Who says the house always wins?, by Michael Pascoe - The Sydney Morning Herald - 18th February 2009

In an ominous move for our local would-be international casino boss, Trump Entertainment Resorts and nine related companies filed for Chapter 11 bankruptcy protection overnight.

Who said the house always wins?

On Friday Donald Trump resigned as chairman of Trump Entertainment. ''I quit'' remains a step above ''you're fired'' for the obnoxious self-promoter with the bad comb-over.

The bottom line is the same, though, for the three Trump casinos in Atlantic City, New Jersey - they can't meet their loan payments.

Unlike Australia's cozy monopoly casino regime, where state governments give their operator of choice sole rights to a city or whole state, running casinos overseas can entail the same problems of any other business - competition and over-capacity in a slowing market.

Trump Entertainment isn't the only US casino outfit in trouble - a symptom of Las Vegas' strife is that it has the third-highest mortgage foreclosure rate in the US. And it's not just in the US that mug punters are having second thoughts about throwing away their money when they're fearful of losing their jobs.

Machinations

In Macau, the Vegas of Asia, there is the extra difficulty of Beijing deciding it really shouldn't be letting a legion of corrupt cadres hand over stolen millions to Stanley Ho and James Packer, among others. The clamp down on Chinese visas to Macau is hurting, never mind the usual impact of an economic slowdown on such a highly discretionary spend.

Packer is plunging hard on Macau. His second casino there, City of Dreams, is due to open in April and a third is being developed. Despite being in partnership with Lawrence Ho - son of Stanley who previously enjoyed a Macau monopoly - Macau has become a competitive market.

Las Vegas is extremely competitive. Last month the Nevada Gaming Commission gave Packer's Crown Ltd unanimous permission for its latest American bet - $2.7 billion to buy Cannery Casino Resorts which runs three casinos in Vegas and is building a casino in Pennsylvania.

The Cannery acquisition is on top of two costly Vegas minority investments - nearly 20% of the new Fontainebleau casino and 37.5% of the planned $5.6 billion Crown Las Vegas. And let's not forget $414 million apparently blown on a 2.5% stake in Harrah's and 4.9% of Station Casinos.

The common element in Packer's casino bets is that they have been made at the top of the market in an industry heavily dependent on tourism. The US punt is at the centre of the global recession, while the cream of the Macau business depends on Beijing's willingness to hand out dubious visas.

There is an ethical consideration somewhere in there as well about what sort of people are happy to take money stolen from peasants, as the cash of any high-rolling Chinese bureaucrat is likely to be.

Michael Pascoe is a BusinessDay contributing editor.

(Credit: The Sydney Morning Herald)

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