Casino gambling in Australia is big business. It is also somewhat of a growth industry.
Australian Gambling Statistics suggest that casino gambling turnover jumped around 11.9% between 2014 and 2015 (this data doesn't include NSW or Tasmania so should be taken with a fair whack of salt).
Regardless, it is well ahead of the 6.2% increase in total gambling and a big part of the growth is likely coming from the notable increase in "international" or "VIP" business that coincides with the restrictions and subsequent slow-down in Macau gaming.
But where does this money filter through to? Here is a ranking of Australia's key listed casino assets by annual reported EBITDA (earnings before interest, tax, depreciation and amortization), which includes non-gambling revenues:
By far the biggest winner is Crown Melbourne, owned by Crown Resorts Ltd (ASX: CWN) and the numbers are huge. Just over $50 billion of VIP revenue was turned over by the casino in the 2016 financial year, while weighted average occupancy rate across the company's three Melbourne hotels was 94% which suggests some effective management is being used under conditions of strong demand.
It's no surprise then that Crown plans to develop an additional 388 room luxury hotel in the area to further stamp its mark on the city.
EBITDA from Melbourne alone was more than the combined EBITDA from Star Entertainment Group Ltd's (ASX: SGR) The Star Sydney, Crown's Perth resort and SKYCITY Entertainment Group Limited-Ord's (ASX: SKC) Adelaide and Darwin resorts.
Change is coming
But the most interesting point here is how it will all soon change. Crown's proposed fourth Melbourne hotel development is in addition to the company's territorial advance on Sydney with a $2 billion, six-star hotel and casino.
To counter, Star Entertainment has announced it will drop another $500 million on its Star Sydney asset with a hotel and tower expansion.
Star Entertainment also plans to spend billions on the new Queen's Wharf Brisbane joint venture and the transformation of 'Jupiter's Gold Coast' into 'The Star Gold Coast'.
The respective investments appear to make sense in an environment of strong demand, but prospective investors should be sure to consider what the impact might be if demand starts to slow for some reason.
