After seven years of preparations, Australian casino operator Crown Resorts on Monday throws open the doors on its new showcase property, a $1.67 billon skyscraper hotel right on Sydney Harbour.
The Crown Sydney, now the tallest building in Australia’s commercial hub, brings key advantages to the table as its owners seek to crack the monopoly on gaming in the city long held by domestic rival Star Entertainment Group: posher rooms, flashier restaurants and more spectacular views.
What the upstart lacks, at least for now, is actual gaming.
New South Wales state regulators have held off licensing the 75-story tower for gambling amid an inquiry into allegations involving money laundering, entanglements with organized crime and corporate governance failures.
“The delay is certainly not helpful, but if you must have a delay, now is a good time to have it,” said David Green, previously chair of the state gaming authority in South Australia and now head of Newpage Consulting.
When Crown launched the project in 2013, the company had a lucrative joint venture with Hong Kong’s Melco International Development to run casino hotels in Macao and Manila. Crown won state permission then for the Sydney project with a business plan of targeting foreign high rollers, especially from China.
These days, however, between the coronavirus pandemic, related travel restrictions, economic uncertainties, bilateral tensions and heightened scrutiny from Beijing on citizens’ overseas gambling, Chinese high rollers are scarce to be found in Australia.
“Their (Crown’s) problem is they have constructed a casino for a market that doesn’t exist in the same form,” Green said.
Crown’s net profit declined 80.2% to 79.5 million Australian dollars ($60.13 million) in the year ended June 30, as revenues tumbled 25.7% to AU$2.21 billion. Its current flagship casino in Melbourne, the country’s largest, and its sister property in Perth were both closed for extended periods due to pandemic restrictions.
Crown’s regulatory troubles started late last year after local news reports linked junket agencies bringing Chinese gamblers to the company’s casinos to Asian crime syndicates and money laundering.
The resulting inquiry by New South Wales’ Independent Liquor and Gaming Authority has captured headlines with frank testimony from current and former executives and board members on their awareness and negligence of money laundering at Crown’s casinos and the risks born by company staff in China.
Footage was played of loose bags of cash changing hands in a room belonging to Macao junket group Suncity and the inquiry was told of bankers raising concerns about the apparent manipulation of transactions to avoid the triggering of reporting requirements.
James Packer, one of Australia’s richest men and the company’s largest shareholder, gave testimony by video over three days from his yacht moored in the South Pacific about his extensive involvement in the company’s affairs even after his resignation as chief executive and chairman.
The explosive inquiry could result in Crown being denied a gaming license in Sydney or, more likely in the view of analysts, large fines and tightened operating conditions, especially in regards to junkets.
The New South Wales regulator plans to release the results of its probe in February but its peer in the state of Victoria has now moved up a periodic review of Crown’s Melbourne license by two years due to the revelations from the current inquiry.
Helen Coonan, who took over as chair of Crown’s board in January, has apologized for the governance and risk management failings outlined at the inquiry and outlined reforms to strengthen the company’s compliance and anti-money laundering practices. The company has halted dealings with junket agents and said it will only resume links when agents win endorsement from state regulators.
Amid the various headwinds, Moody’s Investors Service last month downgraded its credit rating on Crown by one notch to “Baa3” while Fitch Ratings placed its scoring on “rating watch negative.”
These are only the latest bumps in the Packer family’s long quest to open a Sydney casino.