Star chairman John O’Neill warns Chinese tourism is no safe bet

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Star Entertainment Group chairman John O’Neill has warned that Australia should not take its high level of Chinese tourism for granted. “We have got, at all costs, to avoid complacency with China,” he said in an interview with The Weekend Australian on the fifth anniversary of his appointment as chairman of the casino group with operations in Sydney, Brisbane and the Gold Coast.

“The Chinese market is incredibly important, but we shouldn’t be putting all our eggs in one basket.

“There are other important markets in Southeast Asia, including Thailand, Singapore and Indonesia.”

Mr O’Neill said the Australian tourism industry also needed to closely watch developments in China, including shifts in government policies.

He did not want to comment on the situation facing his casino rival, James Packer’s Crown Resorts, which recently had 17 of its staff detained for offences related to the illegal promotion of gambling in China. But he said companies such as Star, which operated in the casino business, needed to be sensitive to government policies in each of the places in which they operated.

“We operate in a highly regulated environment in all our ­various jurisdictions,” said Mr O’Neill in an interview at the Balla Italian restaurant in Sydney’s Star casino.

“Each market has its nuances which must be understood by operatives. There cannot be any room for complacency. Early warning signals, or changes to the rules of engagement, must be monitored carefully and responded to proactively.”

His comments also come as an increasing number of Australians with a direct interest in doing business in China are quietly concerned at whether outspoken comments by the Turnbull government, including criticism of the Asian giant’s role in the South China Sea, could prompt Chinese authorities to ease back on the level of tourism and students coming to Australia.

Mr O’Neill did not want to comment on government policies, but said Australia needed to be “well informed about the potential for change of sentiment” from the Chinese about doing business.

Australia had the potential to significantly boost the number of Chinese tourists as long as it could build enough infrastructure including high-quality hotels to cater for the demand.

He said Australia could attract more than five million Chinese tourists a year — five times the number it does today.

“There are 100 million Chinese tourists who travel overseas a year now,” he said.

“We have got about 1.2 million a year, or about 1 per cent of them.

“Australia should be picking up about 5 per cent of that. There is no reason why we can’t.

“That’s why a lot of this tourism infrastructure, including hotel rooms, has to get built to accommodate them to a good standard.”

Mr O’Neill has been a director of the group since 2011. A former banker, he ran the Australian Rugby Union from October 1995 to the end of 2003 before being recruited to run Football Federation Australia in March 2004. He rejoined the ARU as chief executive in 2007.

He was appointed acting chairman of the group then known as Echo Entertainment in June 2012 on the sudden departure of its chairman John Story, who blamed his departure on efforts by Mr Packer to remove him from the job.

Mr O’Neill was confirmed as chairman in July 2012, opting to step down from the ARU in October of that year to concentrate his attention on the chairmanship of Echo (later renamed Star).

Mr Packer’s Crown group had a big win the next year in 2013 with the NSW Liberal government giving it a second casino licence with an unsolicited bid in Sydney in ­direct competition with the Star casino located outside the CBD area in Pyrmont.

But, in more recent years, Crown’s fortunes and those of Mr Packer have fallen on tougher times, while Star group has repaired relations with the state government and steadily expanded its footprint. It has stepped up investment in its casino/hotel properties in Sydney, Brisbane and the Gold Coast to cater for middle class tourists from Asia.

The Star group is now developing a $2.5 billion casino, hotel and entertainment project in Brisbane after beating a bid from Crown ­casino resort in 2015 for the development in the city’s Queen’s Wharf precinct.

“It’s a massive $2.5bn project which takes up 12 per cent of the Brisbane CBD — a hotel, entertainment and apartments precinct with apartments and a footbridge across to South Bank,” Mr O’Neill said. “It’s game changing and transformative.” The project is being completed by Star in conjunction with two major Hong Kong Chinese partners, Chow Tai Fook and the Far East Consortium.

Mr O’Neill sees the Star partnership as the model of how an Australian company can work successfully with Chinese investors, with the foreign companies bringing in capital and expertise in tapping into the Asian tourist market. “We couldn’t have taken on such a massive capital project without the partnership,” Mr O’Neill said.

“It is a model for how to bring in Hong Kong and Chinese investment into Australia.

“We (Star) are not expanding into China or any other overseas destinations.

“We are a partnering with Chinese investment, bringing it into our properties in Sydney, Brisbane and the Gold Coast. There are endless benefits they bring to the table.”

Mr O’Neill said the Chow Tai Fook group owned the largest jewellery store chain in the world and also owned and operated the New World shopping centres and the K11 shopping centres in Asia.

“Their expertise in retail is better than anything we have got in Australia,” he said.

Family members involved in overseeing the Australian operations included Adrian Cheng, the son of Chow Tai Fook chairman Henry Cheng, and Winnie Chiu and Andrew Chiu, the son and daughter of Far East founder billionaire David Chiu.

The 37-year-old Winnie Chiu is president of Far East’s hotel business, Dorsett Hospitality International, which has some 25 hotels in Asia and London with plans for hotels and apartments in Australia.

“They have massive distribution channels in Asia and strong relations with the Chinese airlines,” Mr O’Neill said of Star’s Hong Kong based partners.

“They are helping to bring more Chinese and Asian tourists to our properties. They add tremendous strength to our organisation.”

Mr O’Neill said his first two years as chairman of Star were “difficult times” as he had to work through strained relations with the state government and the challenging prospect of competing with Mr Packer’s Barangaroo casino and criticism of Star.

“I have worked through many difficult times in my life including running the State Bank of NSW during a recession,” he said.

“What I have found is that, in adversity, it doesn’t help anyone to lose your nerve.”

In April 2014, Mr O’Neill and the board promoted Star’s finance director, Matt Bekier, to the role of group managing director and chief executive of the Star group.

He said Mr Bekier had done a great job turning the casino group around.

“The company is unrecognisable,” Mr O’Neill said. “All sorts of derogatory assertions were made about our assets in the past, but we have all moved on.”

In the meantime, the start date of Mr Packer’s proposed casino at Barangaroo has been pushed back several years to 2022, while Star is involved in a $500 million upgrade of its Sydney casino and the construction of new hotels area.

“We have been refurbishing the hotel rooms and put in new bars and restaurants at The Star,” he said.

“We have a new hotel which will open in November and have put in a request for planning approval for a new Ritz Carlton.”

The new developments are being completed in conjunction with the two Hong Kong partners.

Mr O’Neill said the company was “not unaware” of the prospect of the eventual arrival of Mr Packer’s casino at Barangaroo.

“We will continue to improve our assets and we will be as prepared as we need to be,” he said.

Mr O’Neill said Star had used the same joint venture model with the two Hong Kong companies for the acquisition of the Sheraton Mirage on the Gold Coast.

“We have announced plans for what is now called Star Gold Coast for another hotel and apartment tower with 700 rooms,” he said.

“We have plans for one more tower but you could possibly add at least one other.

“It’s a case of how long is a piece of string?”

Mr O’Neill said the Star group was “unrecognisable” from the difficult situation it was in when he took over as chairman in five years ago. “We are in great locations, we have very good licences, very good relations with government and regulators, a good board and high-quality management,” he said.

“The best is yet to come.”

By GLENDA KORPORAAL
The Australian

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