With new large scale, premium-oriented casino resorts opening over the next five years, there will be both winners and losers, according to Fitch Ratings.
The winners will likely be operators with mass-market and geographic diversification, which can avoid the risks related to oversaturation of the premium market.
“Billions of dollars were invested in the last decade to build casinos that cater to wealthy Chinese consumers in APAC. The premium segment has already plateaued in markets such as Singapore and Australia but the investment is continuing across the region, even as China’s economy goes through a structural slowdown.”
The rating agency is forecasting China’s GDP to grow 6.1 percent in 2019 and 2020, down from 6.8 percent in 2018.
Crown Resorts is spending $1 billion to build such a resort in Sydney, Australia, while Caesars Entertainment and Mohegan Gaming & Entertainment are developing gaming-oriented integrated resorts (IR) in South Korea. Both resorts will rely heavily on Chinese visitation, says Fitch.
“We view these developments as somewhat risky because foreigners-only projects in South Korea have experienced subpar return on investment and VIP or rolling chip revenue in Australia declined meaningfully since peaking around 2015-2016,” it says.
Fitch says it views LVS as best positioned among global gaming operators due to its mass-market orientation.
“The mass market segment in Macau is less cyclical, more profitable and benefits from secular tailwinds related to the rising middle class and improved transportation infrastructure in the greater China area.”