The Star shines as VIP gaming room win rate boosts earnings

For the first time, the Sydney casino’s VIP revenue has outstripped that of its major rival in Melbourne.

Punters at Star Casino in Sydney, February 2016.

The Star Entertainment Group’s VIP revenue at its Sydney casino has, for the first time, outstripped the revenue at its major rival — the Melbourne property of the James Packer-backed Crown Resorts.

The Star’s (SGR) annual results today show its international VIP rebate business turnover was up 7 per on the prior year to $49.5 billion, with normalised revenue of $670 million.

The Star’s jump on Crown’s VIP revenue was recorded in the second half of 2016. The Star, which has been growing its VIP business over the last two years, recorded a normalised VIP revenue of $320.5m at its Sydney property in the second half of 2016, compared to Crown Resorts’ figure of $312.8m for the same period. Crown also includes domestic VIP customers in its figure, which The Star excludes.

The Star’s chief executive Matt Bekier said today the company’s VIP business had a good year.

“2015 was a huge year of (VIP) growth for us and we were able to consolidate on that growth and add another 7 per cent on top of that (for 2016),” he said.

“The win rate was terrible in the first half but it was much better in the second half at 1.5 per cent. That gives a full year win rate of 1.2 per cent.

“What is pleasing for us was we were disciplined in terms of commissions and we were disciplined in terms of the credit that we were issuing and that is translating into a very clean book.”

The Star reported a 23.4 per cent jump in normalised annual profit today to $241m and a 6 per cent rise in revenue to $2.4bn.

Mr Bekier said the junket business, which is used by VIP customers, accounted for around 80 per cent of the total revenue made in The Star’s International VIP Rebate Business.

“The junket business will continue to be the backbone of the VIP business for us,” he said.

“Our VIP strategy is to continue to grow the junket business as the backbone but we feel we need to diversify the sources of revenue for the VIP business.”

The company highlighted in its results today that trading levels in early 2017 were exhibiting satisfactory growth on the prior period.

Mr Bekier also pointed to future growth opportunities by capturing an increasing share of the Chinese tourist market.

He said while the company had no formal arrangements in place with its Asian joint venture partners yet, it was building up its own stand-alone sales force, focused largely in South East Asian markets, not China.

The chief executive added that there was an opportunity through the joint venture partners to tap more broadly into the high end Chinese traveller who might want to visit a casino.

“Only about 3 per cent of our revenue comes from tourists and we also know that a large percentage, around 25 per cent, of Chinese tourists find their way into our properties,’ he said.

“The attraction is there but the reason we don’t get more is because we can’t get these people to stay on property.

“That is one of the main drivers for us to build out room capacity at our properties.”