Crown licence would reduce tax haul - Echo
ECHO ENTERTAINMENT has launched the first salvo in its campaign to convince the NSW government that the state's economy would receive a larger boost and a bigger tax haul by not granting James Packer's Crown a second casino licence at Barangaroo.
The Echo offensive will be an uphill battle given all indications are that Premier Barry O'Farrell's remaining approval stages are all but a rubber-stamping exercise.
Echo revealed it had big plans to develop numerous new facilities around its existing Star casino in Pyrmont which would likely to be jeopardised - or at least retarded - by the granting of a second gaming licence to Crown. The economics of building what it describes as a more integrated casino would be threatened if it had to share existing revenues with another operator.
The case it is putting to the NSW government is that the game has moved on in the casino world. The new driver of growth in visitors is the multi-faceted attraction of an integrated casino, including conference and convention facilities, hotels, entertainment venues, a retail complex and even theme parks.
Echo's finance director, Mat Bekier, raises questions over whether the Barangaroo development being proposed by Crown will attract the projected 2 million visitors given the development's relatively small size. ''On our reading, there is significant potential to apply that concept of integrated resorts in Australia, but we are a very mature [market],'' he says.
On a per capita basis, Australians spends more on gambling than most other countries; only 18 per cent of it goes to casinos.
''The idea of a hotel tower with a bit of gaming in it is not going to be the proposition that grows the market. Anyone [in Australia] that wants to gamble right now is probably already gambling,'' Bekier says.
And when it comes to bringing in new players from offshore, Bekier maintains that high-spending VIPs want the large-scale integrated resorts. ''They don't want to be locked away in a stand-alone resort where they have three restaurants to choose from. That's been tried in small clubs in London and hasn't really worked.''
Echo sees Barangaroo as more likely to siphon the Star's local VIP market. Star is the closest thing Australia has to an integrated resort but Bekier contends it doesn't yet have critical mass. Echo's recent $870 million capital expenditure program is only the start - the idea being it will start to throw off sufficient cash over the next five years to invest in new facilities.
''That's where we see opportunity. [But] that sort of investment where most of the money goes into non-gaming is only viable if we have one casino - if you have to cut earnings too many different ways, you can't invest into the iconic development and non-gaming infrastructure.''
Echo's second campaign plank is tax. On its international high roller business, both casinos would be taxed at the lower rate of 10 per cent.
However, once domestic premium player revenues grow beyond a certain point the tax rate scales up progressively from 27.5 per cent. Splitting this premium player income between Star and Barangaroo could ultimately reduce the tax take for the NSW government.
Meanwhile, there is still uncertainty over whether Packer's plan to invest $1 billion in Barangaroo and open when Echo's exclusive NSW licence expires in 2019 is his preferred option. Crown entered the battle to get into the NSW market by taking a 10 per cent stake in Echo and trying to negotiate a joint venture at Barangaroo. Some still see this as his first preference.
His real agenda and that of Echo's other big shareholder - the Asian gaming operator Genting - will become clearer when they are granted regulatory approval to increase their stakes beyond 10 per cent. Genting is sitting on a 7 per cent stake and has intimated the Sydney market held less appeal if Crown was given a second licence.
The author travelled to Singapore and Macau as a guest of Echo.