WA slowdown will hit Crown’s luxury hotel
by Leon Gettler
Casino giant Crown Resorts has warned investors that the slowdown in Western Australian will affect the opening of its Perth luxury hotel towers.
Crown’s Perth six-star hotel development is still due to open in December.
But Crown's chief financial officer Ken Barton has told investors that downturn from WA’s mining boom makes the timing of this high-end entry into the market more problematic.
"While it looks like a fantastic property, it may be opening at the wrong time in the market," Mr Barton said on an investor call. "It will be a fantastic asset. It will do very well in that market but probably would have done a lot better if the market was at a different time in the cycle."
For sure, Crown Towers, the largest hotel in Perth boosting the gaming company's number of rooms and suites to nearly 1200 at the complex, will offer high occupancy rate because with no real high end accommodation in Western Australia.
But it will be affected by the slump in mining.
The collapse in commodity prices has seen most mining companies slashing costs to remain globally competitive, which means there will be less money going into accommodation at ritzy hotels.
Mr Barton said there were also delays in Crown’s plans to delays in the planned sell down of its 74 per cent stake in the planned $2 billion Las Vegas casino Alon which it hopes to open in 2018.
Under Crown’s game plan, it needs to have a high yield corporate debt package in the US market to smooth the equity transaction and sell its stake down to 45 per cent.
The problem is that US debt markets right now are sluggish, pushing up costs for new borrowers and those that need to refinance.
That creates a less than ideal market for Crown to consider a debt deal which could top $US1 billion.
"Leveraged markets in the US have been a bit challenging the last few months so we haven't been able to progress the debt financing at the pace we would have liked," Barton said. "I think we are waiting for a period where we see more stability in the debt markets and that will give us the opportunity to re-engage on the debt funding side and if we make good progress on that I think the equity story gets a little easier as well."
April 13th 2016
