Chinese Gambling crackdown could damage high roller revenue

SkyCity warns that a wider Chinese crackdown could damage high roller revenue.
Last weeks arrest and continued detention of 18 Crown Resorts Chinese staff and three visiting Australian execs involved in high roller promotions are still creating industry ripples as operators and investors alike try to figure out whether this is the start of a wider Chinese government crackdown on gambling.
Fast-moving events this week have seen Australian media reports quoting hundreds of millions of dollars wagered by Chinese high rollers in Aussie land casinos, offset to some extent by Crown claims that this whale gambler" demographic generates only 12 percent of turnover.
One operator, New Zealand-based SkyCity, has clearly been unsettled by the arrests, and opined this week that a wider Chinese crackdown on foreign gambling will hurt high-roller revenue.
Addressing a meeting of shareholders, SkyCity Entertainment Group interim chief executive John Mortensen predicted there would be a drop in the immediate term in the business it gets from high-rollers.
Mortensen said it was hard to determine what was going on with Crown management giving out little information because that company has been given only limited information in China and no reason had yet been provided for the arrest and detention of its employees.
“This is part of the Chinese government’s drive on corruption and their viewing of all of the movement of finances from the country. But we’re aware of the rules and regulations, and our independent contractors operate within those rules and respect the laws of China,” he said.
Mortensen went on to quantify the contribution of foreign wagering to his companies revenues, revealing that while international punters are an important part of SkyCity’s business, they represent only 15 percent of normalized group revenue and 10 percent of normalized EBITDA.
In the 2016 financial year, SkyCity’s share of the total international business market in Australasia was 9 percent, he said, noting that around half of the customers came from China.
Unlike Crown, SkyCity does not have any staff in China, and instead uses independent contractors.
Mortensen said that going forward SkyCity will make a bigger effort in Asian markets other than China, such as Singapore, Malaysia and Vietnam to attract more VIP players.
Crown Resorts reportedly angered local media by ordering reporters off the premises at its annual meeting in Perth as an unhappy shareholder spoke out about what he called a lack of transparency over the arrests.
In related news, Macau’s gaming regulator has called for a meeting with the islands six gaming concessionaires to discuss the Chinese situation.
Secretary for Economy and Finance Lionel Leong emphasized that no local operators are involved in the Crown Resorts arrests, but he warned Macau-licensed casino firms that the government is closely monitoring this case and developments flowing from it.
Leong commented:  "Many times have we reminded them [Macau casino operators] that any commercial activity or behavior has to be carried out strictly in line with local laws, in Macau or elsewhere."