Crown Sydney
How a company successfully managed its non-market environment in order to
achieve its corporatestrategy aims.
a BGS case on
Introduction• Crown Resorts Ltd is one of Australia’s largest entertainment groups and owner-
operators of Crown Casinos.
• In 2012, Crown launched its bid to build a 2nd casino in Barangaroo, government-owned land in the heart of Sydney, New South Wales.
• Crown had to overcome large regulatory, political and public sentiment issues in order to be successful.
James Packer,Chairman of Crown Resorts
1. Casino Industry in Australia
• 4th largest market in the world• 2012 market revenue was $4.2bn• Big 3 players
Crown: 52% of market share, 2 casinosEcho: 32% of market share, 3 casinosSkycity: 5% of market share, 2 casinos
Market Overview
38Macau
Las Vegas
Singapore
Australia
Atlantic City
0 842 6
Source: Morgan Stanley
Gambling Revenue 2010 ($ bn)
1. Casino Industry in Australia
• 80% of Australians participatedin some form of gambling
• The highest spending in the world• Of which about 60% was spent on
the ‘Pokies’ (poker machines)• Estimated social cost of
between $3.5-6.3bn
Public Health issue
Australia
Singapore
Ireland
Canada
Finland
0 14001000200 1200
Source: H2 Gambling Capital
Gambling loss per resident adult 2010 ($)
800400 600
1. Casino Industry in Australia
• NSW Casino Control Act(1992)- Only 1 casino license allowed
• Current license held by Echo Entertainment until 2019
Regulation of casino is
a state issue in AU
2. Crown Resorts Ltd.
• Australia’s largest entertainment and integrated resort groups• Headed by James Packer, the fourth richest person in Australia by
Forbes• Crown’s resorts attract over 25ml visitors every year• Key differentiation factor in market strategy:
Build and operate integrated resorts, attracting Asian tourists• Already running two integrated resorts in Melbourne
and Perth
Company Overview
2. Crown Resorts Ltd.
To achieve their vision of being Australian leading tourism and entertainment business with a global reach, they need to have another casino in Sydney.
2. Crown Resorts Ltd.
• Initially, Crown attempted to obtain a Casino sub-license from Echo Entertainment but was unsuccessful.
• Public opinion regarding the negative impacts of a casino was strong, especially in NSW which already had a large casino.
• Crown realized that a purely market response will not work in their quest to build a second casino in Sydney.
Key Issues & Challenge
Crown decided to challenge to get a 2nd license directlywith non-market strategy.
3. Crown’s Non-market Strategy
Crown’s Proposal Building an integrated resort in Barangaroo Included a 6-star hotel and apartment complex, as well as a gaming
venue Casino is for VIP only (membership policy) No pokies (poker machines) Guaranteed tax revenue from Crown: AUD1 bn (by 2036)
Crown Sydney Hotel ResortUnsolicited Proposal to NSW Government
Barangaroo, Sydney, New South Wales
Crown Sydney (at completion) Opera House
Barangaroo is located on the north-western edge of the Sydney central business district and the southern end of the Sydney Harbor Bridge.
Harbor Bridge
3. Crown’s Non-market Strategy
Public Relations through charity programs
Charity programs are strategically picked and covered by the media to improve their reputation and to reduce the negative perception of the general public.
3. Crown’s Non-market Strategy
Powerful connections in political, media and finance arenas
Head of Tourism Victoria
John Howard,Ex Prime Minister
Ex Senior Minister
the Minister
of Comm.
Premier of
Western Australia
Ex Liberal Gov.
Treasurer leader
Shadow Minister
for Finance, Deregula
tion
Ex Australia
Chief Medical Officer
ExMinister
for comm. IT
& Arts
EX National Secretary of the
ALP
ALP Senator
Current Chairma
n of Tourism Australia
Chairman of
Seven West Media
Ex Editor in Chief,Sydney Morning Herald
Inside Crown Outside connection
3. Crown’s Non-market StrategySuccessfully shape the arena in which the decision would be made;Go through Unsolicited proposal rather than a competitive tender process Unsolicited proposal is designed to develop private-public partnerships to
provide new infrastructure and services Put Crown in a better position to be able to exert influence on the process Reduce competition and opposition to the plan
“Decide where to fight before start fighting”
3. Crown’s Non-market StrategyFraming: Economic benefit to Sydney through achieving tourism goals
Increase in NSW Gross State Product: AUD638 ml New job creation: between 2300-3000 jobs Increase in exports: AUD512 ml Increase in investment: AUD151 ml
Sydney Tourism+ =Six Star Hotel
VIP Casino
Money
Job
Tax
4. Outcome
Echo’s reaction Echo responded by submitting a counter-proposal to the NSW government
through the unsolicited proposals process as well.
In the proposal, Echo asked for1) An extension of exclusivity to operate sole casino in NSW (up to 25 years), paying a license fee of $250 ml2) Revision to The Star’s regulatory and operating arrangement(e.g. removal of limit of # of Pokies or the bet limit) – Failed to consider public
opinion
In return, Echo proposed a series of commitments:1) Total incremental investment of $1.1 bn – Less than Crown’s offer of $1.5 bn.2) Ongoing maintenance of the integrated resort3) Ongoing delivery of responsible gambling program
No framing! Not enough investment! Less connection!
4. Outcome
In November 2013, the NSW Casino Control Act was amended to allow a “restricted gaming license” to operate specially in Barangaroo.
The government gave the green light to Crown in the same month.
Crown’s license to operate will start in 2019, once Echo’s exclusivity clause runs out.