Casino operator Echo Entertainment has suffered a fall in profit, and says private gaming rooms at The Star in Sydney need more investment.
The operator of Sydney’s The Star casino says it needs to upgrade its private gaming rooms after they suffered a sharp fall in revenue.
Echo Entertainment says more work is required at The Star despite a $870 million refurbishment of the property that was completed in 2012.
Chief executive John Redmond, who will leave Echo in May after little more than one year in the job, said there had been next to no investment put into the private gaming rooms, despite extensive refurbishments at The Star.
“We’ve identified that as an area that needs to have investment going forward in order to maintain the demand for that product, which currently has been underestimated to date,” Mr Redmond told reporters on Wednesday.
He likened the private gaming rooms to private airport lounges, where higher spending customers enjoyed better facilities.
The Star’s private gaming rooms had recently undergone an interim “lipstick and rouge” upgrade, but something more substantial was required, Mr Redmond said.
Revenue from private gaming rooms at The Star fell 25 per cent to $54 million in the first six months of the 2013/14 financial year.
Echo’s net profit for the fist half of 2013/14 was $46.1 million, down 30.5 per cent on the prior corresponding period’s $66.5 million.
Its shares dropped to a record low on Wednesday, losing 14 cents, or six per cent, to $2.18.
Profit was pulled back by a lower win rate against high-rolling VIP gamblers, and one-off pre-tax expenses of $22.2 million from a restructuring of financing arrangements in December 2013.
Business at The Star and Echo’s three Queensland casinos was also affected by soft consumer sentiment.
The company also had to absorb $7.3 million of new government levies and charges.
Echo’s profit before one-off items was $71.5 million, up 1.3 per cent on the same period in 2012.
Echo cut its expenses by 4.5 per cent.
It said the outlook for the full financial year would be affected by general economic conditions, the financing expenses incurred in the first half, volatility in the VIP gaming business, regulatory changes and the success of the group’s marketing programs.
But Mr Redmond said Echo had made an encouraging start to the second half of the financial year.
“All our properties in the month of January are doing much better than in the prior year,” he said.