Star Entertainment’s deal with the NSW government effectively blocks its upcoming rival, Crown Resorts from installing poker machines at its new Sydney casino for the next 21 years.
Further stipulations of the deal include a more favourable tax rate for gambling operations at its Pyrmont venue, where a restricted number of patrons were recently allowed in. This is the first time the venue’s doors have opened since March 23.
According to Star, the agreement with the NSW government means it will continue to operate the only casino in Sydney with poker machines, and that it is also entitled to compensation if Crown is permitted to install pokies at any time before June 30, 2041.
Crown has consistently denied industry speculation that the group is aiming to have the license for its $2.2 billion casino amended to permit poker machines.
“We now have certainty that it won’t happen,” said Star chief executive Matt Bekier.
“[It] guarantees the operating environment for which we’re paying our taxes, and it de-risks our business for the next 21 years, which is a great thing.”
Last month, the Sydney Morning Herald and The Age reported that Crown was actively forging relationships with some of the larger clubs and RSL’s in Sydney ahead of the opening of its Barangaroo casino in February in a climate where it doesn’t have access to international high rollers.
The terms of the compensation clause are still classified and Crown has refused to comment further on the matter. In an official statement, the NSW Treasury said that “poker machines will not be operated at Crown Sydney at least for the duration of the agreement”.
“The agreement will allow long-term revenue certainty for the NSW Government and contribute billions of dollars to be directed to important projects.”
A 20-year tax agreement includes the requirement that Star’s table games are set at a fixed rate of 29 percent from 2022, the same stipulation that Crown operates under. Pokies will start at a fixed rate of 32 percent and increase to 34 percent after six years.
Macquarie economic analyst, David Fabris, predicts that the new deal will translate to an average tax rate of 30 percent in the years 2022 to 2024 for Star, increasing to approximately 31 percent from 2028. According to Star, its average tax rate was 31.5 percent in 2019.
These are higher rates than at Crown’s casinos in Melbourne (26 percent) and Perth (21 percent), and Star’s casinos on the Gold Coast (26 percent) and Brisbane (25.6 percent).
Star stated its intention to reopen its gaming rooms soon, with seating limited to 500 loyalty club members at a time and only by invitation. This decision follows extensive consultation with the state government.
Mr. Fabris advised that if Star invited its highest-spending gamblers, who typically spend around $1000 each on average per visit, the group could generate revenue o about $20 million in June to help cover its $20 million a month cash burn.
Star’s CEO revealed that close to 700 stood-down employees could return to work if the casino is fully reopened, but the reality is that the facility will likely operate on a restricted basis for another month or two.
“The way to look at the next month is really just to give everybody confidence that you can ease up without it blowing up into new outbreaks,” he said, however financially, “it’s not going to do much for us”.