Star Performer
There's no doubt that Sydney's Star City Casino is well and truly positioned on the map of major tourist attractions, following the success of the Sydney 2000 Olympic Games. Nestled on the foreshores of Darling Harbor, the property includes a 480-room hotel and apartment complex, two theaters with a seating capacity of 3,000, seven major restaurants - and, of course, the casino with 210 gaming tables and 1,500 slot machines.
The property is performing well for Victoria-based Tabcorp Holdings Ltd., who acquired the complex in October 1999.
"The Olympics was a great opportunity to introduce international and Australian visitors to the entertainment complex at Star City," says Tabcorp CEO Ross Wilson. "We [expected] it to achieve record business, given its unique status as Sydney's only casino, combined with its prime harbor-front location," he says.
Star City contributed $468.3 million revenue and $122.2 million earnings before interest, tax, depreciation and amortization for the 8.5 months it has been part of Tabcorp.
[Editor's note: Australian-dollar figures are used throughout this story unless otherwise noted. One Australian dollar equals about $0.54 U. S.]
For comparative purposes, in the 12 months ended last June 30, Star City generated revenue of $651.2 million, an increase of 16.5 percent on the previous corresponding period, with EBITDA at $170.2 million, an increase of 26.4 percent.
Total table-gaming revenue for the 1999-2000 year increased by 24.2 percent to $404.3 million, predominantly due to international play that contributed $81.7 million - a whopping 3,000 percent increase on the previous year of $2.5 million.
Slot-machine revenue increased slightly from $155 million to $162.3 million, mainly because of the provision of more 1-cent and 2-cent machines, and the installation of new games on existing machines.
Tabcorp has talked of possible off-shore acquisitions after posting a higher-than-expected annual profit on the back of its Star City Casino acquisition.
Wilson says the Star purchase has been a success for Tabcorp and acquisitions were an option, including another casino, if the timing and price were right. However, he says he doesn't see Internet gambling as a big revenue-earner in the short term.
Tabcorp also plans to spend up to $25 million to expand its flagship Star City casino as part of a plan to strengthen its position in the Australian gaming industry.

Casino Jewel in Packer Crown
The largest casino in the Southern hemisphere, Melbourne's Crown Casino, is faring extremely well as one of Australia's only casinos that continues to target the volatile high-roller market.
The latest financial results for the 1999-2000 fiscal year show a 15 percent jump in casino revenue, from $706.4 million to $812.5 million, boosted by international business.
"The win rate was higher than the theoretical win. In addition, there was a substantial boost in international players coming back after the Asian economic downturn," says Gary O'Neill, Crown's spokesperson.
The percentage win rate on international business was 1.54 percent, compared with the average expected ratio of 1.28 percent, resulting in an extra $39.4 million in operating profit, and a gross win result of $316 million, up from $247 million over the previous year.
Indeed, a new element of success has been achieved since Kerry Packer's Publishing and Broadcasting Ltd. (PBL), acquired Crown on July 1, 1999.
Announcing the results, PBL Chief Executive Officer Nick Falloon says Crown improved across all business units, including the hotel, restaurants, tables and poker machines.
"That is the nonvolatile and biggest part of Crown, and the cream on it was we had a good six months in terms of the win rate and volume from high rollers, so it was pretty hard to fault the result," he explains.
Gross win for slots increased from $234 million to $263 million for the current year, with table gaming fairly stable at A$241 million.
Crown's current player profile comprises around 80 percent local players, 12 to 15 percent Australian interstate and 5 to 8 percent international visitors. With 350 tables and 2,500 slots, the casino continues to tap into the international business through its six Asian offices, which remained open throughout the Asian economic crisis.
"We remain focused on Asia, in particular Taiwan, Japan, and a concentrated effort to market to players in main land China," says O'Neill.
It comes as no surprise that Crown Casino's front-line competitors are the major Vegas casino-resorts and five-star cruise lines, particularly those operating out of Asia.
Building will commence this year for a second hotel tower of 500 rooms to finalize Crown's original commitment to the Victorian state government to offer a 1,000-room property. Due to be completed toward the end of 2003, the tower will connect to the main casino via a bridge. Crown also will build a Lyric theater under the same agreement with the government.

Burswood keeps fingers crossed
Casino gaming is a regulated monopoly in Melbourne for the next five years, which gives Crown a huge reprieve from the woes of Western Australia's Burswood International Resort-Casino.
Burswood was facing the Dec. 24 expiration of its exclusive licence as this issue went to press. That left recently appointed Managing Direct John Schapp with the important task of establishing Burswood's position with the government for the duration of that exclusivity.
Although an additional license is unlikely in Australia's anti-gambling political environment today, gaming analysts there have a few major concerns that have left Burswood out of favor with the investment community.
"Even though the $32.1 million annual profit represents a modest rise on previous year earnings, there is a concern about Burswood's capital expenditure commitments, its perceived distant relationship with the WA government and the continued deterioration of the overseas junket market," explained one local broker to the market.
Set in a prime location within a pristine garden setting, Burswood is still focused on international play, but acknowledged to Casino Journal that it is a shrinking side of business. "We experienced a marginal downturn due to the Asian crisis and increased competition, but net profit after tax currently stands 3.9 percent higher," says Julie Cameron, Burswood's public relations manager.
With offices in Hong Kong, Taiwan, Singapore, Malaysia and Bangkok, the company is expanding its target market of Southeast Asia to include Northern Asian points such as Hong Kong and China.
Slightly over half of Burswood's gross gaming revenue comprises international play.
Obviously, they're not doing too bad a job at attracting the premium play market - especially considering that Burswood also suffers from a punitive 15 percent tax regime on its international business compared with 10 percent of Crown and Star City.
Indeed, Schaap, who replaced long-serving CEO Ed Posey a few months ago, has a challenging task ahead of him. His priority is to work together with the state government toward an improved casino tax regime, to overcome uncertainty with regard to the expiration of that exclusive license, and discuss online gambling.
"I doubt that another casino will ever be built in Perth, although it is possible for Christmas Island to re-open," says Sean Monaghan of Burdett Buckeridge and Young. "If this were to happen, stability would have to return to Indonesia - and that could take some time.
"In the interim, additional gaming ships like the 117,000-ton liners from Star Cruise will start operations over the next few years," Monaghan says.
Burswood appears determined to participate in the growth of Internet gambling, but current regulations prohibit this. In the interim, the operation has upgraded its website at www.burswood.com.au and launched a play-for-fun gambling site.
Other initiatives include a $70 million resort upgrade that includes a food emporium and an extension to the convention center, as well as new on-the-floor gaming technologies such as a loyalty reward program, a pit tracking system and a state-of-the-art surveillance system to identify key players.

Online Gambling a Thriving Business
Australia's first regulated Internet casino, Lasseters Online, went live in April 1999 and is soon expected to equal performance with its land-based operation at Alice Springs in the Northern Territory.
"Online gambling is only in its infancy. Those that will succeed will have established a good brand," says Peter Bridge, CEO of Lasseters Hotel-Casino and Lasseters Online. "I believe that there will be a transition from unregulated to regulated casinos such as MGM. Companies with no land-based casino will face competition and the brand name that comes with that," he says.
Indeed, this is why Lasseters is building its product mix as both a traditional land-based casino, and offering its mark in cyberspace as an online gaming site fully regulated by the Northern Territory government.
Lasseters' 18-table, 250-slot casino and 74-room hotel have been "good solid earners," providing a constant revenue stream. Annual gross gaming revenue was around $20 million for the past fiscal year, up 12 percent on the previous year due to the installation of 52 more slots. Reflecting current trends in the gaming industry, slots represent the bulk of their revenue - in this case a 70-30 split.
Lasseters Hotel-Casino primarily caters to the locals, and is the major center for gaming in the region. Located in Alice Springs where there is no widespread community gaming, the casino continues to attract the grind market of predominantly local patrons, including around 15 percent tourist trade - the majority of them domestic "Aussie" visitors.
Unlike the land-based property, Lasseters Online attracts a completely different clientele. It operates as a separate division from the casino, with 30 staff. They currently have 100,000 players from 208 countries, with around 70 percent from North America. Popularity of the games reflect the land-based operation, with a 70-30 split between slots and table games. "Second-screen features are really popular," says Bridge, "and our Lasseters slot machine is a ripper."
Lasseters is a public unlisted company, having deferred its planned debut on the Australian Stock Exchange in May. "We deferred listing as a publicly traded company based on the uncertainty of the federal government's proposed moratorium for Internet gambling, and the volatile stock exchange market," Bridge explains to Casino Journal.

Federal Group Goes Live on the Net
The Federal Group invested $14 million and went "live" with Internet gambling last July 4, following approval of their state government license. The intention is to capitalize on the growth of Internet gaming by offering an Australian regulated operation, and provide diversified growth for their two land-based casinos and network gaming facilities.
Powered through their portal www.southerncrosscasinos.com, the Federal Group offers a choice of two casinos to complement their land-based properties in Tasmania - Wrest Point in Hobart, and the Launceston Country Club Casino.
Unlike Lasseters, the Federal Group integrates its Internet gaming facilities by sharing resources for areas such as help support, even though they maintain separate marketing divisions.
"We've experienced a lot of distraction through the proposed federal government action towards Internet gambling, and believe we have a potential claim for compensation if they proceed with a moratorium backdated to May 19, which was before we went live," says John Farrell, business development manager for the Federal Group.
Hesitant to give preliminary figures on their profitability, Farrell comments, "We're doing a lot of trial marketing to test efficiency and effectiveness, and are yet to exploit the powers of Internet marketing."
The Federal Group is the largest private marketer in the state of Tasmania. It controls all gambling, including 154 venues with online TasKeno and 100 club and hotel venues with 1,610 slots, as well as the two casinos. Around $200 million is generated in gaming and hospitality revenue through the combined 1,100 slot, 40-table and 550-odd hotel rooms and accompanying food and beverage and convention facilities.
The two casinos withdrew from the premium-play market after the opening of Crown and Star City, but are re-entering the business by branding each property as a small boutique casino offering friendly service.
"Tasmania attracts around a half million tourists every year, predominantly from mainland Australia, so we try to attract the tourism and conference dollar," he says. "We are now marketing to the mid-premium interstate market by emphasizing our island state's tourism and each property's F&B and conference facilities. In this respect we are competing against Crown, Star City and New Zealand by offering special weekend gaming packages and lucrative tournaments," explains Farrell.

Reef Posts First Profit
The Reef Hotel Casino in Cairns recently recorded its first annual profit since opening in January 1996. The $5 million profit for 1999-2000 was coupled with the operation's maiden dividend payout of $0.25 per unit. This compares to a $400,000 loss for the previous year. As there is no high-roller gaming, the increase is attributed to "retailer" gaming.
The Reef is owned by Casinos Australia International Cairns, a subsidiary of Casinos Austria International (which also owns Casino Canberra). Only last year the casino underwent a $70 million financial restructuring, including CAIL (acquiring the property's 128 suite, five-star hotel lease and Reef Centre Management operation).
The chairman of Reef Corporate Services, Barry Duke, says the result was due to an increased casino revenue and lower costs, combined with a reduction in interest charges. Over this period there was an improvement of casino performance, contributing 21 percent more revenue to the controlling body, the Reef Casino Trust.
The 535 slots helped boost casino revenue earnings by around 7.5 percent to $35.9 million, mainly due to investing in note acceptors and state of the art electronic gaming machines. "Our 44 table games have been suffering due to the development of new, whiz-bang interactive slots," says Reef General Manager Alan Massie. "We've replaced a lot of machines with the latest offerings, and installed hyperlink jackpots to offer bigger prizes."
Massie, employed at Reef since its inception, has noticed a significant swing over the years away from table games, with 58 percent of revenue now attributed to slots. "This is the opposite to our first year of trading, when 53 percent of our revenue was generated from table-game activity."
Located in the hub of the Cairns tourist area, Reef has pulled out of the junket and premium market and focuses on the Northern Queensland and domestic market by offering one-on-one customer service and a friendly, relaxed atmosphere.
A refurbishment program is currently under way, including hotel-room improvements, an upgrade of part of the casino floor, and a bar and grill that will mark the first time that full F&B facilities have been integrated with the casino.
The possible introduction of a third airline into Cairns in the coming year could provide a further boost to the Reef's operation.

Relaxed Jupiters
Also offering a relaxed, friendly service in a tropical atmosphere and vying for a similar market is Jupiters Townsville Hotel and Casino, located in North Queensland.
Townsville was previously managed by the Sheraton Group, until it was taken over by Jupiters in December 1999.
"We have spent an enormous amount of time re-branding our product since Jupiters acquired a majority shareholding of 47.5 percent," says Terry Botten, CEO of the property, which is listed on the Australian Stock Exchange under Breakwater Island Ltd.
"This involved purchasing 930,000 chips with our new logo and organising a new reservations system [previously linked to the worldwide Sheraton chain], right down to new monogrammed towels for our hotel guests."
"At this point in time, we don't share customers or marketing with the other two Jupiters casinos, but I would like to see that changed in the future," he says. "In the meantime, we're working on technology to operate with the Jupiters systems, so we can offer attractions such as the same linked progressives."
As the Jupiters website is tied to Hilton, the Townsville Hotel and Casino currently working on its own site, which will supplement the new $3.5 million advertising campaign which was launched after the Olympics.
In particular, the property is promoting its multimillion-dollar renovations, which were completed in April and included an overhaul of meeting rooms and an upgrade of the 193-room, five-star hotel's lobby.
"We were closed for conventions between January and March [last] year due to our building works which should have had quite a big impact on our bottom line. Fortunately we didn't suffer too much," explains Botten.
Indeed, EBITDA for the 1999-2000 year was only slightly down at $9,275,000, compared to the previous year of $9,558,000. Similarly, gross gaming revenue for the 248-machine, 24-table property was $25,995,000 in the year ending 2000, compared to $26,545,000 the previous year.
Botten explains to Casino Journal that the marginal downturn is attributed to the increased costs in re-branding, and the city's inclement weather. Townsville is known for its 320 days of sunshine every year, but Cyclone Tessie resulted in a particularly long and severe wet season.
The casino is situated in the dry tropics, on Cleveland Bay and next to the 230-slip marina and Townsville Entertainment Center. "The casino was closed for three days and the hotel was an evacuation site," he says.
Now that the $16 million improvement program has been completed, Jupiters Townsville Hotel and Casino is targeting the meetings and conventions business.
"A lot of people overlook the strength of the meetings and conventions trade. Even though delegates may not spend a lot of money in the casino, it definitely adds an element of excitement to their stay.
"We target pre- and post-visits for our delegates, as we have found that they want more than just a place to attend meetings. Our mandate is to be the best entertainment venue in North Queensland. As part of this we offer great golf, good weather, barramundi fishing, and of course the casino."

Jumpin' Jupiters
Jupiters is one of the few companies to diversify its gaming interests beyond casino properties.
The company's flagship hotel-casinos - Conrad Jupiters and Conrad Treasury - are operated by Park Place Entertainment, headquartered in Las Vegas. Jupiters also holds a controlling interest in a third Queensland property, the Jupiters Townsville Hotel and Casino.
In recent years Jupiters Ltd. has pursued a strategy of diversifying its sources of cash flow into technology-based gaming in multiple jurisdictions.
The acquisition of AWA Ltd. in January was a strategic business decision to position the company nationally across Australia. As a result, Jupiters sold off the wagering division and integrated the remaining business units. This "eGaming and Technology" group encompasses the operations of state-wide keno in New South Wales, AWA Technology Services, Jupiters International (Sales), Jupiters keno in Queensland, gaming-machine monitoring, Jupiters Technology and Centrebet - the largest provider of e-commerce in Australia through its Internet and telephone sports-betting operations.
The group's EBITDA for the 1999-2000 fiscal year was $170.1 million, an increase of 34.5 percent over the previous period, primarily attributable to improved premium play assisted by strong earnings from gaming machines at the Gold Coast and Brisbane casinos.
In addition, the benefit from an above-average theoretical win rate on commission premium play business provided approximately $10 million in additional after-tax earnings.
The combined Conrad Jupiters and Conrad Treasury operations offer 104,400 square feet of gaming space, including 2,343 gaming machines and 185 tables, 743 hotel rooms and 25 restaurants and bars. Overall, casino revenue for the two properties increased by 13.5 percent for the year ended June 2000, due to commission premium play business and further growth in gaming machine revenue.
Operating revenues at Conrad Jupiters increased by 14.4 percent to $325.6 million, boosted by a 92 percent increase in revenue from commission premium play. Casino patronage was maintained at around 12,500 per day while average main-floor spend per patron increased by 14 percent over the previous year.
Operating revenues for 1999-2000 at Conrad Treasury increased by 6.7 percent to $239.1 million. Unlike the Gold Coast property, revenue for commission premium play decreased by 14 percent, although non-commission premium play revenue increased by around 21 percent, due to increased business volume. Casino patronage was approximately 9,600 per day, with the average main-floor spend per patron increasing by around 17 percent compared to the previous period.
Despite these pleasing results, some analysts in Australia are concerned about Jupiters' decision to invest in the next few planned developments. Jupiters is the preferred developer of the Gold Coast Convention and Exhibition Center, to be constructed adjacent to the Gold Coast Highway and Conrad Jupiters casino. The $118 million, government-owned center has been designed to hold up to 1,500 convention delegates or up to 6,000 concert or sports attendees.
In addition, plans have been announced to undertake a remodeling at Conrad Jupiters at a cost of up to $84 million.
Jupiters believe it has opportunities to extend its existing revenue base in both Australian and international markets. Indeed, they are well poised to do this, considering their diversification.
On a separate note, the company has applied for an Internet keno license with the Queensland government and an Internet casino license in Norfolk Island - both designed to provide access to new revenue sources.

MGM Grand Darwin ‘Seasonal'
At the top of Australia's northeastern tip is Darwin's MGM Grand Darwin, owned by Las Vegas-based MGM Mirage Inc.
The casino has been in existence for 21 years, and was first taken over by MGM Grand Inc. five years ago. Since then MGM merged with the Mirage group, which will hopefully reflect continual positive results for the property in the median to long term.
Although the casino does not disclose performance data, information at the MGM Grand corporate web site indicates that casino revenues were US$30.9 million, representing an increase of 13.2 percent over the previous year, primarily as a result of slots volume.
Housing some 370 slots and 27 table games, the casino relies on local clientele and is somewhat cyclical in attracting regional and Australian domestic tourists, due to weather changes.
"Our base population in the region is 90,000, although this increases during the dry season," Marketing Manager Melissa Patterson tells Casino Journal. "We regard ourselves as a seasonal casino, in that our peak periods are during the months of May through September," she says.
As MGM Grand Darwin's General Manager Dave Steinhardt explains, "With such a high proportion of local players we are able to provide a very personalised service." Naturally, the dress regulations are relaxed and informal, with shorts, T-shirts and clean running shoes permitted.
The casino and 96-room five star hotel employ 500 workers, and current promotions include a morning each week of free cash, coffee and cakes which is a "real hit with the locals."

Sky's the Limit
The Adelaide Casino, which operates from within the historic Adelaide Railway building, was acquired by Sky City Ltd. last July.
Sky City, which also owns and operates New Zealand's Auckland casino, may well plan to capitalize on joint marketing incentives for both properties to position them as major tourist attractions in the Asia-Pacific region.
The current maximum number of tables and gaming machines allowable under the Adelaide casino licence are 90 and 880, respectively, with the current count at 71 tables and 763 gaming machines.
The latest performance figures for the 1999-2000 period reflect total revenue for the casino and F&B facilities of $90.3 million, EBITDA of $20.2 million, visitation per day of 5,770 and average win per customer of $36.70.
According to one analyst, gross gaming revenue for 1999-2000 is around $77 million.
The Adelaide Casino's major competitors are hotel and club gaming machines in the South Australian jurisdiction, which were first introduced in 1994. There are now some 12,800 slots in over 500 venues, with the majority in hotels that have a cap of 40 machines per venue.
Tax rates are slanted heavily toward table games, with a rate of 10 percent of net table-game revenues and 43.5 percent of net gaming-machine revenues.
First opened in 1985, the casino pulled out of the premium player market in the early 1990s to concentrate on grind business. According to Greg Hawkins, general manager of casino operations, the change in management and ownership will soon result in a marketing push to recapture high-end players.
"The reactivation of the property as a VIP player destination is scheduled in the near future, with the popularity of the classical ‘members' room still well known within this domestic segment," he tells Casino Journal.
"From an electronic gaming perspective, an aggressive approach to the introduction of low-entry, high-frequency jackpot arrangements and the stimulation of the $1-and-above play segments is seen as a priority," he explains.
The casino is due to start a phased refurbishing program including signage, the replacement and updating of slot machines, and a significant redevelopment of the interior "look" of the property. "The integration of machines [and] tables will be reviewed across both levels to ensure optimum use of space," says Hawkins.
In addition, the F&B facilities will be upgraded to deliver a greater variety of product and live entertainment options. As the casino has a solid core of regular players in the 55-plus age bracket, these incentives are presumably to attract younger age groups.

Pitching for Boutique Business
If the prohibitive tax rate for slot machines makes it difficult for the likes of Adelaide Casino to compete on par with other Australian casinos, consider Casino Canberra.
This is the only casino in Australia that has zero slot machines.
"We are continuing to lobby the Australian Capital Territory government to install poker machines, so we can become competitive with other casinos in Australia," says the general manager of Casino Canberra, Warren Richards.
Casino Canberra attracts a 50-50 split of local and interstate visitors.
Suffice it to say, emphasis is placed on special incentives to attract players to the variety of 40 table games, which attract a 20 percent tax rate on gross gaming revenue.
"We invented a Pai Gow game with a Gee Jung jackpot which is hugely popular with the Asians, and are the only casino with it," comments Richards. Its manual jackpot component with this game of tiles currently stands at a record $150,000.
The European-style boutique casino has been operating for eight years and is owned by Casinos Austria International Ltd. The property's figures are consolidated with their other operations, and as result no financial data is available - although it's believed that their operations are stable and are profitable for CAIL.
Richards tells Casino Journal that trade is steady, with an average of 1,700 patrons a day. Open from midday to 6 a.m. over seven days, the casino does not operate a hotel but offers keno, a nightclub, three bars, and a restaurant with modern Australian cuisine. A major renovation is planned in the next two years.