Shares in Cairns' sole casino owner Reef Casino Trust (ASX: RCT) have dropped 4.8% today, after the Australian Competition and Consumer Commission (ACCC) raised its concerns over a new casino to be built.
Aquis Reef Holdings, owned by Hong Kong billionaire Tony Fung, had planned to open an $8 billion casino resort 15kms north of Cairns, while separately making a $217 million bid for Reef Casino Trust.
Today the ACCC says it is concerned that Reef Casino was the only competitor to the new proposed resort, and was worried about customers missing out on promotions, cheaper prices and the improvement in services that two competing casinos would bring to the region.
To me that argument makes no sense at all.
If the ACCC knocks back Aquis' plans, there's only going to be one casino in Cairns – like there is now, and if Aquis assumed control over Reef Casino then there would likely only be one casino, with Reef's casino potentially closed down. Either way, there's likely only going to be one casino. Knocking it back may also have consequences for attracting other casino operators to the region.
It's an odd stance to take, given most cities around Australia only have one exclusive casino licence on offer. Will the ACCC now raise concerns over Echo Entertainment Group Ltd's (ASX: EGP) Brisbane and Gold Coast casinos, Crown Resorts Ltd's (ASX: CWN) Perth casino or SkyCity Entertainment Group Limited's (ASX: SKC) casinos in Adelaide and Darwin?
And it seems odd that the ACCC thinks the Aquis proposal, which includes 7,500 hotel rooms, 750 gambling tables and 1,500 machines is somehow not economically better for the region than Reef's existing 128 hotel rooms, 38 gambling tables and 500 machines.
While the ACC has yet to make its final decision – that's due by August 21 – Reef Casino says it would work with Aquis and the regulator to address the issues raised. The Queensland government may well have something to say about it as well – it is pushing for more casinos to stimulate the state economy and create jobs.