Echo Entertainment Group: The Star- Sydney

ASHISH SUNDERASHAN 1

Executive Summary

This report is analyses on the Sydneys dominating integrated resort owned by Echo
Entertainment Group-The Star that has rapidly adapted to the concept of Mixed-Use-
Development and its strategic position amidst the huge competitive integrated resort market in
the country as well as neighboring country. The key caption of this evaluation is to get a strong
understanding of mixed-use-development concept and the business roles in integrated resorts.
This report also presents the overview of gambling industry and evolution of the industry with
the change in trend, expectations and time.
This report also pivots a well placed analytical tools such as Kotlers PEST framework and
Porters competitive analysis, which evaluates the internal and external environment of The
Star. It also flows with the logical and practical arguments on the recent challenges and how
The Star manages its resources and control its immediate risk to stage itself as a unique
integrated resort with a robust competitive advantage.
For a deeper understanding the relevant datas and statistics has been drawn out form the
government websites and company published journals as well as the current news reports. This
report on overall will be rounding about the Echo Entertainment Groups turbulence, the start,
the run in financial track and forecasting the success facts that have a breakthrough in every
step to success for a sustainable business in future.













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1. Introduction
1.1 Concept of Mixed used Development
Mixed used developments are the blend of residential, commercial and culturally modified
concepts that consists of fully functional institutions and industries that are physically
integrated, providing a financial pedestrian to the businesses involved in this concept.
Promisingly, The Star of Echo Entertainment Group quickly adapted to the mixed used
development and evolved providing a modern accommodation variety and spacing, ease of
accessibility between the hotels, retails, workplaces and entertainments. The Development
of more compact facilities and gaming infrastructures are shaped and designed to serve
people of all ages and families of all sizes satisfying the expectations of wide population of both
leisure and business market in Sydney and other parts of Australia.

Echo Entertainment Group holder of The Star has completed a $870 million renovation to I
improvise and expand star into an premium blend Integrated resort with a modern New Life
theme and an architectural design which fails to be a traditional nature blend resort whilst
occupying a huge space amidst the busy city of Sydney, with an investment of approximately
$2 billion with 4 hectares of full fledged entertainment, casino, restaurants and
accommodation serving over 10 million visitors per year ahead of 2013 (Echo entertainment
Group, 2012)

1.2 Evolution and Expansion of Integrated resorts (IR)
The first Casino was established in Australia (Wrest Point Hotel) in the year of 1973. Since the
Opening of first authorized casino in Tasmania the gambling sector was established vastly with
a massive growth of 13 casinos nation wide. However, Australia has been formed as the first
destination to authorize American style casinos in urban locations after the
monopolization of casinos in Perth, Gold Coast and Brisbane at 1980s with a biggest gambling
state globally as per the statistics shown in [Appendix- Fig.1].

The Australian casino industry with the integrated entertainments have shaped the countries
economy since 1980s and reshaping the sector in the year 1990s with a tight government
regulated authority to run legalized gambling industry in the country. Australian gambling
sector have retained their position since 1999 as a protuberant integrated entertainment
destination dominated by 6 major organizations in New South Wales and Queensland such as,
Star City casino previously owned by Tabcorp Group in Sydney now owned by Echo
Entertainment group- The Star, Conrad Group of Casinos and entertainments, Crown Groups
In Melbourne and Burswood Entertainment Group In Perth. Since then, the Mixed used
developments; as well as integrated resorts have become one of the newest trends changing
the entertainment sectors to a fully used development (Queensland Treasury and Trade, 2012).


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1.3 Overview of Australian Gambling Industry And Development of The Star
The mainstream gambling disbursement in Australia was from the Casinos located inside the
hotels and IRs generating 62% of total gambling expenditure in the year June 2012, which has
declined from 76% of total gambling expenditure since December 2002. Casinos in Australia
push 21% of contribution to the total gambling expenditure. Echo entertainment Group: The
Star being a 1.2% contributor of the total casino expenditure to the local Australian economy
with a total revenue of $ 230 AUD million in the year June 2012 shown in [Appendix -Fig1.1].
Consistently adding up to the total of $19 billion AUD of Australian gambling expenditure. The 4
hectare spread integrated resort in Sydney has also won the increased share of about 27% in
VIP Gaming market in the year 2012 with 10 million visitors with 14% increase compared to
the 2009 visitor statistics of 8.8 million. The overall gambling market in Australian territories
however seem to face a declination of visitors and the lose of interest levels, The Star
Integrated resort has planned to renovate its casino and expand with the help of Echo
Entertainment Group and starts to build a keen interest level amidst the local and
international markets (Echo entertainment Group, 2012).

2. Societal Analysis (Kotler, 2013)
2.1 Political Analysis
Casino regulations in Australia are specific to the jurisdiction with each state having its own
rules and legislations. Australian Casinos are subjected to more stringent regulatory acts than
the other gambling sectors located in other countries. However in Australia, the generalized
regulations includes Trade Exercises Act (1974). In NSW (Sydney) consists of more than
11 regulatory acts such as Casino Controlling Act (1992), Casino, Gaming and Liquor Control
Authority Act (2007), shown in [Appendix -Fig1.2].
The Star a product of Echo Entertainment Group has generated approximately $691 million
Non-Rebate gaming revenue with $186 million of tax pay to the government with a marginal tax
rate of 34.5% Including GST. By the expansion of the new casino proposed business in The
Star by end of 2013 the Group has forecasted of about 15 % increase in the Non rebate on
gaming tax rate of 50% with $740 million Non rebate gaming revenue and more than $200
million tax to the government increasingly shown in [Appendix - Fig 1.3] (Smith, 2000).
2.2 Economical Analysis
In 2008- 2010, NSW (Sydney) accounted for 37.6% of Australias overall gambling expenditure.
NSW accounted the higher percentage of expenditure with a maximum household disposable
income of 2.7% increasingly shown in [Appendix-Fig 1.4]. The trend in real per capita
expenditure by the NSW jurisdiction over the period of IRs emergence till date has seen a
massive growth in the Gambling economy. The total expenditure on gambling in NSW has
forecasted a string growth from 1990 till date with an increase in $468 million positive growth
with a 132% increase on real expenditure over decades. Echo Entertainment Groups Proposal
for the development for The Star integrated resorts is a significant move, which creates and
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generate high revenue in gambling sector contributing to the local economy (Australasian
Casino Association, 2010) & (Australasian Casino Association, 2008).
Echo entertainment Group-The Star has orderly predicted to deliver an additional of 330,000
international visitors per annum with its substantial investment in shaping tourism infrastructure
of approximately $1.2billion and increased gaming and payroll tax of more than $63 million per
annum by the year 2025. With these high counts on tourism footfalls and gambling expenditure
NSW would have positive impacts on the Gross state product with a $350 million increase and
creating job opportunities of about 4000 on and offshore skilled workforce. This revolutionary
development of The Star has more positive impacts on the local Australian economy with an
increased value of Australian dollar and the economical boost breaking recession threshold.
2.3 Social Analysis
The total population of Sydney comprises of 107,271 people living in the urban lands with a
median age of 32 years old and 20,680 families. The median income level of families without
children is $2985 AUD and family with children is $3233 AUD with a 21.7% of employment
status of 100% in Australian employment status statistics (Australian Bureau of Statistics, 2012)
shown in [Appendix- Fig 1.5].

Echo promotes responsible gambling and deliberately eyes on the target segments which
experiences lower range of problem gambling without requiring and additional gaming licenses.
The Star with Echo Entertainment group set up responsible gaming initiatives to support
customers of both internal and external sources and the wider community by providing
counseling services through experts. Adding to that Echo also focuses on creating job
opportunities to the local families and commit support to a policy-oriented responsible gambling
research to facilitate the needs of the customers.

Ethical Gambling initiatives such as age restrictions of 21 years and above as well as
citizenship entry fee of 150 AUD has been implemented by The Star casino to minimize the
high gambling addiction in respective states of Australia. However, controlled measures of
compulsive gambling and illegal gambling is evident in the state of Sydney [Australia] it has
been difficult to regulate the control over it. Moral gambling initiatives of controlling theft, fraud
by Echo Entertainment Groups- The Star has taken preventive measures by counseling
people affected by household debts and addiction by joining hands with The Heroes-
Prevention and Detection Program (Gill, Luijerink and Bell 2013).

2.4 Environmental Analysis
The NSW (Sydney) Regulatory environment act is one of the most stringent acts like other
environmental acts followed by the integrated resorts in competitive countries. To Ensure the
NSW regulatory and framework, The Star creates and competitive edge with other integrated
resorts in Australia by modernizing the technology with minimal energy usage, state of art
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renewable resources. Ensuring apt risk based approach to the NSW regulations by adopting
markets best practices as well as changes in technology and consumer habits and
expectations. The Star being a trendsetter of the next generation integrated resort plans to
increase efficiencies for both Echo and ILGA (Independent Liquor and Gaming Authority) by
keeping the existing framework of environmental regulations and reform the practices that are
best suited for the stakeholders for implementation. (Echo Entertainment Group, 2012)

2.5 Competitor Analysis (Porter, 2013)
The Crown Hotels and Integrated Resorts are one of the major competitors for the Echo
Entertainment Group: The Star, which comprised of similar services and products before
Star expansion. The Star differentiated itself from The Crown by function of their scope and the
mass capability to offer the mainframe work of the tourism growth opportunities. The Crown
groups whereas targets only 1 out of 3 major market segments leaving them unable to
generate any revenue to the incremental economic growth as well as low involvement in
economic activities such as taxation and employment opportunities. As the Second casino
competitor in Sydney, it is not dependent on market growth to justify investment;
cannibalization of revenues from The Star provides a practical profit pool to underpin
investment. However, a proposal grounded on cannibalization delivers far inferior
economic outcomes for NSW than one based on market growth. Echo Entertainment Group is
the only IR that is dependent on growing the amusement and potential tourism market to justify
its revenue speculation in Sydney as shown in (Appendix Fig 1.6).
The buying powers are tolerated by The Star, by addressing the needs and requirements of
High Rollers and the MICE groups which has a supreme power to price modulation. The
suppliers who pull in target audiences globally, such as Viator, Topdecks, Sydney Tours and
government sites like Tourism Australia help The star in materialistically branding and
increased footfalls to The Star Integrated Resort (Echo Entertainment Group Profile, 2012) &
(Nicholls, 2013) shown in (Appendix Fig 1.7 & 1.8).
3. Challenges
3.1 Skilled labor force
Echo Entertainment Group-The Star integrated resort, has promised to create 5750
employment opportunity with 1460 permanent job scope for the Sydney people. The statistics
states about the global economic crisis and work force crunch in the companies has been
negated by the Australian economy and the hiring of skilled labor as been actively taking place
effectively. However, finding skilled labor in the Australian soil is yet a challenge for The Star,
which is located amidst the rich Australian natural resources and revolutionary renewable
energy hub. Foreign manpower tend to migrate into Australia opting for the job that
provides good pay and ease of finding job for the openings in The Star integrated resorts. In
order to provide jobs for foreign labors, the Sydney placed integrated resort tend to lose the
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local skilled manpower and leaving the industry with no choice to hire foreign labors to
compromise on the skilled work (Australian Bureau of Statistics, 2012).
3.2 Investment Opportunities
With a huge base of gaming revenue that is accessible to fund in non-gaming infrastructures
spread widely across numerous operators, each significant operator will have minimum
capacity to reinvest into a non-gaming tourism infrastructure. The consequences of this would
leave all the operators from having financial capability to build and integrated resort of that
standard to compete on a nation basis. There would be a reduced re-investment opportunity
into the future shaping of business and changes in competitive sector. The investment
opportunities would be crunched in such a way that the existing operator could only drive
returns on investment through the incremental tourism growth and revisiting foreign market
growth. However, the emergence of new integrated resort through foreign investment in NSW
with a increase in gambling products would have an adverse affect on the existing responsible
gaming market in the State (ONeil 2013).

4. The Star as Mixed Use Development
Casino Generated 48% of the total revenue in the year-end of 2012 leaving the net profit
of $229 million according to the Echos annual report. Its proposed that the revenue was
generated from the front money of both new and repeated guests of VIPs from Local and
International market mostly from Asian-Pacific region (Echo Entertainment Group Annual Report,
2012)

Restaurant / Hotels/ Clubs and PubsBeing a partial but important contributor stream, it
showed a relative growth of 70% revenue growth in the year 2013 June by accommodating and
serving guests and strong a tourism boosting product of Sydney. The Star states it to be
contributing about 33 % of revenue to the current approximate total revenue $ 280 million a
year. 11 restaurants and cuisines served by 6 celebrity chefs like Adriano Zumbo and David
Chang and 3- 5 Star graded hotels with 8 night clubs and pubs all together serve the guests to
create their own experience story and returning back year on year (Echo Entertainment Group
Annual Report, 2012).

The Spa- The traditionally designed day spa with a uniquely themed Moroccan Hammam ritual
which offers a wide range of beauty products and services from Massage services to couple
date spa treatments and exclusive aroma therapies. The Spa however is a minor contributor for
the revenue yet, acts as an added advantage of the package and shares its stream of revenue
to the total profit (The Star, 2012).

Events and Functions-The Uniquely Designed and renovated function room and ballroom
with a largest holding capacity of 4000 people quotes to be the most impressive infrastructural
epitome in Sydney. And the Events room of 2500 capacity named Marquee is the ideal spot for
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night events and music concerts that drives The Star to retain guests with surprise all year
round entertainment events as well as MICE, Business groups who choose to set up exhibitions
and stalls with sponsorship in their magnificent large event rooms. Events such as Blueman
Show, David Guetta shows, Ricky Martin concert, these international events not only draws the
crowd all over the world but also attracts the attention of mass medias and international news
medias and sponsorships which helps as the powerful branding for Echo Entertainment
Groups prestigious flagship The Star (Star, 2013).

Retail Shop- The matchlessly branded Stay & Shop theme of The Star Integrated resort is
seamlessly an ultimate shopping experience for the guests who stay at The Star parallel to the
physical shopping experience guests can also shop online retail store of The Star staying at the
hotel which would be delivered at the door step. Retail Therapy is a brand mascot created by
The Star retail departments that believes to enhance the shopping experience by offering
promotions and offers to the guests who spend more the $100 on any of their international multi
brands such as Calvin Klein Jeans, Bottega Veneta, Chanel Beauty Boutique, G-Star, Gucci,
famous Justine Rose and so on. This is an added advantage to the chain of revenue streams
amidst that high source of revenue generators of The Star as listed above (Star, 2013).

5. Sustainability and Sustainable Factors
5.1 Competitive Advantage
From world class gaming experience to the globally acclaimed chefs in its signature
restaurants, sets a new benchmark of a luxury lifestyle and modernized accommodation and
themed day spas. Delivering superior services all under one roof. Over a year of growth, The
Star attained revenue of $111.3 million, which was 53.2% lower than the previous financial
year. The Stars gross revenue escalated by 2.7% to $1,023.6 million. The uniquely designed
glass faade entrance embracing the Sydneys Harbour and Sky Scrapers with the VIP gaming
experience stay that includes private jet transportation and limousine services to the VIP suites.
This stands as the ultimate competitive advantage compared to Crown Hotel and Casino.
Another competitive lead of The Star Sydney is The Darling with a refurbished first 5 Start hotel
in Sydney that offers 171 stylish VIP rooms of own private gaming rooms and its uniquely
designed event rooms which has the largest floor space capacity of 4000 that attracts nearly
17% of MICE revenue of $100 million in 2013. Since these niche features as well as one-of-a-
kind Integrated resort creating an entertainment destination (The Star, 2013) shown in
(Appendix Fig 1.9).
5.2 All-Inclusive Strategy and its benefits
Echo entertainment Group-The Star has the niche ability to create several memories on the
same night of stay at the luxurious visit under one roof. One visit to entertainment destination
The Star, offers a unlimited experience to the guests from music performance, luxurious day
spa, super dining experience, night clubs, bar and ultimate gaming experience as well as
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private gaming rooms which is tailored according to the guest needs. This all-inclusive strategy
offers a superior blend of fun stay providing multiple reasons to visit and revisit of the targeted
VIP business and International tourist market. The chain linked to all revenue streams during
the stay in The Star creates a 3.8% revenue growth per average length of stay by up-scaling
the service standards and the upgrading facilities keeping on charts that the VIP market
segments are becoming competitive for Integrated Resorts in Asian-Pacific region (Echo
Entertainment Group Annual Report, 2012).
5.3 Risk Management
The Board of Risk and Compliance Echo Group Committee have responsibility for examining
health and safety issues and safeguarding keen focus on health and safety risks as well as the
prospects within the business. The flexibility of the Groups Health and Safety Management
Systems has provided a firm basis for unremitting improvement and audit results in managing
business and financial risks. Demand risks such as the expectations of target audience in order
to gamble has been handled in legally and ethical way by the Echo Group. In financial risks
such as interest rate risks and foreign currency risk the group has a policy of controlling
exposure to interest rate stipulations and hedging USD/AUD conversion maturity levels.
However natural disasters are unstoppable yet The Echo Groups have taken preventive
measures to maximize the security and safety levels to minimize occurrence of those threats to
their guests and internal guests. (AXS Corporate Governing Council 2013)
6. Conclusion
The change in lifestyle, change in trends, power of income and the cultural change has huge
impact in the development of the casinos and entertainment concepts. Casinos being the major
money generating entity occupying a minor space in the IR occupying huge space of natural
reserves and energy consumption compared to the city hotels. In order to sustain in this business
one the major IR player, Echo Entertainment Group: The Star continues to create key selling
entertainments and events to attract and retain the local as well as international markets
sustainably. However, The existing market players is small and its not seen to be growing rapidly
particularly in New South Wales while the International VIP segments has a massive growth in
recent years due to rapid economic growth in Asia-Pacific countries. This leaves The Star to have
a sustainable future ahead in generating profitable revenue offering exclusive services to the
guests by keeping the market of NSW for itself.







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7. References
ACA (Australasian Casino Association) 2008. The Australian Casino Industry: Economic Report 2006-
2007,pp.

ACA (Australasian Casino Association). 2010. Casino Industry Survey: Economic Reports 2009-
2010,pp.

Australian Bureau of Statistics, 2012. Australian Demographic Statistics. Population by Age and Sex,
Regions of Australia, 1, 1-10.

AXS Corporate Governance Council. 2013. Echo Corporate Governance Statement. Queensland: Echo
Entertainment Group Limited

Echo Entertainment Group Profile. 2012. Asia Investor Road Show 2012. Queensland: Echo
Entertainment Group Limited

Echo entertainment Group. 2012. Annual report 2012. Queensland: Echo Entertainment Group Limited

E Porter, M. 2013. Competitive Strategy. 1st ed. New York: The Free Press. England: Prentice Hall.

Gill, G., Luijerink, D., Bell, S. 2013. Forensic Survey of Fraud. A survey of fraud, bribery and corruption
in Australia & New Zealand 2012, 5, 1-41.

Kotler, P. 2013. Principles of Marketing (15th Edition). 15. Prentice Hall.

Nicholls, S. 2013. A battle royale for the very, very profitable VIPs. Sydney Morning Herald, 29 June. 3.

ONeil, J. 2013. Half-Year Results Announcements and Accounts. Echo Entertainment Group Directors
Report, 2,1-13.

Queensland Treasury And Trade. 2012. Australian Gambling Report. Australian Gambling Statistics
2009 - 2010, 28, 1-37.

Smith, J. 2000. Gambling Taxation: Public Equity in the Gambling Business. The Australian Economic
Review, 33.120144.

Star. 2013. Sydney Hotels, Restaurants, Casino and Entertainment. [Online] Available at: http://
www.star.com.au [Accessed 16 September 2013].

The Editor. 2013. Sydney's Star Casino offers $250 million for exclusive license. ABC News, 23 June.
2.

The Star. 2012. The Spa Brochure. Queensland: Echo Entertainment Group Limited

The Star. 2013. Unsolicited Proposal to NSW Government To Further Develop the Star as Sydneys
Only Integrated Resort. Queensland: Echo Entertainment Group Limited