NEWS: Crown faces major management restructure

Hundreds of management positions will be axed at James Packer’s 46 per cent-owned Crown Casino today as part of a plan for efficiencies and to modernise its management system in table games in the wake of increased competition from Singapore and Sydney’s Star casino.

According to The Age, it is believed that up to 300 managers in the casino’s table games division, including supervisors, pit bosses and operational managers, will be informed as early as this morning of the changes. Most of the affected managers are expected to be offered positions in the new structure.

The 1000-plus dealers will not be affected by the management overhaul. Indeed, the company is believed to be about to lift the number of dealers.
The restructure is aimed at modernising some of the more archaic management structures that dominate Australian casinos and that date back 40 years.

It is also part of a grand plan of the casino operator to give its Perth and Melbourne casinos a facelift, spending more than $2 billion on refurbishments as it fights for a slice of the lucrative Asian VIP market.

It’s not hard to see why. Australia’s share of gaming revenue captured in south-east Asia has fallen from 30 per cent to 9 per cent over the past five years due to competition from Singapore and Macau.

In Macau, several casinos have been developed at a total cost of more than $20 billion. Japan, the Philippines, Malaysia, Thailand, Taiwan and Vietnam are also planning major integrated resort developments, principally targeting tourism out of China.

With an estimated 30 million Chinese patrons in the premium gambling market, and forecasts by PriceWaterhouseCoopers that casino gaming revenue will rise to USD $62.9 billion (AUD $58.9 billion) in the Asia-Pacific region by 2014, Australia is in the right region to get a cut of the action.

A report by Allens Consulting says that international VIP program players spent $739 million during their visits to Australia in 2007-08. It estimated that expenditure associated with these players increased gross domestic product (GDP) by $84 million and that maintaining this expenditure would raise Australian private consumption by $1.8 billion over 10 years.

By making his casinos top quality, Packer is banking on getting a bigger slice of the action. The refurbishment of the Perth casino also coincides with the explosion in mining investment that is going on in Western Australia.

The restructuring announcement comes shortly before the company releases its half-year results, scheduled for February 24, with the consensus estimate at $215 million. However, after a better than expected profit from its venture in Melco Crown Entertainment in Macau, some analysts are lifting their estimates. Melco, a venture between Crown and Lawrence Ho, increased profit more than 550 per cent as revenue at its City of Dreams casino jumped 42 per cent.

Nevertheless, the shares have been up and down in the past year, falling as low as $7.45 a share and rising to $9.20, on fears of the impact on revenues if mandatory pre-commitments were introduced. The proposal was that gamblers would be forced to sign up to a system that, at a nominated limit, shut off their access to poker machines.

The regulatory uncertainties in wagering and gaming and the high Australian dollar make for challenging times for the sector. As governments try to plug holes in their deficits, they will continue to squeeze gaming operators.

While gambling may have issues, the more governments put the thumbscrews on it, the more damage they will do to tourism and leisure dollars. Put simply, since Singapore allowed two casinos to open up, tourist arrivals to Singapore have increased by 19 per cent and Singapore’s GDP has experienced double-digit growth.

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