Creating the perception of a superior product
It was pleasing to see figures released last week by Tourism Research Australia that revealed Chinese tourists were still flocking to Australia’s shores. According to the report, there were 573,071 Chinese arrivals in the 12 months to September, which was a 17 per cent increase over the previous corresponding period.
While there has been a lot of commentary on the state of the tourism industry, there is one company that is frequently cited as the shining example of a group that can successfully capture the opportunities in this growing tourism market, and that is Crown Ltd.
Crown is a prime example of branding leading to a competitive advantage. Long-run value enhancement can be achieved by companies whose product are essentially generic but appear superior. Of course some industries have the path made smoother. Its easier for Apple to differentiate its iPhone smartphones, than it is for a coal miner to differentiate a carriage of coal.
In the case of Crown, it is now synonymous with high-end entertainment and gambling. Of course there are a number of casino operators in Australia, but Crown has the perception that it offers a superior product, even though there is no difference in odds from one blackjack or baccarat table to the next. By creating the perception that there is no superior alternatives to the service a company provides, things have a way of “turning up trumps” for investors.
Personally, I believe there are few clearer signs of Crown’s competitive advantage than a specific reference to it in the Asia Century White Paper:
Importantly, the tourism industry needs to develop culturally relevant products to capitalise on growing Asian interest in Australia as a tourist destination. This will mean developing sophisticated luxury urban tourism opportunities, such as those offered by Crown Limited, as well as showcasing Australia’s outstanding natural beauty.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
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Andrew Legget
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Casinos are a business I like to think I know well. Early on my investing journey I thought it represented an ultimate business. One where people come to spend large sums of money in the chance that they might end up with more and theaths showing this is unlikely to be the case.
In regards to casinos, you are correct about the product perception being superior and that the games itself (its product) are similar from casino to casino.
That is the thing, the games are the same, it is the quality of the experience that is important as that attracts a certain quality of player and this is what crown has done well. It is Australia’s Bellagio, echo are more MGM grand and Skycity is more Barbary coast.
Echo are improving after realising that they needed to offer a more superior experience to what they have so finally decided to put better retail, food and entertainment options at the star. Crown did this from the start and have been expanding with new hotels cementing their leadership in this field so echo are still playing catch up.
It would be interesting to see what the average spend per guest to these “integrated resorts” and the class they fit into (grinder, premium etc”) as the competition goes beyond these shores as the premium players get flown around and competition has been increasing.
Echo has been challenging crown from what I can see lately in Australia but they also have sands, MGM, Wynn resorts eye just over the ocean in Asia which also needs to be considered.
Crown is my pick out of the Aussie companies from a quality perspective but the competitors for the premium player market see’s them competing globally against companies with far bigger, better properties, arguably better databases of players and relationships with the various operators that help funnel these players to specific properties ( and probably more corporate jets to get them).