Beyond Macau: how Asia’s casino space is shaping up in the 2020s

With multiple new destinations opening up over the coming years, Asia’s casino space will have a very different feel in the 2020s.

Of course, new regulation and developments do not occur in isolation. Existing markets – not least Macau – will be watching on very carefully for both competitive threats and potential opportunities.

As the landscape develops over the next decade, it will become increasingly important for emerging markets to stake a claim to a particular segment. AGB takes a closer look at Asia’s key emerging markets and how each is positioning itself.

Japan

With Japan’s casino bill finally receiving the green light, the real work now begins in the bid to unlock a potential $25 billion market.

The size of Japan’s domestic market and its pulling power for tourists makes it the most likely to be able to compete with Macau on both mass market and VIP, although it will be hindered on the latter by the prohibition of junket operations. This issue could potentially be solved with offshore settlement and credit arrangements.

The consensus among Macau’s gaming concessionaires – all of which will likely bid for a license in Japan – is that the opportunity outweighs the threat.

“I would not be worried on cannibalization but it will make the market a lot more competitive,” said Richard P Loughlin, director of operations at the Asia Pacific Consultancy (Macau) Ltd., pointing to how IRs in Singapore and the Philippines did not negatively impact Macau revenues.

Cambodia

Cambodia has quietly carved itself a niche with strong performance in the Chinese VIP segment, while also serving growing customer bases from Vietnam and Cambodia.

NagaWorld, the IR which holds exclusivity in Phnom Penh, reported a 140 percent year-on-year uptick in VIP rolling turnover for 2017 to $21.1 billion.

With taxes from the booming sector pumping around $50 million a year into government coffers, there is an appetite for further expansion. However, long-term growth could depend on maintaining strong relations with China.

“Cambodia is a potential competitive threat [to Macau], but the longevity of the threat may depend on the durability of the current political regime, and the strength of its relationship with China,” David Green, former gaming practice director with PricewaterhouseCoopers in Macau and founder of leading gaming consultancy Newpage Consulting, told AGB.

Singapore

Genting Singapore, Resorts World and Marina Bay Sands have been hit by Beijing’s gambling crackdown, albeit not to the extent of Macau.

However, the outlook looks stable if not spectacular. “Singapore is unlikely to expand further; it opened pretty much as a mature market in 2010, and has likely seen the best of its growth,” said Green.

The city state has been helped by strong tourist numbers. For 2017, tourist arrivals were up 6.2 percent to 17.4 million, with China now the top source of tourists.

Singapore’s IRs have tended to perform strongly on the non-gaming side, while the market should be better insulated against Beijing’s unpredictability than many as it remains the primary destination for VIPs from Indonesia and India. Building upon these strengths will be the key to further growth.

Vietnam

Like Cambodia, Vietnam is taking aim at the Chinese junket market with Suncity’s $4 billion Hoiana project set to open its first phase next year.

The casino will be Vietnam’s largest, and marks a change in strategy with the market also set to trial domestic gaming after relaxing a long-standing ban.

“Vietnam offers potential as both an opportunity and competitive threat, if it can offer an attractive, stable and regulated alternative, and if locals are allowed to enter en masse,” said Green.

South Korea

Political tension with China and its impact on visitor numbers has meant Korea’s burgeoning casino market is still waiting for takeoff.

Given the ban on domestic customers, the reported ban by Chinese authorities on tour groups travelling to Korea hit the sector hard; Paradise City reported an 8.6 decline on gaming revenues for 2017.

New regulation and more investment is needed to drive growth into the 2020s, although this may not be forthcoming.

“Korea may offer a couple attractive properties, but the market is substantially unregulated, and the risk associated with its proximity to North Korea has scarcely diminished,” said Green.

Philippines

The Philippines has enjoyed impressive growth of late – gross gaming revenues were up 13.8 percent year-on-year for 2017.

Its revenues are better diversified than many competing territories, split fairly evenly between VIP junkets, mass market and electronic gaming machines.

In theory, this provides plenty of room for growth, particularly on the VIP side given the Philippines close relationship with China.

However, questions still remain over the stability of Rodrigo Duterte’s government, and the largest operators have so far steered clear. This may need to change if it is to emerge as a leading destination.

“The Philippines is unlikely to regulate its way to success in attracting established IR operators, especially from the US. Melco is there, of course, but it is difficult to see Nevada licensees ever following,” said Green.