On Friday, Chinese police have reportedly detained many representatives of Australian casino giant Crown Resorts Ltd and the real reason was not divulged as of yet. Shares in billionaire James Packer's Australian gaming and resorts company Crown Resorts fell by over 10% today following the arrest of 18 of its employees by the Chinese authorities, which included three Australian nationals. Crown's executive general manager of international VIP services Jason O'Connor has been verified as one of the detained Australians.
Most of the detained staff were based in China as part of Crown's local marketing and sales team. It is prohibited in China to advertise gambling services on the mainland, but casino operators are allowed to promote their resorts' non-gaming tourism offerings such as hotel accommodations, restaurants, concerts, shows, etc.
The arrests, according to China's Foreign Ministry, were made due to suspected ‘gambling crimes' without further explanation. It said it was still investigating the issue.
Due to the this, Crown shares fell approximately 14%, their largest one-day decline ever, while their smaller Australian rival Star Entertainment Group Ltd dropped to 5%, amidst rising concerns about the impact this event would have on the companies' ability to attract wealthy Chinese gamblers to new major developments in Australia.
Even though it still remains unclear what brought on the mass detention, analysts speculate that the move suggested Crown had miscalculated the enforcement climate regarding marketing its venue and activities on the mainland, where gambling is deemed illegal except for some regulated state-sanctioned lotteries.
Many other gaming operators have toned down their marketing efforts in China over the past two years, focusing more on their restaurants, hotel accommodations, live shows, concerts, and other non-gambling events.
David Green, an analyst at Newpage Consulting (which focuses on Asia's gambling industry) said, "Crown staff possibly either thought that there's nothing to worry about, or they may have only recently revived their marketing operations in China. Whatever it is, they've got it wrong."
Earlier this year, as a result of the Chinese government corruption crackdown putting the brakes on the gaming revenues in Macau, Packer had stepped down as co-chairman of Melco Crown.
Hong Kong-based analyst Vitaly Umansky said the detentions looked to be a repeat of China's crackdown on South Korean casino marketing efforts which occurred a year earlier, a move not often seen as an attempt to curb Chinese gambling than to keep it under control domestically.
Umansky added, "The Chinese government seems to be making a clear statement about its view on gaming activity being offshored to foreign jurisdictions, while Macau is not being targeted in the same way."