SkyCity revenue hit by Chinese gambling clampdown

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Some of New Zealand’s casinos have been affected by China’s gambling crackdown. SkyCity Entertainment Group operate four casinos across New Zealand, as well as a further two in Australia. Lucky Nugget Casino have the full story on how the business is shaping up and continuing to compete with online casinos.

Positive picture overall

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SkyCity Auckland is located at the base of the Sky Tower.

SkyCity mostly reported improvements across the sector. They made a record NZ $83.8 million net profit in the six months between July and December 2016 – which is an improvement on last year’s previous record of $71 million. There was an 18 percent total increase in the net profit.

Total revenue was also up, especially across New Zealand casinos. In total, the company earned $533.1 million over the same period. $449.3 million was spent on running the business and other associated costs.

Specifically, the Auckland casino did much better than previously, and saw a 12 percent improvement in the three months from October to December. Overall this year, the casino’s revenue rose by more than three percent and generated $283.9 million. Its total profit for the year came in at $130.6 million – five percent more than it delivered the year before, and accounting for about four-fifths of SkyCity’s total profit.

This offset some of the problems that SkyCity was facing – namely, a weakened Australian dollar and a decrease in international business.

China’s continuing crackdown

Gambling is illegal in mainland China. However, that doesn’t stop many Chinese tourists from travelling around the world to spend large amounts of money in casinos. In 2014, Chinese gamblers lost $132 billion – mostly in overseas venues. Many of them go to Macau, which reported $52.6 billion in revenue in 2012.

China is famous for its wealthy businessmen, who make the kind of high rolling customers that casinos are keen to attract. However, the country’s government has decided to make it harder for businesses to attract Chinese customers. In 2016, over a dozen Crown Resorts staff were arrested in China for supposedly breaking the laws about promoting gambling to citizens.

This has had a knock-on result with SkyCity. While the business said none of its staff were detained in China, the event caused a lot of uncertainty and affected the short-to-medium term prospects.

And, lo and behold, the high roller business at SkyCity fell by 39 percent in the second half of 2016. The company brought in $4.4 billion. The normalized underlying earnings, which doesn’t count the volatility of high rollers, fell by 69 percent down to $7.1 million.

The future for SkyCity

The future is a little uncertain for SkyCity following China's new strictness.
The future is a little uncertain for SkyCity following China’s new strictness.

The Auckland casino is expected to carry on growing into 2017, and hopefully post modest improvements on its previous revenue. The casino in Hamilton also has a positive outlook and SkyCity are optimistic about its future.

However, the situation in Australia is more complex. Darwin is facing challenging conditions, and the Adelaide casino is currently being renovated. The company hope its future will improve once the renovations are done, and help make up for the problems Darwin could face.

China’s tightened gambling laws make it harder for Oceania casinos to attract the Chinese high rollers they’re used to. The business will have to look forward to find ways around this problem, in order to carry on staying relevant.