James Packer is one of Australia’s richest men and has a fortune that is estimated to be close to $5 billion. Packer has vested business interests but derives major revenue from his Crown Resort casinos that have been established in a number of countries.
Packer’s Melco Crown Casino in Macau, China used to bring in significantly more revenue before Beijing started to crackdown on Macau’s casinos and high stake gamblers. The operation which started on the mainland in 2013 has continued into 2015 and has been successful in driving away VIP gamblers from Macau’s casinos.
China decided to crackdown on Macau’s casinos because it had turned into a playground for VIP gamblers, some of whom were corrupt government officials and businessmen who had used illegal methods to amass their fortune. These VIP gamblers contributed significantly to Macau’s casino revenue and indulged in a number of illegal activities such as prostitution, money laundering and racketeering.
The less than desirable faction of VIP gamblers have decided to take their business to neighboring countries where the laws are a lot more lenient. Macau’s casinos initially expected the crackdown to last for a couple of months but Beijing has made it clear that it has no plans to stop the crackdown, even though Macau’s casinos lost over $100 billion in 2014. Other factors contributed to the decline but VIP revenue was a major portion.
Packer’s Crown Resorts which used to make half of its revenue from Melco Crown properties has been forced to cope with a huge drop in profits and have no idea when business will pick up again.
In a statement, Packer said “Obviously the slowdown in Macau is more severe in truth than any of the operators foresaw. I don’t think any of the operators could have predicted what has happened now. As an Australian investor in China and Macau, it’s very hard to be critical of a corruption crackdown…[but] when and how that ends is something that no one knows.”
Melco Crown currently operates two full scale casinos in Macau; the City of Dreams and the Altira. The company has plans to open Studio City, a third casino during the 3rd quarter of 2015 and is hoping that business will improve so that Studio City can start well. The good news for Packer is that the slump in Macau’s casinos has slowed down during the months of March and April and things could be getting better.
Melco Crown chief executive Lawrence Ho stated that Studio City casino resort will have a total of 1600 rooms and over 400 gaming tables.