Troubled Australian casino operator Star Entertainment Group is reviewing its VIP customer processes, including the strict KYC protocols it currently applies, with the company admitting it may have gone too far in its quest to appease the heightened level of regulatory scrutiny it has faced in recent years.
Speaking at Star’s Annual General Meeting (AGM) in Sydney on Tuesday, Chairman Soo Kim – who is also chair of US casino firm Bally’s Corp – said he was “mystified” and “horrified” by how the company had been treating its VIPs, particularly given the substantial strides being made by its local rival Crown Sydney in growing its own VIP customer base.
This followed criticism by a Star shareholder during the AGM around the treatment of premium players and specifically the length of time it takes for KYC and source of wealth checks on many of those customers to be completed.
Kim said there had been an emphasis by Star management on “doing their best” to follow the stricter regulatory rules but that there was evidence of “potentially swinging too far the other way.”
“This new team is trying to achieve the right balance, because we know that the vast, vast majority of our customers have no malfeasance or any unwanted behavior that they want to bring to The Star,” he explained.
“We want to and we need to welcome them, although we haven’t solved that one yet.”
Kim stressed that the issue around how Star deals with VIP customers was operational rather than regulatory, pointing again to the contrasting experience of Crown as evidence that the issue needs to be addressed internally.
“I remember in some of our earliest board meetings, earlier this year, I asked the question, ‘Hold on here. We’re taking a huge number of our customers and not allowing them to play because we can’t get them through our enhanced due diligence, because we don’t know them well enough. What percentage of these customers are now playing across the street?’
“The answer was: a good chunk. And so, my question is how can we blame the regulatory rules if the other operator across the [harbor] is able to, under the same regulatory construct, welcome these customers?
“I would think that it is our execution of the rules that is incorrect. So, we know the problem. In this case, our ill treatment of our own VIPs is actually so obvious that we know that’s our number one problem, but also our number one opportunity.”
Also on Star’s agenda is a revamp of its F&B offerings, with Kim acknowledging a need to reactivate large swathes of The Star Sydney property that have gone dark in recent years – in some instances due to retail tenants abandoning a sinking ship but others of Star’s own doing.
The long-time Bally’s chair bemoaned a decision by previous management to evict the famed Chinese restaurant Golden Century to make way for more junket space – a scenario he described as “amazing” given the collapse of the Macau junket model upon which Australia’s casinos once relied so heavily.
Ironically, Golden Century was last year brought back to life by Crown Sydney and has become one of its most popular restaurants.
On The Star Sydney’s current predicament, Kim said, “In this very large and irreplaceably beautiful building, there used to be a lot more, including some of the best restaurants in the country. Some of those restaurants have left us because of all the mistakes of the past.
“We have a lot of space in this building that we need to bring back to life and we’re very excited for that project, although this is kind of like the ‘crawl, walk, run’ thing.
“I think we’re still crawling a bit. I would say that improvements to our F&B offerings are definitely on the list of things that we want to do.
“But to be completely frank, our biggest issue is how we’ve dealt with our VIPs in the near term. It’s really not the lack of restaurant offerings, it’s the fact that we can’t even treat our own customers with the care that they deserve. And we’re going to work on that.
“Then, after we get through that crawling phase, in terms of the walking phase, [it’s about] making sure that we are again considered one of the really exciting destination venues for this entire city. It’s not lost on us that we are still one of the few 24-hour options in this city, so we need to take advantage of what we have.”
On the difficult steps being taken to return not only to profitability but also suitability in the eyes of regulators, the new-look Star board is making no apologies. Last month, the NSW Independent Casino Commission (NICC) opted against finding The Star Sydney suitable to regain its casino license, instead extending its license suspension and the term of manager Nick Weeks until 30 June 2027.
In doing so, the NICC and its Commissioner Phil Crawford referenced earlier media reports which cited internal communications at Star, including from Group Managing Director and CEO Bruce Mathieson Jr, expressing frustration at the regulatory restrictions that continue to weigh on the company.
Mathieson Jr refuted those allegations during Tuesday’s AGM, while Kim said not everyone was going to agree with the “incredible amount of change” currently being implemented across the Star Entertainment Group.
“Pretty much everything that was done before us, we’ve reversed,” Kim said. “And with no disrespect to all the efforts of the management teams and people that have sat in this room before me, we’re going to do things differently.
“That journey is going to naturally come with some level of differences of opinion. Some people have taken those differences of opinion to the press. And look, it’s a free country. You’re welcome to do it. But I will tell you that I cannot be prouder of our 7,000 team members that show up every day and work hard to meet our customers where they are, and our hardworking management team – some of whom are very new to this job but are trying their best in terms of delivering on our promises.
“What I would say is to look at the scoreboard and judge us by our results.”
Tuesday’s AGM was certainly notable for a substantially more positive tone compared with 12 months ago, when shareholders fired upon departing board members and management with both barrels over the company’s precarious financial state.
Since Bally’s Corp and Investment Holdings Pty acquired a combined 61% stake in Star late last year and assumed control, finances have gradually stabilized – aided by the recent sale of Star’s 50% stake in Queen’s Wharf Brisbane and a critical refinancing deal that has shored up liquidity.
Tuesday also saw Star report its first quarter in more than two years in which both group-wide EBITDA and cash flow showed positive growth.
Kim praised the efforts of the new-look Star team in reversing the company’s fortunes but was also highly critical of previous management.
The fact that Australia’s gaming regulations are now “the highest standards in the entire industry” anywhere in the world is, he said, “a response to some of the excesses that this company and other companies in this industry have had in the past. There have been years of excesses and those years of excesses are being reversed dutifully by this management team.”
In the immediate aftermath of regulatory inquiries into its operations in 2022 and 2024, and the enhanced compliance obligations subsequently imposed, Star “dealt with this by throwing bodies of people, and in that way we’ve seen corporate expenses balloon,” Kim added.
“That’s not the best solution. That creates a lot of pressure on folks, it’s not the most efficient and it leads to a lot of human error.
“So, we’re still improving every day. We look forward to working closely with the regulators to deliver on all the objectives they have set. And I don’t think there’s anything specific for us other than an imperative to give the Australian people, the people of New South Wales and Queensland, the confidence that we run the tightest gaming operation not only in this state but also in this country and in the world.”
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