New South Wales regulators have missed a golden opportunity to open its casino market to new investors by giving Crown Resorts the green light to open its Barangaroo property in Sydney, says Ben Lee, managing partner of IGamiX Management & Consulting. 

The NSW Independent Liquor & Gaming Authority said on Wednesday that it had given the Crown Sydney casino conditional approval to open its gaming operations. The ILGA said the approval would mean operations would be under its supervision for a further 18 months to two years. 

Ben Lee, IGamiX, Crown, resorts,
Ben Lee, IGamiX

The approval comes just weeks after the Federal Court gave the final stamp of approval to a takeover by Blackstone. It’s also just four months after Crown agreed to the US$6.3 billion buyout on the third sweetened approach by the U.S. investment group. 

Crown was found unsuitable to hold its casino licenses in three states following three separate inquiries into its business practices, which revealed a litany of problems that shook corporate Australia. In handing down his findings in New South Wales, Commissioner Finkelstein’s report found Crown’s behavior was “illegal, dishonest, unethical and exploitative”.

The company has since lost a handful of key senior executives, overhauled its corporate governance and AML practices and had a change in ownership with Blackstone, which has seen James Packer decoupled from the casino that he founded.

Still, it would have been a chance for a reset for the state’s casino industry that has now been missed. 

“It should have been an opportunity for New South Wales to revisit the license and put it out to competitive tender, making Crown compete against other bidders,” Lee said. “That was something they failed to do the first time around.” 

James Packer was granted the status of “approved applicant” for a casino in Sydney in 2013 after an unsolicited approach by the executive to the state cabinet. Some nine months later he was given probity approval, which was seen as relatively speedy for Australia’s notorious regulatory red tape.

It took Genting Malaysia more than three years to gain approval to raise its 9.7 percent stake in Echo Entertainment to above the 10 percent mandated cap. Echo has since changed its name to Star Entertainment. 

Crown go-ahead speedy

Lee said the go-ahead to open the Crown casino, which will be a members-only club with no slot machines, was not unexpected. However, he pointed to the again seemingly short due diligence process, given the Blackstone bid was only agreed in mid-February and the group has a portfolio of global casinos.

The company owns the MGM Grand, Mandalay Bay and Bellagio hotels and casinos in Las Vegas. It also owns Spanish company Cirsa, which operates 147 casinos in Spain, Italy and Latin America.

Crown did have a clause in its license, which would have required the government to pay hefty compensation if it had amended or canceled the Sydney license without due cause.

“Any clauses that prevented Crown from being stripped of the license would have been crushed by the suitability findings,” Lee said. 

The reset would have given other players a chance to throw their hat into the ring in what is without doubt Australia’s premier destination. In 2019, the city welcomed 4.1 million international visitors, who stayed a hefty 20 nights. 

New Zealand’s SkyCity Entertainment already has a property in Adelaide and may have been interested in a tilt for Sydney, while it’s likely there would also have been interest from some of the U.S. operators, Lee said. 

“The U.S. operators have dabbled in the Australian market in the past, but left because it was small with low growth,” Lee said. “However, the domestic market demographic has changed dramatically over the past 20 years.”

Australians now have the highest per capita gambling spend in the world, while there is now a much higher percentage of high-spending Asians making up the domestic market. The casinos have enjoyed a strong underpinning from the locals, while prior to the pandemic they were also benefiting from rising Asian tourism.

Revenue per capita from gambling in the 2018/2019 financial year was $1,276 ($915), according to figures compiled by the Queensland Government. 

The $2.2 billion Crown Sydney is the first six-star hotel on Sydney Harbour and opened in December 2020, without its gaming facilities.