MB Jan | Rising Star

By Paulo A. Azevedo in Sydney 

It’s good to see you again after all these years. How important were those five years in Macaufirst at the Altira and then with CoD – for your executive career? 

Greg Hawkins – Extremely important. I always had an ambition to work in a part of Asia, and when that opportunity was presented I jumped at it. Particularly in Macau, because I arrived around 2005; it was still the early days of the enormous transformation of Macau as an entertainment hub in that part of the world. So, joining Melco Crown (now Melco Resorts) [meant] building a really productive and important relationship with Lawrence Ho and his team. It was incredibly insightful. 

Apart from the relationships, the networking, the ability to be involved in building and opening new properties was an enlightening experience. Learning about Asia – and particularly the China growth story – and being able to relate to that very closely. Something I brought back to other organisations that I have worked for since. The other one would be working in such a small and competitive environment with many of the largest global operators in Macau.  

That teaches you a lot about how the competitive operating environment [works] and what you need to do to attract customers across different tiers when the competition is next door. Lots of great learning [experiences] and I still go up there quite regularly. 

And a major lesson . . . ? 

G.H. – The importance of government relations and broad stakeholders in the sector. You’re not just building and operating; in many ways you’re collaborating with government or regulators on the bigger picture, so we’re making sure that as we look to operate in different jurisdictions those stakeholder engagement issues are there.

Looking at other operators and how they approach design, build, pre-opening – there’s a lot to be learned on that front and making sure you’re applying detailed thought to how you design a property [for a] target market audience for those properties. And thinking that through very clearly and bringing products to market when they are ready, as well, was a key learning. 

And to better understand the needs of Asian gamblers and the Chinese, in particular . . . ? 

G.H. – In the early days there were a lot of Western executives coming in to run the businesses, in many ways in a Western style, and then across that timeframe leading to now [where] we’ve probably seen a reduction of the number of Westerners running the businesses, as locals are presented with opportunities.

The Chinese Midas touch  

It seems that the VIP market is recovering, with the return of Chinese gamblers, including to Australian casinos. Are you as optimistic as Morgan Stanley analysts about the resurgence? 

G.H. – We’re feeling positive about it. The last 24 months of inbound VIP businesses into Australia have been well documented [following] negative growth on the back of the detention of Crown personnel in Mainland China. That issue reverberated generally around inbound businesses into Australia.

From Star Entertainment’s point of view we’re always confident in how we approach those markets and as the resolution of that court case and so on is ultimately finished I think the Australian market has generally seen a reasonable quick return of international players to Australia. So, we’re feeling positive about that and then sitting next to that is the broad inbound China tourism story into Australia, which is a very positive one, as well.  

The growth of Chinese tourism has been in the double digits for a long time. Importantly, the spender profile of Chinese visitation into Australia is well ahead of other jurisdictions. So, the capital of our investment in Sydney and other properties is really focused not just only on our VIP China inbound story but on a broader tourism pushing into Australia for Mainland Chinese which correlates to the demand for a raft of premium and mass hotels, F&B, and other services, as well.  

So, we’re feeling quite positive about the next 20-year journey of investment into the Australian assets. 

There was this nice headline from a local newspaper: Echo crown Greg Hawkins new MD of The Star. A surprise move not long after your departure from Crown in Merlbourne . . . ? 

G.H. – I went back to Melbourne for a couple of years and as happens in all organisations there was a look at a broader structure across the group and I was aspiring to a particular role . . . At that point in time I thought long and hard about what I wanted to do in the sector, what opportunities were around, both in Australia and internationally . . .

What struck me about The Star Entertainment Group was realistically driven by our Chairman, John O’Neill, and our group CEO Matt Bekier, who presented me with a very compelling vision of the growth of this business and how they wanted to really transform it dramatically. And that was quite exciting to me, so to that extent I was after a bit of a cultural change. I think we all go through that corporate cultural change now and then. 

The enormity of the changes across the group in the last four years driven by the board down and led by Matt in many ways has been amazing. We’ve seen that in the growth profile of the businesses. The attractiveness of the businesses has been far more on offer to people who want to come and work for the organisation now apart from the capital that we’re putting into the properties, as well, [for example] new loyalty systems . . . if you look at all the so-called areas of transformation, it has been an incredibly busy few years but I think we’re getting the growth, earnings and share prices across that time frame, as well. So, it’s very exciting. 

One of your tasks, I believe, has been to improve the number of domestic punters, who are still the group’s core customers. I do see here on the casino floor a mix of gamblers. Locals and Asians. What are the numbers, mass and VIP? 

G.H. – If you look at the Sydney property it’s currently a monopoly casino licence in Australia’s largest city, so the local market is critically important and generates around 70 per cent of the earnings for this property through gaming and non-gaming. Then, on the other side there are the international and domestic markets, with a smaller portion of the revenue profit to the organisation but critically important elements as well.

Our international business from a group point of view – and bear in mind that most of that occurs in Sydney at the moment – has grown significantly over the last few years. 

  • Across The Star Group in FY17 total domestic gaming revenue was Aus$1.54b, while total normalised gross VIP revenue was Aus$545m.   
  • To date, The Star Sydney has driven the bulk of the group’s international business, with the Gold Coast and Brisbane properties expected to further build VIP business aligned with completion of their capital programmes.
  • The local market in Sydney represents the lion’s share of property earnings. With approximately 28,000 guests to the casino each day, 80 per cent of whom are local.
  • The local premium mass segment is very important to the performance of The Star Sydney. As such, a large part of the property capital programme has been aligned with this sector’s importance.

Gaining terrain on Crown 

Any percentage of growth that comes to mind? 

G.H. – The amount of turnover that we generate across the group in our international business is roughly a 50/50 share with Crown [James Packer casino operator] of the total Australian market. We might be marginally ahead of them at the moment . . . 

And growth . . . ? 

G.H. – Has shifted probably from 40/60 to 50/50, so we probably had a 30 per cent growth in our international volume. And that’s been one of our focuses on good sales activity in the core international markets – but at the same time service and the hotel and gaming experiences needed a significant investment from The Star’s point of view.

So, we’re very much focused upon improving our service proposition to particularly Asian and Chinese guests, investing in that, recruiting talented multilingual personnel who can build relationships with our guests and at the same time we’ve refurbished all of our hotel rooms, built a new VIP gaming salon area and The Darling Hotel recently won the first Forbes five star hotel [accolade] in the Sydney awards, so we reinvested in all our assets to make sure we can compete effectively. All of that is paying dividends. 

And investing as well in your fleet, now with three airplanes and two boats? 

G.H. – Sydney, as a destination is an incredibly popular one for Chinese tourists, including high rollers and junket players. And for all the reasons you’re discovering: its contemporary, geography, weather, fresh seafood . . . yes, we operate aircraft and a couple of large boats which we take our guests onto the harbour in to experience all those elements on offer here.

Are junkets also a key issue for the international markets? 

G.H. – That’s right. We operate with a number of licensed junket holders into Australia, as well . . .

Macau junkets . . . ? 

G.H. – Macau and Southeast Asia-based junkets. You would find a lot of the listed corporate junkets who operate in Macau bringing business into Australia.

Let me ask you bluntly: would Crown have made the same mistake by promoting gambling in China which led to its 18 employees being arrested if you were still its Melbourne CEO? 

G.H. – [Pause] It’s a very difficult question to answer. I think different organisations have different approaches to activity in different jurisdictions, so I really couldn’t comment more on that.

I’ve been departed from Crown for over four years or so . . . how decisions were made in that time were completely different. I can talk about The Star: it’s extremely vigilant on its approach to activities of its sales team in all jurisdictions, ensuring absolute compliance. 

Do you fear that this diplomatic controversy with the Chinese on the foreign interference law might have an impact on VIP gaming results? 

G.H. – I don’t think so at this point in time.

The exclusivity period on The Star’s licence runs out this year, in November. And Crown Resorts will counterattack with a Aus$2 billion casino on the western edge of Sydney‘s Central Business District. How does The Star plan to minimise that impact? By redeveloping and increasing its offer to its customers? 

G.H. – We have a very detailed strategic plan that we would consider in a changing competitive environment. As we look at Crown and what we know about Crown, we’re making sure that what we offer as a property is appropriately differentiated from that and can compete successfully.

At heart, we think we’re very much a local property and we want to make sure that what we offer aspirational and accessible luxury. As a property [we are] probably more broad-based than Crown might be . . . 

In June 2014, the then Echo Entertainment Group Limited (later renamed The Star Entertainment Group) announced a binding Memorandum of Understanding with Chow Tai Fook Enterprises Limited and Far East Consortium (Australia) Pty. Limited, a subsidiary of Far East Consortium International Limited, to create a new consortium to develop an entertainment precinct and Integrated Resort on the Queen’s Wharf Brisbane site. Later, the JV included a new hotel tower adjacent to The Star in Sydney. 

Chow Tai Fook Enterprises Ltd. (周大福企業有限公司) is a Hong Kong conglomerate engaged in property development,  hotels,  casinos,  transportation,  jewellery,  ports  and  telecommunications formerly led by  Cheng Yu-tung, who fled from China during World War II and got his first job in Macau in a jewellery store before marrying the owner’s daughter. Later became a business partner of Stanley Ho. Died in 2016. 

Far East Consortium International Limited (FEC, HKSE: 35) is a leading regional conglomerate with property development, hospitality and car parking ventures in Mainland China, Hong Kong, Malaysia, Singapore, Australia, New Zealand, the United Kingdom and Hungary. 

New additions 

But you’re also building more? A new tower . . . ? 

G.H. – Part of the plan for the development of this property – and its not just all in response to Crown appearing – we’re proposing to build another hotel tower, which if all goes according to plan will be a Ritz Carlton hotel, and that will be developed in conjunction with our joint venture partners, being Far East and Chow Tai Fook. We’re significantly expanding our restaurant options here, really lifting the position of the property into a truly world class 5-star Integrated Resort, something Sydney should be proud of.

How important, also for the Sydney expansion plans – not only for the Brisbane and Gold Coast projects – are the joint ventures with the Hong Kong-based companies Chow Tai Fook and Far East Consortium? 

G.H. – As you would know, the Brisbane Queen’s Wharf project has been constructed under that JV arrangement and that collaboration. From my point of view, it brings a degree of excellence to the design, operating thinking and evolution of those types of resort.

The experience of hotel operation they can bring to the table and the deep understanding of China business and China customers is invaluable in terms of what we’re building. 

And it’s a sign of optimism of all partners in the Chinese market? 

G.H. – Tourism in Australia, the statistics and the growth in the north Asia market into Australia, particularly the Chinese, [shows Australia] is a top destination. The capital investment, both domestically and via multinationals – particularly in the last three years – has been significant.

Expansion plans in Sydney are also with the JV partners? 

G.H. – Only the proposed hotel. The rest of it is all our own capital commitment.

How do you see gaming developing in Asia? Since you left Macau, the industry has been making giant steps: Singapore has become a reference, the Philippines and South Korea have upgraded to the Integrated Resort concept and even Japan is finally progressing its regulatory process. 

G.H. – I think within each country, the realisation of the controlled development of entertainment precincts which can be a combination of casino and non-gaming elements can be extremely positive to the growth of those jurisdictions: economically, [for] employment, tourism.

The rationale that in many ways Macau led in a controlled way has been seen as a very positive way to build economic activity in your own local jurisdiction. So, I see that continuing at some pace. The potential growth of the Japanese market and the economic impact of what could be built in Japan is dramatic in many ways.  

My overarching perspective is that more and more quality resort experiences will be introduced across different parts of Asia and that provides us with a good remind of how quality experiences have to be continuously improved. 

Do you see yourself going back to Macau, since this industry seems to be full of surprises or does the water never run under the same bridge twice? 

G.H. – [Laughs] I was back to Macau recently. It was great to go back there and catch up with a range of friends and former colleagues and look at the transformation of what continues to occur in Macau. I couldn’t see myself working again in Macau purely for family related reasons but it’s an area very close to my heart.

I had incredible experiences there and it taught me a lot of lessons. I think it’s very important to remain in touch with what’s happening in that jurisdiction because of its continuous change.