2018 in review – Sportsbetting, IndoChina and Japan

There’s never a dull moment when it comes to gaming in Asia and 2018 produced its fair share of surprises, many of them provided by Philippine President Rodrigo Duterte, who is keeping the gaming industry on its toes.

From the shelving of a planned casino project by Galaxy Entertainment on Boracay, through to the abrupt sacking of the board of local partner, the Nayong Pilipino Corp. during a groundbreaking ceremony for Landing International in Manila, he has injected an added element of risk for gaming operators in the Philippines.

Elsewhere around Asia, the market in Cambodia has continued to see explosive growth, with much of it centered on the coastal town of Sihanoukville, leading to concern about overheating. While in neighbouring Vietnam, projects are progressing and investor interest remains strong.

Operators continue to jostle for position in Japan, strengthening their ground game and hiring local staff over the year in an attempt to win over hearts and minds before bidding begins in earnest in the next couple of years. And in Macau, U.S. President Donald Trump’s trade war has cast a cloud, contributing to a slowdown in the Chinese economy and a resulting hit to the gambling hub’s VIP traffic.

As the year winds to a close, AGB has taken its annual roundup of the state of the gaming industry in Asia, asking key industry figures what they believe were the most important, or surprising trends to emerge over the past year.

Early in the New Year, we will be publishing their predictions for 2019. Here are their thoughts on 2018, with contributions in alphabetical order.

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Harmen Brenninkmeijer, managing partner Dynamic Partners

2018 was a year to remember in the following areas: The clear winner is the hype and excitement around sportsbetting throughout the world. It’s not just the opportunities created by the US constitutional ruling related to Paspa, but also due to the enormous growth created by the World Cup, the growth on continents such as Africa and the approvals in many more countries, of which the latest Brazil.

The number of gaming crypto applications gained amidst a massive loss in crypto valuations as the year progressed, despite the hype originally created around the crypto space and the loss of faith prevailing amongst most people at this stage.

Casinos are chucking along whereby the number of new and exciting projects is stagnating, the business is flattening and the product development is unsatisfactory.

The iGaming sector, in general, has passed many records with regards to its turnover, legislative growth opportunities and product rollouts, but towards the end of this year, heavy clouds are gathering due to legislative controls and advertising bans being introduced.

Esports has been growing and created exciting opportunities and valuations for a number of esports companies, but the average one is still having a hard time to make it.

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David Green, CEO NewPage Consulting

The most surprising event of 2018 for me was the sudden demise of Steve Wynn. It surprises me that it took that event to put a focus on governance of gaming companies, which have historically been driven by the energy and vision of single individuals. One is reminded of Lord Acton’s timeless observation “Power tends to corrupt. Absolute power corrupts absolutely”. It remains to be seen what governance failures might be shown up by litigation, but it is clear that boards across the industry will be held to a higher standard of accountability and performance than has been the case previously, due to the primacy of the duty they owe all shareholders.

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Frederic Gushin, managing director Spectrum Gaming

2018 was generally a good year for the gaming industries in Southeast Asia. Macau has continued its transition to a mass and premium mass market and the Philippines has shown continued growth. 2018 has set up 2019 as another positive year.

Events in Japan will have an impact on the worldwide gaming industry as the members of the gaming commission are appointed and confirmed by the Diet and the initial set of casino regulations is made public, Prefectures will continue their efforts to recruit operators and investors.

Macau will begin to consider the re-issuance of concession as 2022 approaches and the Chinese government will continue its crackdown on corruption in 2019.

The online gaming facilities in the Philippines and Cambodia will come under increased scrutiny by regulators and law enforcement and crypto-currencies will become more widespread and even more controversial in 2019.

Asia will continue to be the worldwide leader in casino gaming and unregulated online gaming.

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Sudhir Kale, founder GamePlan Consultants

One big surprise for me was how unattractive the Japanese Government has made it for foreign companies to want to operate in Japan. Restrictions on casino floor space, entry fee for the locals and high taxes on gaming revenues would make many contenders walk away from this market.

The second surprise is the lackluster “recovery” in the China market. I had spoken about this at last year’s GRWA and written about this issue on AGB (see https://agbrief.com/intelligence-article/taking-china-out-of-the-marketing-loop/), but the relatively slow pace of revenue growth has been a revelation even for me.

The flat Australian casino market has also been somewhat of a surprise. Since all casinos in Australia are largely locals-dependent for their revenues, it is vitally important that casino operators work on enhancing the gaming experience in 2019.

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Andrew Klebanow, senior partner Global Market Advisors

Looking back at 2018, there were some particularly noteworthy events. One was the ramping up of Naga2. NagaWorld, the sole integrated resort in Phnom Penh, opened a second property in November of 2017, essentially doubling its gaming and lodging capacity, and results so far have been impressive. For the first six months of 2018, gross gaming revenue grew by 84.6 percent to US$712.9 million and net profit grew by 19.6 percent to US$180.1 million.  

Naga2 demonstrated that the Mekong region is starving for quality gaming, entertainment and lodging environments. Expect to see other regional operators learn from this.

The Cambodian gaming market is rapidly evolving and it is driven by two factors: the dramatic and unprecedented growth in Sihanoukville and progress on the development of more robust gaming regulations.  

The October 2018 opening of the 507-key Xihu Resort in Sihanoukville is the first of several massive casino resorts that are scheduled to open in this beach town. The development of the Sihanoukville Special Economic Zone and growing tourism is fueling demand for lodging and with it, casino gaming.

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Joji Kokuryo, founding member AGB Nippon and managing director Bay City Ventures

2018 was a year of new opportunity and adaptation. The official start of IR business in Japan has made an operating license in my home country the biggest prize now hanging above the gaming industry.

Sports betting in the US opening up to individual state legislatures is also bringing new opportunities for regulated state and sport revenue, as well as better options and access for punters.

Adaptation was also key. Operators and suppliers alike are taking real steps to adapt to mass market growth, along the way adapting to the future market by bringing in new opportunities, from e-sports and non-gaming revenue sources. We also saw Macau casinos closing their doors for the first time during the hardest of typhoons, showing a willingness to stray from the “show must go on” attitude to making employee and visitor safety the top priority, something many worldwide venues may need to follow as we see more and more natural disasters which will require local operators to adopt measures.

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Tim Shepherd, director Fortuna Investments

Vietnam is the hottest-land based gaming destination in Asia right now and it will remain so into 2019. On the demand side, a mixture of proximity to China, safe environment and a wonderful destination for tourists means plenty of guests. On the supply side strong (and stable) gaming regulation, a large slice of the population who can speak Mandarin, tied to an industrious “can – do” from architects and builders, means fewer headaches, less capex and greater ROIC on a like for like basis than places like the Philippines.