Over the last six months, the Australian and New Zealand casino industry has seen a frenzy of consolidation, following the trend witnessed in the US market over the last five years. According to Jones Lang LaSalle Hotels, this consolidation has placed the local market in a strong position to face increasing competition from the growing Asian industry.
“Tabcorp Holdings Limited’s acquisition of Jupiters Limited which owned and operated three casinos in Queensland in October 2003, signalled a major step in the consolidation of industry ownership,” said Mr Mike Tidbold, Senior Vice President and casino specialist from Jones Lang LaSalle Hotels. “And the activity has continued into 2004,” he said.

Already the owner of the Adelaide casino and the Sky City casino in Auckland, Sky City Limited has indicated its intent to acquire the MGM Darwin casino. This proposed acquisition was followed by a further announcement by Sky City Entertainment Group Limited on April 5 of its intention to buy Aspinalls’ 40.5% shareholding in Christchurch Casino’s Limited, the part owner of the Christchurch casino in the South Island of New Zealand. This acquisition also provides Sky City with an interest in the Dunedin casino. On 30 April it was announced that Sky City Entertainment Group Limited would increase its ownership of the Hamilton casino in the North Island of New Zealand by 15% to a total stake of 70%. “As a result, Sky City has an interest in five of the six casinos in New Zealand,” said Mr Tidbold. “The only casino in which it does not have an interest is the Wharf Casino, Queenstown.”

Even Western Australia has seen some action, with Publishing and Broadcasting Ltd announcing its proposed $686 million takeover bid for Perth’s Burswood Casino complex on 28 April.

“As owners increase their geographical presence, their operations benefit from improved economies of scale in administration and marketing costs as well as the amortisation of product development and innovation,” said Mr Tidbold. This has a flow-on effect for product standard and delivery.

“The consolidation of the industry in the Australian/New Zealand region will assist in strengthening it against likely competition from the proposed development of multiple casinos in Macao,” continued Mr Tidbold.

The liberalisation of this gaming market will be heralded by the opening of the first new Las Vegas style casino in approximately two weeks time. Developed by Las Vegas Sands Inc, the new casino - the Las Vegas Sands Macao will have approximately 250 gaming tables and 500 gaming machines. In terms of gaming facilities, this project will expand Macao’s existing gaming market, which already comprises twelve casinos, by over 50%.

Proposals are already well advanced for the development of a further approximately ten casinos in Macao which will collectively offer a north-Asia Las Vegas style gaming destination. “Whilst this significant development of casinos may have some initial negative impact on the Australian casino market, this is expected to be insignificant when compared with the huge supply-led demand which is expected to be generated from the Macao destination,” said Mr Tidbold.

Although potential exists for further consolidation in both the Australian and New Zealand casino industries, the remaining properties are relatively small and possibly offer only marginal upside growth potential. “The outlook for the industry is expected to be one of continued growth in profit performance and asset values,” said Mr Tidbold.

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