Crown’s big marketing bill not repaid by high roller gambling spend
The Perth Casino royal commission has heard about the marketing campaign the casino undertook in its attempt to lure high roller gamblers.
The ABC reports that former Crown Resorts chief executive John Alexander told the inquiry about the luxury yachts and private jets used to attract gamblers to the venue.
The luxury marketing wasn’t as rewarding as Crown had hoped though, with the venture racking up debts as high as $29 million.
Counsel assisting the royal commission Patricia Cahill gave the example of a $2.75 million-plus wedding held for friends of a junket operator.
She said Crown Perth subsidised the cost of the wedding to the tune of about $950,000, which is a part of the marketing campaign.
“Presumably the idea was that guests at the wedding party would gamble at both Perth casino and Melbourne casino?” she asked Mr Alexander.
“Well, there was always a hope of people gambling, yes, but often people would come and be flown down on private jets to Melbourne or Perth and choose not to gamble,” Mr Alexander said.
Ms Cahill said the gambling related to this wedding party resulted in a loss of $3.1 million to Crown Perth.
“Clearly the appetite for remaining in this business started to dissipate very quickly,” Mr Alexander said.
Bergin inquiry scathing of Alexander during his time in charge
Mr Alexander was a key lieutenant of Crown Resorts’ majority shareholder James Packer and was the company’s executive chairman until January 2020.
He stepped down from a key Crown Perth board role at that time after being a director for almost 16 years, some of those as chairman.
The Bergin inquiry found Mr Alexander’s “stewardship led Crown to disastrous consequences.”
This included a failure “to protect Crown’s casino licensees from the infiltration of criminal elements through, at the very least, its lack of robust junket approval processes”.
In the witness stand at the Perth inquiry, Mr Alexander explained why Crown Perth had invested so much in trying to entice high-roller gamblers to Perth, either as individuals or as part of a junket.
“There was a belief, certainly until about 2015, 2016, that Chinese tourism, Chinese visitation was just going to continue to grow,” he said.
“It was the fastest growing tourist group that we had and there was an expectation that obviously things would get better, with the volume and the like, with more customers.”
Royal commission hears that high roller business is risky business
This customer base disappeared with the restrictions on international travellers due to the coronavirus pandemic, the arrest of Crown staff in China in 2016 and the halt on junkets by Crown Resorts as a result of the Bergin inquiry.
But there were already other problems, including what Ms Cahill called “large, bad and doubtful debts” owed by patrons from questionable backgrounds.
She gave the example of an October 2014 company report which gave a debt schedule for the Perth casino including a gambler with a $29 million debt which had been outstanding since February that year.”
“And the comments suggest that the customer may be under investigation in China,” she said.
Another gambler had a $10 million debt, which had been outstanding since October 2012.
“And in the comments section, media reports suggest he may have been convicted of various crimes in China,” she said.
Mr Alexander said Crown Perth was “very limited” in its ability to enforce repayment of the debts because the gamblers lived in another country.
He told the royal commission these individual high rollers were harder to recover debts from, compared to junket operators, who guaranteed the debts of participants.
The royal commission was told the high-roller marketing business was high risk and marginally profitable, while junket operations had lower margins but less risk of debt defaults.