Aquis Group - proposed acquisition of the Reef Casino Trust

Summary

The Aquis Group (Aquis) proposed to acquire the Reef Casino Trust and its associated entities, which own and operate the Reef Casino in Cairns.

Aquis has also been shortlisted by the Queensland Government to develop an integrated resort and casino at Yorkey's Knob, north of Cairns.

Market definition

The ACCC considered the proposed acquisition in the context of the supply of casino services to:
- non-VIP customers (both table gaming and gaming machine customers); and
- VIP customers from Australia and the Asia-Pacific.

The ACCC considered a VIP customer to be a high-value customer who receives valuable incentives to gamble with a casino such as complimentary accommodation, complimentary domestic or international airfares, and cash rebates for losses. Such customers spend a considerable amount at a casino per visit, and generally upwards of $20,000 per bet.

On the other hand, non-VIP customers range from 'walk-in' and tourist patrons through to those willing to spend many thousands of dollars at a visit to a casino, but who fall short of the amounts required to qualify as a VIP customer.

The ACCC considered that competition for non-VIP customers would only be between venues in Cairns and its surrounding suburbs. In contrast, casinos in Cairns would compete with other Australian casinos for VIP customers, and likely also with casinos in the rest of the Asia-Pacific (given Cairns' proximity to the region).

For the purposes of its decision, the ACCC did not consider it necessary to determine whether there were separate markets for the supply of casino services to VIP and non-VIP customers, or whether these customers constituted different segments of a single market.

For the purposes of its competition analysis in this review, the ACCC assumed that suppliers of racing or sports wagering did not compete closely with casinos.

Competition analysis

The ACCC considered that the proposed acquisition was unlikely to substantially lessen competition in any relevant market.

Aquis has no existing casino interests in Australia (or elsewhere in the world), but proposes to develop a large resort, including a casino, at Yorkey's Knob, 15km north of Cairns (the Aquis Resort). The Aquis Resort is one of two applicants shortlisted by the Queensland Government for the award of up to two casino licences as part of integrated resort developments in regional Queensland.

Development of the Aquis Resort is still at an early stage, and is conditional on a number of factors. The ACCC acknowledged that there was a level of uncertainty about whether the Aquis Resort would be developed, but considered the proposed acquisition on the basis that the Aquis Resort project was likely to proceed.

If the Aquis Resort proceeded, but the proposed acquisition did not, there would have been two casinos located in Cairns with different owners. Considered in this manner, the proposed acquisition represented a reduction in the number of casino owners in Cairns from two to one.

However, the ACCC considered that there was likely to be little overlap between the target customers of the Reef Casino and the Aquis Resort. The Reef Casino is a small regional casino and the majority of its customers are non-VIP Cairns residents and domestic tourists, making bets at relatively low stakes. The Reef Casino makes most of its revenue from gaming machines, rather than from table games.

In contrast, the Aquis Resort is proposed to be a large integrated resort development of a scale unprecedented in Australia, with extensive facilities and requiring substantial capital investment. The business case for the Aquis Resort (if developed) would be necessarily focussed on attracting high-spending international VIP customers from within the Asia-Pacific region.

As the two casinos would be targeting different sets of customers, one targeting VIP customers and the other non-VIP customers, competition was not likely to be lessened substantially by the proposed acquisition.

The ACCC also took into account the number of venues with gaming machines in Cairns. Although these venues are unable to provide the full suite of casino services, they may provide competition to the gaming machine aspects of the Reef.