ECHO CALLS IT THE 'NEW MINING BOOM'
Written on the 4 November 2015 by Nick Nichols
TOURISM is emerging as Australia's new mining boom and its going to last for a while longer, according to Echo Entertainment Group (ASX:EGP) CEO Matt Bekier.
However, he warns that Australia needs to lift its game if is to capitalise on the 100 million outbound tourists coming out of China alone each year.
"We believe this represents a significant opportunity to us as a company, and in fact all of Australia," Bekier (pictured) told shareholders at Echo's AGM held at The Star in Sydney.
"The increasing wave of Asian tourism, particularly from China, has the potential to be our next mining boom.
"We are looking at a trend of long duration, driven by the rapid expansion of an affluent middle-class that is increasingly seeking to experience the world and Australia is an exceptionally desirable destination for this segment of the population.
"To capture our fair share of this opportunity, we need more tourism infrastructure especially in the high-end accommodation category."
Bekier was talking up Echo's ongoing capital expenditure program that has seen the casino group already spend $870 million at The Star, with another $500 million outlay under way.
The company also has just kicked off work on the big-ticket component of its $345 million upgrade at Jupiters Casino on the Gold Coast, the new six-star hotel that is aimed at capturing a bigger share of the premium player market.
Now, Echo is gearing up for the $2 billion redevelopment of Queen's Wharf in Brisbane which chairman John O'Neill describes as a 'game changer' for the company and for Brisbane.
The development is expected to be delivered by 2022 and drive an extra 1.39 million visitors a year to the city.
Echo is sharing the risk on the Brisbane project with Hong Kong-based partners Chow Tai Fook and Far East Consortium.
"Chow Tai Fook has significant financial capacity to support large-scale development, highly complementary VIP relationships in greater China and Asia, hotel management and development expertise through the Rosewood brand and international project development expertise," says O'Neill.
He says Far East Consortium has strong hotels capacity through it ownership of the Dorsett Hospitality brand and its relationships with the Ritz Carlton.
Bekier told shareholders that the multibillion-dollar capital expenditure program was integral to Echo's plans to capture the growing inbound tourism market.
"Continued expansion, refreshing and investment in our properties are keys to that ambition," he says.
"If we are looking for evidence of this view, we need to look no further than this property. The Star was the first of our properties to be redeveloped, and it was our standout performer in FY15.
"The quality of this venue, and the diversity of its offerings, has gained serious traction and provided significant stimulus to the business."
The Star attracted about 11 million visitors last financial year and outperformed the combined performances of both Brisbane's Treasury Casino and Jupiters Casino.
Meanwhile, Bekier says the business momentum of FY15 has continued into the current year, with 'good demand' across all properties.
Domestic business across the group, excluding the VIP division, grew by 8.7 per cent for the year to date.
However, high rollers have been much luckier this year with an abnormally low win rate for the house dragging down Echo's performance in that division by 33.8 per cent.
Echo posted 59.3 per cent surge in net profit to $169 million for FY15. The result was driven by improved earnings across all its properties and an $8 million pre-tax profit recorded on the sale of Jupiters Townsville.
Author: Nick Nichols