the beginning of the year over an exclusive casino licence to operate on the Gold Coast.
This follows some eight years of efforts by the Queensland government, starting under the Newman Liberal National Party administration, to test the market for a second casino operator under a project called the Gold Coast Global Tourism hub.
While no time period was ever mentioned, leaked information suggested that Star was asking for a 30-year exclusivity deal in return for a guarantee to go ahead with a planned $2bn development on the Gold Coast and a $100m contribution to an expanded convention centre in the city.
“The talks have come to an end and the process has been closed by the government,” Mr O’Neill said.
The end of talks between Star and the Queensland government on the potential for Star to have an exclusive licence means that Star is released from its contractual promises to go ahead with a $2bn development of its property on the Gold Coast and having to pay $100m for the convention centre.
But O’Neill said Star remained committed to investing in the Gold Coast tourism market.
“We walk the talk and we will continue to invest in southeast Queensland,” he said.
While Queensland governments of both political persuasions have spent the past eight years looking for potential rival operators to come into the Gold Coast, with rumours of possible interest by Hard Rock International, Lawrence Ho’s Melco and Hong Kong-listed gaming company NagaCorp, which operates a hotel and casino property in the Cambodian capital of Phnom Penh, nothing has materialised.
While Star now has no official guarantee of exclusivity on the Gold Coast it is not worried about another operator coming into the market in the next few years, particularly given the global shutdown of travel because of COVID-19.
“Whilst there is no guarantee of exclusivity, the reality of the marketplace is such that if there were no interested parties willing to make the sort of investment required over the last eight years, it is highly unlikely that with our further developments at Broadbeach coming to fruition in the next two and a half years, that any other operators will be expressing any interest,” Mr O’Neill said. “If the market, over the last eight years, has not produced any credible tender, you wouldn’t imagine that the government is going to find someone who is a credible casino operator with deep enough pockets to invest.”
Mr O’Neill said estimates by accounting firm Deloitte were that it would take until 2022 before domestic tourism in Australia got back to 2019 levels.
“Our timing for the opening of the Queen’s Wharf project may be perfect as that could be the time when the tourism demand could be back to where it was pre COVID.” Mr O’Neill said Star was a “large domestic player” which could “deliver come what may.”
He said Star was forced to stand down some 95 per cent of its 9000-strong workforce in NSW and Queensland due to COVID shutdowns in March with only 15 hours’ notice.
But he said that it had now brought back some 5000 workers at its sites in Sydney, Brisbane and the Gold Coast, to operate under social distancing requirements.
“We have been able to bring back some 60 per cent of our workforce under social distancing requirements,” he said.
He said Star’s properties restaurant and hotel bookings were picking up following the opening of the borders.
“We are getting enormous bookings and demand around Sydney and the Gold Coast,” he said.
“In March, we were told the shutdown would last six months.
“We have a much more optimistic outlook now than we did then.”
Mr O’Neill said political leaders were having to “navigate a very difficult world which none of us have ever experienced”.
“It is a balancing act to protect the health and wellbeing of our citizens and to ensure that economic recovery and job creation is attended to in an orderly and thoughtful way.”
Mr O’Neill, who took over running the State Bank of NSW more than 30 years ago when he was 35, said he had “never seen anything like” the current conditions.
The end of the talks with the Queensland government come after Star finalised a deal with the NSW government to give it exclusive licence for poker machines in NSW over the next 21 years, until the end of 2041.
Rival casino operator Crown is expected to open in Sydney by early next year.
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