Tourism surge shows why Packer wages casino war

John O'Neill wants The Star to compete with Sydney's other top tourism assets.

Picture: Stuart McEvoy Source: The Australian

Chinese tourist arrivals surged 19.4 per cent last month, a record pace that has them on course to replace the British as Australia's second biggest tourism market.

The figures would have delighted gaming mogul James Packer but also his quarry Echo Entertainment, where former Events NSW boss John O'Neill is the newly installed chairman.

"These types of statistics are good news specifically for the tourism industry and obviously have the potential to be good news for the casino business," O'Neill tells The Weekend Australian.

Packer's Crown and Echo's Star casinos are locked in a battle to lure the burgeoning Asian middle class to Australia and specifically to their gambling meccas in Perth, Sydney and Melbourne, which they claim have surpassed the Great Barrier Reef, Uluru and Kakadu as attractions.

Speaking from a tourism perspective, O'Neill wants Sydney's Star to compete with the city's other great tourism assets such as the Sydney Harbour Bridge and the Opera House.

"We are talking about the absolute iconic symbols of Sydney. I am not suggesting Star is everything on that illustrious list. (But) that's aspirational for us.

"We would like Star to be one of those destinations, given the combination of high-end retail and restaurants, the great hotel, a nightclub and entertainment centre and gambling space."

It's a status that O'Neill concedes Packer's Crown casino in Melbourne has already secured, becoming a destination in its own right, and that he is attempting to emulate in Perth, where he has just completed a $750m revamp of the Burswood Casino complex and this week announced plans to spend another $1 billion developing a new, adjacent hotel.

"Asian gamblers don't want to come here just for the natural beauty. They have money and want to shop, eat, gamble. They want first-class facilities and they want sophistication," is how Packer summed up the market in a newspaper interview this week.

Far from being satisfied with his Crown and Burswood properties, Packer has launched an all-out offensive to get a share of the action in his home town of Sydney, Australia's biggest gambling market and major tourist entry point.

That will mean loosening Echo's grip on the monopoly gaming licence for NSW that runs to 2019. Everything from an outright takeover of Echo to a joint venture and a pitch for his own licence have been canvassed. He's already bought a 10 per cent stake in Echo and has sought regulatory approval to double his stake to 20 per cent.

In the meantime, he has already deposed O'Neill's predecessor, John Story, from the board and watched on as a sexual harassment scandal that led to the sacking of casino general manager Sid Vaikunta cruelled the relaunch of The Star after a $1bn makeover pitched at luring well-heeled gamblers from Sydney and abroad.

For all the hoopla over Packer's ambitions, Echo remains in a strong position. Its licence to run a casino extends to 2019, and the NSW government cannot introduce competition until then. Unless Packer wants to make a full takeover bid, Echo doesn't have to do a deal with him.

But the shareholding isn't the only point of pressure on Echo. Packer is also looking to secure the NSW government as an ally, with the lure of a new hotel resort for Sydney and thousands of jobs that would come with it.

This week, Packer upped the pressure on Barry O'Farrell's Liberal state government to give him the licence he wants by signing a two-year exclusive agreement with Lend Lease to develop a $1bn resort hotel at the Barangaroo Sydney foreshore redevelopment.

The catch?

"It can't be built without the casino -- it's as simple as that," Packer said this week. "You don't spend $1bn to build the best hotel in the world on the back of a $450 per night rack rate."

It's a smart pitch that has extended from extensive lobbying to newspaper and television advertisements extolling Crown's role as an employer and good corporate citizen, to extensive interviews by the once reclusive billionaire.

And it has worked in Perth already where Premier Colin Barnett agreed to let Packer expand his gambling interests as the price for building the city's first new hotel in six years.

Poker machine numbers at Burswood will increase from 2000 to 2500 and gaming table numbers from 200 to 350 in exchange for Crown building a new 500-room hotel.

Federal Tourism Minister Martin Ferguson, for one, is on side with Packer's pitch.

"James Packer has real money on the table. Private investors like James Packer are using their wealth to try and create further opportunities for Australia and create real jobs for Australians," Ferguson said yesterday

Ferguson defended Packer's interest in casinos as just part of the tourism and hospitality industry.

If you want to participate in gaming activity, that's your choice, he says. It's no different to some of the gaming in clubs in Australia. Australians go to the races, they bet on football, "gambling is a fact of life, you have to accept that."

"James Packer is a major tourism operator in Australia. In casinos he is creating real jobs in Western Australia. His projects in Perth are probably the major employer in the city of Perth.

"Just look at the benefits to Melbourne from (Packer's) new Metropole hotel."

Ferguson says the responsibility now lies with government to "help facilitate the new approvals (Packer) needs" in Sydney and Perth. Ferguson says he is pleased WA Premier Barnett is behind him.

While O'Neill declines to discuss Barangaroo, he is pursuing an aggressive strategy to lift The Star's rating as a destination for international tourists. The Star's VIP gaming business outpaced Crown's for the first time in the six months to December, growing at 68 per cent, albeit from a low base, compared with Crown's 28 per cent. Hopes are high that it has maintained the rate since, notwithstanding the collapse of a junket operator who helped funnel Asian tourists to The Star.

O'Neill acknowledges Packer's Crown has established itself in Melbourne as being "more than a casino . . . it's more of a destination". But he says "it's too early to say if the same thing will happen with Barangaroo. Anything on the scale of Barangaroo is in the longer term interests of Sydney".

"As with Bennelong Point, Barangaroo, near the beautiful Botanic Gardens, the Finger Wharf, Darling Harbour and Star, that whole precinct is part of a great Sydney asset. The more we work these assets to bring in valuable tourist dollars the better."

Source: The Australian, 4 August 2012