The 2019 financial year was a period of consolidation and executing on a significant capital works program. Aligned to our vision of becoming Australia’s leading integrated resort company, transformational projects across the Gold Coast, Brisbane and Sydney developed momentum as we welcomed more than 21 million guests to our properties. This growth strategy continued during a softening economic environment.
At The Star Gold Coast, construction commenced on a 53-storey mixed use tower that will herald the entry to Australia of the internationally-acclaimed Dorsett hotel brand. The $400 million tower will deliver a third hotel to the property, alongside The Star Grand and The Darling.
There was a further significant development on the Gold Coast. The State Government approved in November 2018 a $2 billion-plus masterplan. This allows The Star Entertainment Group and our partners, Chow Tai Fook and Far East Consortium, to develop an additional four towers.
During FY2019, the excavation stage of the Queen’s Wharf Brisbane project progressed to plan. At the same time, the shell, core and façade contract for the integrated resort development was awarded to Multiplex. This continues to de-risk the development with 60% of project costs completed or under lump sum contract in line with budget. Around 28% of additional project costs are expected to be contracted by the end of FY2020.
In Sydney, an application to the NSW Department of Planning for a development of state significance at Pyrmont was submitted during FY2019. The application includes a tower to house the return of The Ritz-Carlton hotel brand to Sydney. At the time of writing, the Independent Planning Commission was deliberating on the proposal.
There was significant progress elsewhere. The Star Lobby was completed and the new Grand Foyer opened with an art, light and water installation as its showpiece. The Star also broke new ground in establishing an off-property dining experience. The Japanese-Chinese fusion restaurant Chuuka opened in June.
The Sovereign Resort upgrade also progressed to plan. Completion is scheduled for the final quarter of FY2020. A transitional Sovereign experience proved successful during FY2019, driving positive guest feedback.
The 2019 financial year returned record domestic gaming results. Solid increases in domestic revenue were underpinned by market share gains at the Gold Coast and Brisbane and growth in Sydney across both slots and tables. Domestic Private Gaming Rooms were the highlight in Sydney, up 12.4%, to compensate for a Main Gaming Floor affected by capital works. The effective commissioning of new assets and operational improvements provided further stimulus, particularly at the Gold Coast.
The International VIP Rebate business produced mixed results. An impressive sales performance which delivered 10% growth in unique visitation on pcp was offset by a lower spend per customer. When macro market conditions improve, we are confident this ongoing increase in unique patrons will drive a return to earnings growth from this segment. Turnover was down 30.7% on pcp to $42.4 billion, with front money decreasing 7.1% on pcp and unusually low turns of 9.6 creating a further negative impact. Normalised International VIP Rebate business revenue was down 30.7% on pcp, while statutory International VIP Rebate business revenue declined at a lower rate of 17.6% due to a higher comparable win rate.
For the past three years the Group has executed on a diversification strategy across the International VIP Rebate business. The aim has been to drive ongoing growth in non-North Asian source markets and the Premium Mass business. International Premium Mass turnover in FY2019 grew 19% on pcp.
Operating costs were flat for FY2019. Increased domestic volumes and higher wages were offset by lower international gaming volumes.
We also introduced Centres of Excellence in Gaming and Marketing to streamline operations and further improve decision making. It will ensure our business is more efficient, more agile and better focussed on delivering outstanding guest service.
TEAM AND COMMUNITY
The Star Entertainment Group will significantly expand its workforce on completion of the projects that will embed our properties as world-class tourism and entertainment destinations. We also remain focussed on delivering guest service excellence.
There were several initiatives to celebrate in FY2019 that showcased our commitment to tourism, sustainability and the cities in which we operate. These included:
- Committing to an exclusive Aboriginal native bee honey production business on Minjerribah (North Stradbroke Island), working alongside the Quandamooka Yoolooburrabee Aboriginal Corporation
- Recognition for the third consecutive year as the Global Leader in the Casino & Gaming category of the Dow Jones Sustainability Index
- Removing more than 7.5 million plastic straws per year as part of a single-use plastic reduction commitment
- Having more than 100 apprentice chefs enrolled in The Star Culinary Institute
- Achieving ‘Silver Employer’ status in the Australian Workplace Equality Index
- Continuing to host the ARIA Awards and AACTA Awards in Sydney
- Hosting the TV WEEK Logie Awards for the second time at The Star Gold Coast
- Becoming the Naming Rights Partner for the Gold Coast Magic Millions Carnival and Raceday
- An ongoing partnership with the Sydney Gay and Lesbian Mardi Gras
- Celebrating International Women’s Day with the ‘Walk and Talk for Women in Leadership’.
CAPITAL EXPENDITURE AND PRIORITIES
The Star Entertainment Group incurred capital expenditure of $320 million in FY2019, down $157 million on the previous financial year. Key capex projects included the Oasis Private Gaming Room at the Gold Coast and the Sydney Sovereign Resort, with the latter still under construction.
The Star Entertainment Group has the following priorities for 2020 financial year:
- Execute on the Centre of Excellence operating model
- Deliver on the investment strategy
- Manage the competitive environment
- Improve capital efficiency,
I would like to extend my gratitude to the Board and management for their continued support during FY2019. Sincere thanks are also extended to the committed and enthusiastic team members whose efforts have been instrumental in our ongoing growth.
Our vision is to become Australia’s leading integrated resort company. To do that, we also need to deliver thrilling experiences to those who visit us. So, to the millions of guests who did come to our properties this past financial year, we hope you enjoyed the changes we have made and will return to be part of an ongoing transformation.
Managing Director and Chief Executive Officer