High stakes, high turnover, tiny margins

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MOUNTAIN Scene’s lifting the lid on SkyCity Queenstown’s high rollers’ room.

Local SkyCity boss Richard Callander gives an exclusive peek into its secretive Beach Street operation.

The biggest spenders are Asian men from the likes of China and Malaysia – who might fly in on private jets and stay in a five-star hotel’s presidential suite, with bodyguards in the next room.

About 90 per cent of play is baccarat.

Callander says it’s a high stakes and high turnover operation – with bets sometimes totalling more than $30 million over a weekend.

The margins are tiny but, as the old adage goes, the house always wins over time.

SkyCity has been able to attract high rollers to Queenstown since buying out joint venture partner Skyline Enterprises in December 2012. That enabled the listed company to lift maximum bets from $50,000 to $250,000.

Callander says since he was appointed in April its refurbished Horizon Room – used exclusively for its VIP players and staffed by SkyCity Auckland dealers – has been occupied every three or four weeks.

“If you have a player who’s betting at that higher end – at that $100,000, $150,000 or $200,000 [per bet] level – you can easily turn $20m or $30m, sometimes higher,” he says.

“It can vary on the player. Some are slow, fast. It’s definitely a worthwhile contribution to the whole group.”

Callander’s not naming names and says the majority are people Kiwis would never have heard of.

“In their countries they are well known figures in their industry or business.”

VIPs normally stay for about two-to-three days. At the top end, wealthy players will fly in on private jets, get ferried around in limousines and stay at the five-star Sofitel Hotel.

Key players might take the presidential suite and other premium suites, with bodyguards next door and support staff on another floor – up to 15 rooms for big groups.

SkyCity says high rollers spend on average $17,000 a day during their stay – a figure also used in the company’s 2011 report to Auckland Council and impossible to verify.

Callander says some high rollers do most of their gaming in Auckland and use Queenstown as a break to sight-see. Others might spend the majority of the time at the tables.

Big numbers don’t faze Callander but he keeps a close eye on play.

“We are living and breathing those numbers. We get text messages at the end of every shoe – what’s the result; how’re we going?

“If we have a particularly poor shoe or poor result, obviously that’s something we should look at more carefully.

“I’ll get a phone call if there’s a major error.”

That’s usually a dealer error, he says, which involves handing cards to the wrong player or other rule breaches. Most are identified before the game’s finished, he says, but others are picked up later, which can upset players.

“We haven’t had major problems,” he says.

Depending on the arrangement, some wealthy clients promising a big “buy-in” will have their accommodation and meals paid for from “commissions”.

As they place bets, these VIP players will get a certain rate back to cover expenses.

Callander says: “For every $100 spent, let’s say the house wins $1.60.You might say to a player we’ll give you 60c back for your business.

“So we’ve got a dollar left, so to speak, for every $100, but from that we have to cover all the expenses and then make our margin.

“Sometimes the numbers seem very large – guys buying in for $500,000 – but the margin is very, very slim. But there’s high turnover.”

However, he says the house will always win over time.

“The challenge is that timeframe might not always fit your financial year timelines. What we tend to do in reporting as you’ve seen is normalise for that and the market now are used to that for casino businesses.”

Callander won’t talk figures but it’s clear Queenstown is a small but growing part of SkyCity’s high-end business.

In the first quarter of this financial year the “international group” turnover – rolling together Auckland, Darwin, Adelaide and “other NZ” – shot up from $1.4 billion to $2.2b, and the win rate was 1.72 per cent – up from the “theoretical” rate of 1.35 per cent.

Auckland turned over $1.4b by itself, with the “other NZ” turnover – which is mostly Queenstown because Hamilton has no high rollers’ room – was $56.7m, down 16 per cent over the same period the previous year.

That seems disastrous, Callander says, but the volatile business can shift markedly depending on when VIP players arrive.

Sofitel general manager Vincent Macquet wouldn’t speak specifically about casino clients because of the hotel’s commitment to confidentiality.

In general, he says Queenstown’s getting more traction with attracting wealthy visitors and he’s encouraged by the appearance of high-end stores, like Louis Vuitton, in the resort.

Queenstown Airport Corporation chief executive Scott Paterson says: “We are aware that they bring high rollers down to Queenstown and we’d like to see them bring more.

“It’s a market niche and I think it’s an important part of our total offer.”

SkyCity chief executive Nigel Morrison said after last month’s AGM that over the next three or four years the company wants to “reposition” the company’s offering in Queenstown to provide first-class, international-standard facilities commensurate with the international tourism market.

The most up-to-date Ministry of Health figures for problem gamblers show six new “clients” in the Queenstown Lakes district were helped in the 2012/13 year – compared to 3605 new clients in Auckland and 744 in Christchurch.

david@scene.co.nz