Blackstone says Crown overhauling the ‘fun stuff’ after licence return
Blackstone says it is working on overhauling Crown Resorts’ hotels and restaurants after the casino operator it acquired three years ago won back gaming licences in Sydney and Melbourne at considerable expense.
The private equity giant has owned the business, long associated with the Packer family, since spending $8.9 billion on acquiring it in 2022. Crown has faced considerable challenges as multiple government inquiries found significant money-laundering risks, recommending expensive governance changes at the same time as high-rollers steer clear of Australia.
In an interview on Wednesday, however, Blackstone’s global co-head of real estate Kathleen McCarthy and the firm’s local head of real estate, Chris Tynan, said they had never expected a quick exit at Crown.
“We’ve moved past the initial phase of really ensuring that we have the safest gaming operation in the whole world, and now we’re really able to focus our attention on the customer experience,” McCarthy said.
“That’s going to take a little bit of time, given the scale of the assets. What we’re really trying to navigate is the balance between that really great customer experience, growing the company and also making sure that the capital we’re investing delivers the kind of return that we hold ourselves to, in terms of a high standard of results for our clients.”
Turning around Crown has taken a toll on its finances, with Blackstone taking on a $5.4 billion debt to fund the takeover, and pumping another $500 million into the operator to jump-start its remediation. Accounts show that pre-tax earnings slumped 80 per cent to $24 million last year.
Amid a welter of criticisms over standards at Crown’s hotels in Sydney and Melbourne, McCarthy and Tynan said the focus has shifted to its amenities. While ambitious plans to fully refurbish Crown Towers Melbourne are yet to be realised, the $2.2 billion Crown Sydney, a five-star harbour-front hotel, was opened less than five years ago.
“Hotels always need money put into them,” Tynan said. “You have a five-star hotel, you know that you’re going to have to continually reinvest and improve, otherwise someone’s going to open down the road, and they’re going to just be better.”
Tynan pointed to some of the big name eateries recently launched at Crown’s venues – and winning plaudits – such as the Wong family’s Golden Century in Sydney and Kolkata Cricket Club and Marmont in Melbourne.
“We always knew, given what this was, this was not a quick flip type of asset because we knew that Crown had this period of remediation,” Tynan said.
“While it’s been invisible to the Crown faithful, that uplift of the compliance that allowed us to provide the regulators with what they needed to see in the casino environment – that it was the safest in the world – is now done, checked off and operational.
“Now we can very much pivot to the more visible and hopefully more fun stuff.”
Crown’s Sydney casino did not have an easy start. Within a year of opening, Blackstone was forced to cut jobs and shut one of its floors. Within two years, Crown’s owner had injected another $500 million into the business and shed another 1000 jobs across Sydney, Melbourne and Perth.
There has been considerable turnover in the top executive ranks, including the exit of chief executive Ciaran Carruthers and its Sydney and Melbourne bosses Mark McWhinnie and Mike Volkert. David Tsai now leads Crown.
Crown’s real estate book has also been rationalised to focus on its main assets in Melbourne, Sydney and Perth. Last year, it sold a large site opposite its Melbourne casino, where it had once hoped to develop a $1.75 billion, 90-floor hotel and apartment complex. Also sold off is its 20 per cent stake in Nobu – part-owned by Hollywood star Robert De Niro – as well as its small but high-end London casino, Aspinalls Club.
But McCarthy said hospitality remained one of Blackstone’s “longest-held high conviction” investment themes globally, with a large portfolio of hotels in North America, Europe and Asia.
Blackstone said it has no intention to carve off Crown’s hotels from its casinos into a property trust, akin to a plan once floated under its previous ownership. Instead, the inherent value in Crown lies in its capacity to reap returns from its customers all the way from hotel room bookings, to the casinos, to entertainment and food and beverage, Tynan said. “It’s unlikely that you’ll see us start to break apart the integrated resorts.”
Crown Resorts is also expecting to clear its last regulatory hurdle soon, with the West Australian government finalising a suitability assessment of its Perth casino after years of strict oversight. The company has put in place new rules to increase security and crack down on money laundering.
In March, Victoria’s gaming regulator deemed Crown’s Melbourne precinct was suitable to keep operating as a casino, concluding that the company’s “systemic failings” were well in the past.
