Agbriefings August 2018

Jurisdiction Updates August 2018 Edition

In focus pg.22

IR issues

Nightclubs, size matters and employee engagement

JAPAN

Overcoming opposition pg.10

Macau

Are slots gaining traction? pg.6

AUSTRALIA Queensland woos investors pg.38

PHILIPPINES Philweb turns on the charm pg.16

AGE 2018 SUPPLIER SPECIALS pg.42

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MESSAGE 3

Dancing to the non-gaming tune

A

sia’s land-based sector continues to attract

long been a secondary attraction to table games in Macau’s

strong investor interest, as new resorts and new

casinos, but a combination of product innovation and

jurisdictions continue to open.

evolving customer preferences suggest they are a growing

Our Focus in this August 2018 edition studies

influence on operator revenue.

the implications of this proliferation of new properties and

Onto the Philippines we bring you an eGaming odyssey:

the potential considerations for investors. We look at the

almost two years after losing its license in a spat with

practicalities, such as the right size resort for the market,

Philippine President Rodrigo Duterte, gaming technology

what non-gaming amenities to include and how to make

company PhilWeb Corp is back, with improved content

sure your staff is offering the best possible service.

and services.

There has been considerable debate over whether bigger

Down under in Australia we take a closer look at

is better. Around the region, from Singapore to CNMI, the

Queensland where the state is set to kick start its efforts

mega resort seems to be the preferred operating model. We

to establish new IRs four years after a previous round of

ask why, and more importantly, will this trend continue as

bidding ended with little progress.

the market develops?

Keeping to Australia our Supplier Special report is

In another of our featured items, we consider the merits of

dedicated to the Australasia Gaming Expo. Industry leaders

the various jurisdictions. Is the Asian market big enough for

from across the globe are flocking to the newly renovated

all and when will it reach saturation point? Which particular

Sydney International Convention Centre for the 29th

resorts are most at risk from cannibalization and from where?

edition of the show. Organizers are touting exciting new

As new resorts are built out, operators are also faced with

additions to the expo this year, including a Networking

the question as to what will appeal to clients in terms

Zone, a new First Timers Program, and an all new AGE

of non-gaming amenities. In Las Vegas, it has been the

Seminar program. Produced by Asia Gaming Brief the

nightclub that has proved the star attraction, pulling in

educational seminars include three days of sessions

that coveted younger demographic. There are signs Asia

covering issues in technology, gaming, hospitality,

is moving in that direction. Marina Bay Sands is bringing

marketing, media, events, and F&B and more.

in the world-renowned Marquee Club from next year and

The AGB team will be in town following the seminar and

Melco Resorts & Entertainment hosts the Pacha brand.

the Expo. If you’d like to get in touch for a meeting write to

Lastly, the business is all about the people. The personal

us at AGE@agbrief.com.

interactions experienced by visitors are likely to really make

See you around Darling Harbour!

Rosalind Wade

Luis Pereira

the difference when it comes to customer loyalty. But to get Connect with us:

that level of service, employees need to be fully on board.

Marketing expert Sudhir Kale examines how operators need

@agbrief

to drive employee engagement to ensure they are reaching their full potential. He reaches the conclusion that money

Asia Gaming Brief

can’t buy everything.

In these pages you’ll also find the most pertinent updates

Asia Gaming Brief

On behalf of Asia Gaming Brief

across 22 Asian jurisdictions.

Rosalind Wade & Luis Pereira

In Macau we look at the EGM market: slot machines have

Publishers

www.agbrief.com

AUGUST 2018 EDITION Series II • Issue XIX

PUBLISHED BY Blue Sky Venture Ltd. 16/F China Law Building, 409 Av. da Praia Grande Macau SAR | P.O. Box 1139 t. +853 2871 7267 f. +853 2871 7264 e. enquiries@agbrief.com ADVERTISING ENQUIRIES advertising@agbrief.com SUBSCRIPTION ENQUIRIES memberships@agbrief.com EDITORIAL ENQUIRIES editorial@agbrief.com

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AGBRIEF PARTNER EVENTS

› ICE Totally Gaming › ASEAN Gaming Summit › Japan Gaming Congress › G2E Asia › Russian Gaming Week › iGB!Live › World Gaming Executive Summit › Australasian Gaming Expo › G2E Las Vegas › European iGaming Congress › IAGR Annual Conference › MGS Entertainment Show › SiGMA

Asia Gaming Briefings | August 2018

CONTENTS 4

GREATER CHINA

NORTH ASIA

6

MACAU

special focus

Asia Gaming Briefings | August 2018

JAPAN

10

PHILIPPINES

SOUTH KOREA

12

MALAYSIA

RUSSIA

14

INDOCHINA

SOUTH ASIA NEPAL

SOUTH EAST ASIA

32

22

16 20

AUSTRALASIA

CAMBODIA

34

AUSTRALIA

38

VIETNAM

36

CNMI

40

SUPPLIER SPECIAL REPORT

42

LAST WORD

54

6

MACAU

GREATER CHINA

6

Are slots finally gaining a foothold?

Slot machines have long been a secondary attraction to table games in Macau’s casinos, but a combination of product innovation and evolving customer preferences suggest they are a growing influence on operator revenue.

Asia Gaming Briefings | August 2018

T

he latest financial results from Macau’s operators showed a healthy increase in slot machine revenue, indicating that a mix of product innovation, evolving customer preferences and new capacity are beginning to help them gain traction.

According to figures from Macau’s Gaming Inspection and Coordination Bureau (DICJ), GGR from slot machines in the enclave was MOP 3.82 billion (US$ 474 million) for the first three months of 2018, up 17.9 percent on the same period in 2017.

To be sure, slots are still a small part of the market accounting for less than five percent of Macau’s total gaming revenues compared with more than half of revenues in Las Vegas. Q1 figures also showed VIP baccarat still leading the way up 21 percent, but slots are becoming a more important part of the mix for operators with the addition of new properties on Cotai.

“Over the last many years growth in the number of slot machines has been notably lower than of tables games,” Grant Govertsen, managing director at Union Gaming Securities Asia, told AGB. “This is clearly a function of customer preference in that mainland Chinese customers have significantly less interest in slot machines than they do in table games - especially baccarat.”

There are signs this is starting to change.

The number of slot machines in Macau grew an impressive 10.1 percent to 17,205 during the first three months of 2018 versus the previous quarter.

Melco’s Studio City reported an 18.5 percent year-on-year increase in average win per unit per day on gaming machines during Q1 2018, while also increasing the number of machines by 4 percent.

At Galaxy Entertainment, electronic gaming revenue was up 14 percent year-on-year, just behind the 16 percent growth in mass. Quarteron-quarter, it was up 9 percent, beating both VIP and mass on that basis. The slot handle at the Venetian was up 28.2 percent in Q1, just beating VIP volume and slightly lagging mass table drop, which grew 29.9 percent.

Meanwhile, MGM China Holdings said in its 2017 annual report that revenue from slot machine gaming operations increased year-on-year by 11.4 percent to HK$ 1,397.1 million. This outstripped growth in its main floor tables and VIP revenue during the year.

“Whilst Macau is a table-dominated market and likely always will be, we believe that slots will continue to play an important role in the future of Macau casinos,” Michael Cheers, sales director Asia at IGT, told AGB.

GREATER CHINA 7

Casino floors throughout Macau are “ currently saturated with the same few game titles, and our customers are looking to diversify their floors with new, engaging games that will keep players interested,

”

Cheers said that the key to growing Macau’s slots vertical is offering a more diverse product offering. The supplier recently launched its Hyper Hits link slot machine at MGM Cotai for the first time, saying it was “encouraged” by the positive feedback it had received.

“Casino floors throughout Macau are currently saturated with the same few game titles, and our customers are looking to diversify their floors with new, engaging games that will keep players interested,” he said.

The question both operators and manufacturers face is identifying the characteristics of slots players and tailoring their offerings accordingly.

Kevin Lee, deputy general manager of Aruze Gaming Macau, the third biggest supplier of electronic gaming machines in Macau, said slot players tend to be very distinct to those who favour table games.

He said the slots segment is younger, more likely to favour privacy, and more international in its composition compared to the predominantly Chinese customer base for Macau’s table games.

This profile is evolving, however, particularly as Macau attempts to better position itself for the mass market.

Technical advances in the manufacture and delivery of slots have played a significant role in creating products that are more appealing

to the Macau market.

Suppliers now appreciate that reskinning slots that have succeeded in Vegas with an Asian theme is not enough. Instead, products are designed from the ground up with Macau in mind, taking into account theming, maths modelling and volatility.

However, product innovation is not a seamless process. Lee at Aruze noted that “stringent controls and requirements” from the enclave’s regulator have created barriers for manufacturers.

Currently, all electronic gaming machines must comply with Macau’s technical standards and be certified by a recognised gaming testing laboratory, with only licensed manufacturers permitted to supply gaming machines.

While this is in line with other jurisdictions, it can limit the speed at which new products are brought to market.

From a regulatory perspective, slots suppliers will be more encouraged by the fact that Macau is already close to its table cap - just 657 tables short, according to research from Union Gaming.

The number of slot machines permitted remains uncapped, and although the Macau government has occasionally hinted at changing this status quo, operators could well turn to the vertical to power growth if table game expansion is limited.

US/China trade war may catch operators in crosshairs A trade war between the US and China could have implications for Macau casino companies, which, according to Steve Vickers and Associates (SVA), sit on the “geopolitical fault line.” “US patience towards China’s mercantilism – exemplified by the provision of cheap credit and subsidies to exporters, the systematic appropriation of intellectual property, and a failure to open its economy – has run short,” said SVA. “Further escalation seems inevitable, as tensions intensify,” said the firm in a report. The Hong Kongbased risk advisory firm said any slowdown in the yuan’s value may lead to Beijing imposing further restrictions on capital outflows, while US-based casino companies, with their ties to Trump, may see their Macau concessions at risk as a result.

Asia Gaming Briefings | August 2018

GREATER CHINA 8

Galaxy Entertainment Group SJM Holdings Galaxy Entertainment Group (27.HK) has three main properties and runs three City Club casinos inside hotels. The company’s Galaxy Macau Phase 2 and Broadway at Galaxy Macau opened on May 27, 2015, almost doubling the capacity of the resort. The property is viewed by analysts as one of the best placed in Macau, having made considerable efforts in recent years to boost its mass market appeal. Earlier this year, Galaxy bought a stake of just under 5 percent in Wynn Macau, which it says is for investment purposes. For Q1, Galaxy posted record Q1 adjusted EBITDA, despite bad luck during the period, and said it’s actively pursuing its expansion plans in the Philippines and Japan.

Group revenue rose 32 percent to HK$18.5 billion ($2.35 billion). Adjusted EBITDA was HK$4.3 billion, up 36 percent. Normalized for the luck factor, adjusted EBITDA was up 41 percent. Gross gaming revenue gained 31 percent to $17.2 billion, mainly driven by the VIP sector, which posted a 44 percent gain.

The company was granted a license for a resort on Boracay, though the fate of the project is unclear after Philippine President Rodrigo Duterte has repeatedly said he will not allow a casino on the island.

Asia Gaming Briefings | August 2018

SJM Holdings (880:HK) has 22 casinos in Macau, though the former monopoly has been losing market share to new IRs on Cotai. In Q1, its share of the market declined to 14.7 percent from 16.9 percent. The company is counting on its new IR, the Grand Lisboa Palace, which is under construction on Cotai to help it recover lost ground. However, that resort is not expected to open until late 2019, which is likely to result in further market share losses. Analysts are also concerned about the high build cost for the IR. “Based on [Grand Lisboa Palace’s] current capex budget, its construction cost per room is one the highest among the new properties in the Cotai area, reaching to Wynn Palace level. But it would be difficult for the room quality to reach that of the Wynn Palace,” Bernstein Research wrote in a recent note.

For Q1, its overall results for the period beat expectations, with net gaming revenue ring 6.7 percent to HK8.4 billion ($1 billion) and adjusted EBITDA up 17 percent to $987 million.

In June, SJM Chairman and Macau gaming legend Stanley Ho formally stepped down from the company.

Melco resorts & entertainment Melco Resorts & Entertainment (6883.

HK) has three casinos and the Mocha Clubs.

The company operates the City of Dreams and Studio City in Macau and the City of Dreams Manila.

The operator is developing an IR on Cyprus in the Mediterranean and is one of the most active in pitching for a license in Japan. In June, Melco opened its 772-room Morpheus hotel tower. The hotel, which was designed by the late Zaha Hadid, will double the number of rooms available for premium mass customers, while increasing room capacity at City of Dreams by 50 percent. The $1.1 billion hotel opened with 40 gaming tables transferred from other Melco properties.

In Q2, Melco reported an 8 percent gain in adjusted property EBITDA driven by its City of Dreams Manila and Altira properties, though its results were hit by bad luck and a change in accounting practices for revenue.

Overall net revenue was $1.23 billion, down 5 percent. Without the new reporting standard, revenue would have gained 3 percent.

GREATER CHINA 9

Adjusted property EBITDA was US$355.5 million compared to US$329.5 million in the second quarter of 2017, while net income rose to $57.3 million from $36.5 million a year earlier.

The company said it expected the new Morpheus to help mark a new beginning for City of Dreams Macau and it was already beginning to see higher volumes in July.

The company also said it plans to get to work on plans for the Phase 2 expansion of Studio City in the second half.

Wynn macau Wynn Macau (1128:HK) operates two resorts, with its $4 billion Wynn Palace opening in 2016. The company’s original property is on the Macau Peninsula. The Wynn Palace has 1,700 hotel rooms and 90 percent of the resort will be non-gaming. The resort has two further plots of land available for development and the company is considering adding more non-gaming attractions. It may consider virtual reality or alternative reality concepts to drive visitation, although there are no current plans.

Operating revenues from Wynn Macau were $618.2 million for Q1 an 11.9 percent increase for the same period of 2017. Adjusted property

EBITDA from Wynn Macau was $209.8 million, up 15.9 percent. Table games turnover in VIP operations was $17.09 billion, a 28.6 percent increase. Wynn Palace outperformed in the quarter, with revenues showing a 47.2 percent gain to $665.8. Adjusted Property EBITDA was $211.9 million, an 89.4 percent gain. VIP table games turnover in VIP operations was $15.39 billion, a 39.3 percent increase.

MGM china MGM China (2282:HK) is operating two casinos, with its MGM Cotai IR opening in February. The IR, with its jewellry box design, is already contributing to group results. The HK$27 billion IR features 1,400 hotel rooms and suites, meeting space, high end spa, retail offerings and food and beverage outlets as well as the first international Mansion at MGM for the ultimate luxury experience. MGM Cotai will also host Asia’s first dynamic theater with resident shows and more than 300 pieces of contemporary art. In Q1, MGM reported a 26.4 percent year-on-year increase in revenue to HK$4.7 billion (US$598.7 million). Total adjusted EBITDA stayed relatively flat in the quarter, at HK$1.3 billion, compared to HK$1.2 billion in the prior year period. Revenue from MGM Cotai reached $665 million in the quarter. MGM Macau revenue rose to HK$4 billion, up from HK$3.7 billion a year before. The company is also pushing hard for a casino license in Tokyo and is angling for the key Osaka market.

Sands China Sands China (1928:HK) has five properties in Macau. The $3 billion The Parisian opened in September 2016 and is now a key driver of group results. It features a scale replica of the Eiffel Tower, nearly 13,000 hotel rooms, two million square feet of retail-mall offerings and two million square feet of MICE capacity. The company is planning to redevelop its Cotai Central property into a London-themed resort, starting from the end of this year.

The company is spending $1.1 billion on the project, which will feature some of the U.K. capital’s most recognizable landmarks as well as more retail space. The works are scheduled for completion by 2020. Sands has the largest room count of any of the Macau operators and is also seen as the most mass-market focused.

In Q1,net revenues for Sands China increased 17 percent to $2.16 billion, while net income increased 59 percent to $557.

Mass leads Q2 revenue growth The mass market overtook the VIP sector to lead growth in Macau’s gross gambling revenue in Q2 with a gain of 21 percent over the prior year, according to figures from the Gaming Inspection and Coordination Bureau. VIP gaming rose 14 percent in the same period, the slowest rate in more than 18 months. “That mass, once again, drove growth in 2Q is great news for operators as it has been the backbone of the recovery and is generally less sensitive to political winds,” Union Gaming wrote in a note. “That mass outpaced VIP is also an upside surprise relative to most expectations and, trade war fears notwithstanding, is reason to remain bullish on the Macau names.”

GROSS GAMING REVENUE GGR 2017

+19.1%

Q1

+21%

Q2

+17.2%

GGR 2018E Fitch Ratings

+13%

Morgan Stanley

+16%

Union Gaming

+16%

Deutsche Bank

+12.9%

Asia Gaming Briefings | August 2018

NORTH ASIA

10

JAPAN

Politics to continue to create headaches in Japan Public opposition to casinos in Japan remains strong and sooner or later this is likely to have practical consequences for the industry, despite the passage of the IR Implementation Bill.

T

he act represents the culmination of almost two decades of lobbying efforts by the advocates of legalized casino gambling. However, the reality is that casinos have become legal in Japan due mainly to the authoritarian and non-democratic strains in the Japanese political system.

The conservative and right-wing politicians who wish to write Japanese war crimes out of the history books, or who bristle at the establishment of monuments to wartime Comfort Women, are also the ones who pushed the hardest for the legalization of domestic casinos.

The pro-casino movement in Japan was effectively launched in 1999 by former Tokyo Governor Shintaro Ishihara, an outspoken nationalist hawk.

Under Prime Minister Shinzo Abe, it is this far right trend which has been dominating the nation’s political sphere, and there would have been very little prospect for this legislation succeeding had not Japanese moderates and the liberal-left been in a long-term political eclipse after the perceived debacle of the 2009-2012 Democratic Party of Japan administrations.

The first and most important challenge for the IR industry going forward, will be to find a way to stop relying on the right-wing politicians who originally brought them into the country, and to gain a greater degree of acceptance from moderates and liberals as well.

At the national level, Japanese conservatives will remain in power for some years to come.

The strongest progressive opposition force, the Constitutional Democratic Party of Japan (CDPJ), was created only in October 2017 and

NORTH ASIA 11

will need a number of years to build its party infrastructure to the point that it is really ready to take on the ruling conservatives across the nation.

However, the CDPJ does have the potential to pull off some upsets in local elections, and they are now preparing to contest the many local seats that will be available in the unified local elections next April.

One key region to watch is Hokkaido, where both Governor Harumi Takahashi and the prefectural assembly face elections next April.

Even now, it is thought that support within the assembly for an IR bid is doubtful, and should the liberal-left make significant gains within that body, or even manage to topple Governor Takahashi, then all the plans in Tomakomai and other local municipalities could quickly come to naught.

Forced withdrawal?

At any rate, the possibility is high that at least one of the major IR candidate cities will yet be forced to withdraw when a conservative governor or assembly loses its grip on power at the ballot box.

There is no real prospect that the Japan Communist Party will come to power, but with roughly 5-10 percent electoral support across the nation and a formidable network of leftist activists unlike any other political organization in Japan, they are nearly certain to be a thorn in the side of IR operators going forward.

The Japan Communist Party has already focused on the anti-casino issue as one of its

Global casinos not attracting Japanese tourists Asia’s glitzy IRs and casinos around the world are not attracting large numbers of Japanese tourists, despite their propensity to gamble in pachinko parlours at home, operators on a panel at the World Gaming Executive Summit in Barcelona said. “With all the talk about the propensity to gamble, you just don’t see the Japanese in Asia’s casinos,” said Tim Shepherd, director of Fortuna Investments and co-founder of Silver Heritage Group. “It is going to be an interesting challenge for everyone.”.

main campaigns. They know that the majority of the public currently agrees with them on this stance and are well motivated to go on the attack. The form of the offensive is most likely to be continued street protests and support for anti-casino rallies and lectures.

Left-leaning lawyers, many of those within the Japan Federation of Bar Associations, could attempt to tie up specific IR construction projects in environmental or other kinds of lawsuits.

Many operators and pro-IR commentators seem to have a rather sanguine view of these challenges, noting that they’ve faced such problems in other jurisdictions, or that the Japanese public will begin to respond once a more thorough education program begins.

But the political starting point is not a good one. The legislation was forced through against the will of the majority by a government already burdened by a series of corruption scandals. In many people’s eyes, the IR Implementation Act will remain tainted by that political genesis.

Moreover, the dominance of the Japanese political system that Prime Minister Shinzo Abe has wielded was largely the result of public disgust with the incompetence of the former Democratic Party of Japan administrations.

Now it is more than five years on, and liberals are beginning to reorganize more effectively, and are nearly certain to achieve better electoral results in the years ahead.

If it wants to navigate the waters ahead, the IR industry will need to quickly prove itself to be about more than investment, profits, and employment, but also an indispensable partner for Japanese social progress.

GROSS GAMING REVENUE GGRE $5b - $6b

GGRE 2025 $15b

(Source: Fitch)

(Source: Morgan Stanley)

GGRE 2030 $24.2b

from six locations

(Source: Global Market Advisors)

Tokyo governor signals change of heart on IRs In a development that has potential to reshape the IR race in Japan, Tokyo Governor Yuriko Koike indicates that she is willing to consider an IR bid for the Japanese metropolis. Governor Koike stated, “I have heard that former Governor Shintaro Ishihara was very passionate about his casino concept.

It may be that casinos, as part of an IR, could earn a lot of money. There are many possibilities. I have also heard stories about adverse effects.

Include those issues, we need to consider it.” Tokyo has not been considered a realistic candidate for the first round of IR licensing, largely because it is already very busy preparing for the 2020 Olympics, and also because the governor had never before indicated such an interest.

Asia Gaming Briefings | August 2018

NORTH ASIA 12

SOUTH KOREA

Japanese gamers drive Paradise City revenue Sega Sammy and Paradise Co. are seeing a gradual ramp up in their Paradise City IR on Yeongjong Island, with increased visitation from Japan making up for the shortfall in Chinese arrivals due to last year’s travel ban.

T

he resort opened in April last year, a month after China put a halt to tour groups in retaliation for South Korea’s decision to instal a U.S. anti-missile system on its territory. Relations between the two countries have thawed, though according to reports, group travel from China to South Korea remains sluggish.

In its monthly sales report, Paradise Co. recorded a 65.9 percent surge in overall casino revenue for June reaching KRW57.6 billion (US$51.7 million).

While machine revenue stayed stable yearon-year, table games revenue contributed the most to the month’s growth, increasing 71.8 percent year-on-year to KRW54.6 billion.

The stellar results in June boosted the company’s revenue for the first six months of 2018 to a total of KRW296.3 billion, up 23.7 percent year-on-year.

The company doesn’t split out the

Asia Gaming Briefings | August 2018

performance of its IR in its monthly sales figures, though in its Q1 results, the company reported a 145 percent jump in casino sales at the IR to KRW55.6 billion, helped by Japanese VIPs. The table drop from Japanese players rose to KRW512 billion from KRW375 billion in the fourth quarter, although the drop from China declined to KRW324 billion from KRW464 billion.

The results also showed the Paradise City IR already making up a sizeable portion of group income, accounting for KRW561 billion of the KRW1.48 trillion total. Paradise operates four foreigner-only casinos, including Paradise City.

Sega Sammy says it expects the second phase of the resort to open before the end of March next year. The Japanese company said the phase will include a club and a spa.

The Incheon area is expected to become

home to three further integrated resorts, although progress so far has been slow.

Caesars Entertainment has teamed with Hong Kong-listed Guangzhou R&F Properties Co to invest more than KRW850 billion in a resort in Midan City on the island. The property will have 720 rooms and suites and boasts “never-before-seen features and creative amenities.” It will be Caesar’s first project in Asia and completion is slated for 2021.

Mohegan Sun is also taking its first steps in Asia in South Korea with plans for a $5 billion project. The tribal operator recently bought out its local partner and now holds 100 percent of Project Inspire, as it’s known.

The first phase of the integrated resort will cost $1.6 billion, and will feature 1,350 hotel rooms, a 20,000-square-foot casino with 1,500 slot machines and 250 table games, 15,000-seat theatre, retail shopping, amusement park, and multiple restaurants.

NORTH ASIA 13

GROSS GAMING REVENUE Drop by Nationality (KRW bn)

Casino Sales by Site (KRW 00 mn)

VIP (China)

VIP (Japan)

Walkerhill

Jeju Grand

VIP (others)

Mass

Paradise City

Busan

1,410 1,199

1Q17

1,341

1,360

1,123

2Q17

1,246

3Q17

4Q17

1Q18

1Q17

1,556

1,567

3Q17

4Q17

1,487

1,149

2Q17

1Q18

(Source: Paradise Co.)

The property is on schedule to open in 2020.

Earlier this year, LongRunn International, a Chinese real estate and resorts developer, said it also agreed to construct a $4.5 billion property in the area. The company has agreed to buy a parcel of land for $80 million for the resort, which will be called Diamond City, Global Construction Review reports.

According to the company’s website, Diamond City is a new mixed development to be build on a 165,769m2 site comprising 740,925m2 of residences, a 7-star hotel, casino, office tower, retail mall, schools, medical and aesthetics centre, interactive world cultural avenue, K Pop hub and theme parks.

Yeongjong Island is the location of the Incheon International Airport, which is the gateway to South Korea and also a major Asian air hub. It’s about an hour by train from downtown Seoul.

The government is also planning to build the country’s largest cruise ship terminal in Incheon, which is set to open in April next year and should help boost visitation.

This will be the first time the Seoul metropolitan area will have a pier capable of handling large-scale cruise ships with the capacity to carry 5,000 to 6,000 passengers.

According to the Incheon Port Authority (IPA), it plans to operate the 114,000-ton cruise ship, Costa Serena, on the IncheonShanghai-Fukuoka-Busan route in partnership with Lotte Tour.

SIS to livestream KRA races SIS (Sports Information Services) has reached an accord with Korean Racing Authority to broadcast live coverage of the action from two of the country’s racecourses, Busan and Seoul. The agreement will allow SIS to provide pictures and data to retail and online bookmakers in the UK, Ireland, and Spain. “We are delighted to have agreed terms with the Korean Racing Authority and to be able to supply further betting opportunities to our operator partners at key times,” said Simon Fraser, Head of International Horseracing at SIS Betting. “I’ve no doubt racing fans will be very pleased with the quality of the racing on display and I’m confident the fast-paced action will also appeal to a host of new admirers as we promote it in Europe.” “For SIS, this is another piece in the jigsaw as we look to create a quality, round-the-clock pictures and data product which gives operators options, no matter where they are in the world or the time of day.”

Lawmakers indicted in Kangwon Land scandal Two lawmakers from the main opposition party in South Korea have been indicted in connection with a job placement scandal at Kangwon Land, local media reports.

Representatives Kweon Seong-dong and Yeom Dong-yeol were charged with abuse of power and business interference, but were not detained. They are accused of requesting illegal favors in the selection of trainees at the casino and exerting pressure for their acquaintances to be hired between November 2012 and April of 2013. Last year, Kangwon Land admitted that between July 2011 and February 2014, 95 percent of all staff hired – some 493 people – were selected either for their political connections or because of their personal relationship to former CEO Choi Heung-jip.

Asia Gaming Briefings | August 2018

NORTH ASIA 14

RUSSIA

Shambala unveils Primorye plans as land auctions resume Russia’s Primorye entertainment zone has just held a new round of bidding for land plots, attracting a major investor with plans for a 16,000-square meter integrated resort complex.

R

uss i an bus i nessman Max i m Smolentsev, who heads Shambala, presented his plans to the governor of the Primorye Territory, Andrey Tarasenko, earlier this year and then took part in a land auction at the end of May. The company has more than 15 years of experience in the Russian gaming industry, though its Azov City casinos are being forced to shut down at the end of this year after the federal government chose to close the gaming zone.

The new complex in Primorye, which is in Russia’s Far East, close to Vladivostok, will include a casino with 500 EGMs and 50 gaming tables, as well as a five-star hotel with 270 rooms and a spacious nightclub.

Total investment in the project is estimated at RUB 8 billion, (US$128.6 million), with design works to begin in September 2018.

The concept was developed by the international architectural company AEDAS, which designed The Venetian casino in Macau and Marina Bay Sands in Singapore.

Asia Gaming Briefings | August 2018

For the implementation of the project, the investor needs two free plots of land, the Development Company of Primorski Krai said on its website.

After this latest auction, there are eight

“

We are considering the possibility of creating a golf club and a ski resort. These are the kinds of entertainment that will allow you to relax at the resort Primorye all year round,

”

remaining unoccupied land lots in the region, which the development corporation intends to auction off in the future. It says it’s in talks with several investors, who have expressed interest in development.

So far seven investment agreements have been signed, but only one casino is operational.

After a slow start, Summit Ascent’s Tigre de Cristal appears to be ramping up. Adjusted property EBITDA for Oriental Regent, which operates the IR, rose 32 percent in 2017 to HK$173.7 million. Total revenue jumped 46 percent to $470.8 million, with the VIP business being the main driver for growth.

Rolling chip turnover last year was $18.8 billion, up 33 percent.

The resort was voted the best in Russia in the World Travel Awards 2018, beating out three Radisson properties and two other resorts.

The company plans to present plans for the second stage of the resort in summer, which is expected to have a greater focus on non-gaming attractions.

NORTH ASIA 15

“We are considering the possibility of creating a golf club and a ski resort. These are the kinds of entertainment that will allow you to relax at the resort Primorye all year round,” Stylianos Tsifetakis, the property’s chief operating officer, said at a presentation in March. “In addition, our new Taiwan shareholder plans to create one of the largest shopping centers in the Far East located in the IER Primorye.”

Cambodian casino operator NagaCorp is also pushing ahead with its project in Primorye.

Naga Vladivostok is scheduled to open next year and the company recently commissioned a Chinese railway company to build a 380 km high-speed railway linking Vladivostok and Mudanjiang to improve access to the zone, according to media reports reports.

NagaCorp refused to comment on the news “until an active phase of the work in this direction starts,” but it did reaffirm plans “which were announced during the signing of a relevant agreement.”

A third resort being developed by Russian group, Diamond Fortune Prim, is also expected to open next year, known as the Selena resort.

Primorye is considered the most promising of Russia’s gaming zones due to its proximity to Northeast Asia. The flight from Beijing is about two hours, making it much more accessible for residents of northern China than Macau.

The government has also eased the visa process for mainland Chinese and Korean residents easing travel.

GGR: TIGRE DE CRISTAL Mass table drop

Rolling chip turnover Q1 2017

Q1 2017

3,438

Q2 2017

4,965

Q3 2017

5,570

Q2 2017 Q3 2017

Q4 2017

4,818

Q4 2017

FY 2017

18,791

FY 2017

FY 2016

14,081

FY 2016

132 127 155 163

577 496

(Source: Summit Ascent)

Royal Time head goes bust Rashid Teymasov, the former head of Royal Time Group has been declared bankrupt, while the company he headed has exited all projects in other Russian gambling zones except Azov-City. The Oracul casino in Azov-City was the first to open after the Russian authorities restricted gambling activities to designated zones back in 2010 and it is now the only gambling facility operated by Royal Time Group. However, even this project is facing closure later this year due to the establishment of another gambling zone in the same region after the 2014 Olympics. Royal Time Group’s investment portfolio previously included projects in the gambling zones in Altai Territory, Primorye and Kaliningrad. Teymasov is reported to owe his creditors some RUB 203.5 million (US$3.2 million) and voluntarily filed for bankruptcy. .

Gaming tax revenue rises 27 percent Tax revenue from Russia’s five gaming zones increased 27 percent year-on-year in 18Q1, with a total of RUB 189.15 million (US$3.2 million) in taxes paid. Azov-city, which faces closure, paid the largest amount of taxes – over RUB 78 million. Primorye paid about RUB 27 million, Siberian Coin paid RUB 10.6 million, Yantarnaya paid RUB 23 million, while Krasnaya Polyana in Sochi – paid around RUB 50 million. It is also understood that out of all the gambling zones in the country, only the Krasnodar Territory has decided to increase the gambling tax for casinos by two-fold, while other regions have opted to leave the current tax rates in place.

Asia Gaming Briefings | August 2018

SOUTH EAST ASIA

16

PHILIPPINES

PhilWeb launches charm offensive Almost two years after losing its license in a spat with Philippine President Rodrigo Duterte, gaming technology company PhilWeb Corp is on a charm offensive to win back lost business with improved content and services.

SOUTH EAST ASIA

“I

17

hope you will support us,” PhilWeb the player’s funds all in one virtual wallet, it’s President Dennis Valdes said as he easy to move funds in and out as the player shifts recently shook the hand of Pastor from one online game to another.

Albano Jr, a businessman who operates “We’re not just going to stay with online internet-based casinos about 500 kilometres casino software because, at some point, what north of capital Manila. “If the price is right,” you don’t want to see is just another slot machine Albano replies. game. We’re going to put sports-betting games, Valdes gathered dozens of independent virtual games, and a variety of other games into game operators from all over the country in that same platform so that [the number of] our May to reiterate a message: PhilWeb is back players will grow,” Valdes shares. in business. He wants to win back Albano and The single wallet will be what differentiates a others who felt they were the unwitting victims player with a mouse and a screen from a player when PhilWeb ran into regulatory troubles. in a land-based casino, he adds. In a land-based PhilWeb lost its license in August 2016, casino, a player may have a single wallet, but when prompting electronic casino game operators to he wants to move from, say, a baccarat table to a shift to a unit of rival DFNN Inc. Albano, the slot machine, he has to physically walk to get over businessman from Laoag City, drove for about 8 there. An online casino player with a single wallet hours to attend PhilWeb’s luncheon meeting in doesn’t even have to stand from his chair.

Makati City to decide whether he should keep PhilWeb used to be the anointed vendor of running DFNN’s gaPhilippine Amusement ming software in his Gaming Corporation, machines or return to or Pagcor, to service its We’re not just PhilWeb’s fold. network of accredited To make his case, e-games cafes. PhilWeb going to stay with Valdes ran some slides operated under a coveted online casino claiming 18 percent Intellectual Property to 20 percent more LicenseandManagement software because, revenue from each Agreement (IPLMA), at some point, terminal running games which gave it blanket provided by PhilWeb approval to provide what you don’t versus those by DFNN; gaming software, as want to see is more transparent and well as marketing, timely management just another slot cash management of cash commissions, and administrative machine game. and better marketing services, to all Pagcorservices. licensed electronic “It’s time you can casinos operated by expect more from us,” he says as he unveils the independent businessmen. new company slogan.

Belatedly, rival DFNN was also granted The company has a two-pronged strategy. an IPLMA in 2013. But by 2016, Philweb It aims to provide a new menu of online games, still had the upper hand with 286 electronic including non-casino games, to enrich the gaming game outlets versus DFNN’s five. That year, experience and attract a younger audience.

President Rodrigo Duterte assumed office and It also plans to reactivate account-based play started blasting PhilWeb’s former chairman through its single wallet offering. and major stockholder Roberto V. Ongpin as At the heart of this strategy is PhilWeb’s an “oligarch he must destroy.” partnership with Habanero Systems BV. Ongpin eventually bowed out of PhilWeb, Habanero’s Viva Las Vegas social gaming but Pagcor still did not renew PhilWeb’s IPLMA platform will be rolled out on PhilWeb’s system when it expired in August 2016. This left casino through Q3. It’s the second such social casino operators out in the cold and about 220 electronic offering for PhilWeb after Magic Macau. casino sites later shifted to DFNN’s electronic “Over the next years, we have plans to keep gaming system, ‘Instawin.’ introducing new casino games into that mix, “We met with Pagcor early on, and we but always with the single wallet so the new tried to understand what they were trying to players that are coming in can take advantage do,” says Valdes. A common ground for the of that ecosystem.” discussions was how to eventually revive the The single wallet will be interfaced with P2 billion ($37.4 million) that Philweb had PhilWeb’s POS and membership system. With been remitting to Pagcor every year as part of

“

its IPLMA. That amount is among the biggest non-tax revenues that directly fund some of the national government’s social programs.

A “mutually acceptable solution” was reached over a year later. It mirrored some existing regulatory structures. In the electronic bingo world, for example, Pagcor grants licenses to outlet operators who then choose the bingo machines from suppliers also accredited by Pagcor.

“In the electronic casino world, Pagcor said let’s just do the same,” Valdes says. As part of the accreditation process, Pagcor held a competitive public bidding for Electronic Gaming System (EGS) licenses. These are similar to the accreditation that Pagcor grants to bingo machine and slot

Pagcor appoints new licensing head The Philippine Amusement and Gaming Corp. has announced changes to the senior leadership of its Gaming Licensing and Development Department, appointing lawyer Angeline P. Papica-Entienza as its new head. She will also be an assistant vice president and took up the position on July 3, replacing Ramon Villaflor.

In addition, the regulator appointed Rowena Alcaide as senior manager of the Casino Licensing and Regulatory unit replacing Dave Fermin Sevilla. Angelie Agustin will be a senior manager of the Responsible Gaming and Logistics unit, while Jeremy Luglug will be acting senior manager of the Remote Gaming Unit.

”

Government to ease arrivals for Chinese and Indians The Philippines is looking for ways to hasten the processing of “visa upon arrivals” for Chinese and Indian tourists after recognizing the importance of the two markets.“Right now, two major markets that we have to really look out in terms of facilitating entry are China and India,” Department of Tourism Undersecretary Benito Bengzon was cited as saying in local media. Bengzon said the government is considering deploying Mandarin-speaking personnel to airports to better communicate with Chinese tourists. In terms of tourist arrivals, South Korea took the top spot at 1.6 million tourists in 2017, followed by China, and the United States. India took the 12th position at 107,278 arrivals in 2017.

Asia Gaming Briefings | August 2018

SOUTH EAST ASIA 18

machine suppliers. In October 2017, Philweb was granted the first EGS license.

By December 2017, Philweb plugged back its gaming software on 16 gaming sites operated by a fully owned subsidiary, BigGames Inc. As of today, the company has 52 sites, with 28 of those actually owned by PhilWeb unit BigGames. Alongside the provision of services, the company has also been actively acquiring Pagcor-licensed cafe operators. It has previously said it was offering to buy the sites in return for the support it has received from the owners.

The company’s Q1 results show it is regaining ground, with a 236.7 percent spike in revenue and its cash loss narrowing from P45.4 million to P4.4 million.

Tiger Resort, Leisure and Entertainment Tiger Resort Leisure and Entertainment’s Okada Manila, owned by Japan’s Universal Entertainment, is the largest resort in Entertainment City and the last to enter the market, with a soft opening in 2016. Universal said in its Q1 results that business had been ramping up well. In Q1, the casino business had net sales of 8.8 billion yen ($80.1 million) and an operating loss of 1.41 billion yen. Compared with Q4 of last year, sales increased by 1.73 billion yen and the loss decreased by 550 million yen. Universal has said it may seek a stock exchange listing for the local unit that controls the resort, Tiger Resort, Leisure and Entertainment, to improve name recognition. The IR has been gradually rolling out new amenities and in Q2 expected to open the Maharlika Club, a high-end area and spa targeted at local guests. It will also open more hotel rooms and retail amenities.

The property spans 44 hectares and at the

GGR LICENSED CASINOS Non-Junket 1Q 2Q 3Q 4Q

Total

completion of Phase One, Okada will have 994 hotel rooms and operate 500 tables and about 3,000 slots. Its centrepiece is the world’s largest coloured fountain, as well as a giant inner city beach complex, known as “Cove Manila”.

The casino floor will have about 500 table games and 3,000 electronic gaming machines, a 90,000 square-feet nightclub and beach club entertainment complex.

City of Dreams The $1.3 billion City of Dreams Manila is owned by Belle Corp and Melco Crown Entertainment’s local unit. For Q2, revenue slipped due to accounting changes, though its adjusted EBITDA rose to $87.3 million from $62.8 million in the comparable period of 2017. The company said the improvement was the result of a better performance in all gaming sectors.

City of Dreams Manila has six hotel towers with approximately 950 rooms in aggregate, including VIP and five-star luxury rooms and high-end boutique hotel rooms, a wide selection of restaurants and food & beverage outlets, a 4,612.44 square-meters family entertainment center in collaboration with Dreamworks Animation, a live performance stage, two international nightclubs and a multi-level car park.

Bloomberry Resorts Bloomberry Resorts’ Solaire was the first IR to open in Entertainment City and its most recent results have been strong, with record VIP volumes helping the company swing to a profit in Q1. It posted a profit of 2.15 billion pesos, compared with a loss of 1.15 billion pesos in the prior year quarter. Solaire reported VIP volume up 34.7 percent, mass table drop up 23.7 percent

2016

1Q

10,879 10,262 12,230 10,544 12,503 11,557 12,466 42,658 48,078

2Q 3Q 4Q

Total

Resorts World Manila Travellers International Hotel Group, a joint venture between Genting Hong Kong and Alliance Global, is the owner and operator of Resorts World Manila. The IR is not located in Entertainment City and caters primarily to a loyal mass market, local crowd. However, the pull to the newer resorts, coupled with a deadly attack by a lone gunman who set fire to gaming tables in June last year, have affected performance. For Q1, net profit fell 35.2 percent to P444 million (US$8.5 million). Revenue for the group fell 14.8 percent in the quarter to P4.5 billion, while EBITDA fell to P839.7 million, down from P1.4 billion in the same period last year.

Travellers said the decline in revenue was due mainly to lower revenue in its non-VIP segment at RWM.

2017

Junket 10,295

and slot coin in up 26.2 percent.

Solaire is a 16-hectare integrated resort. The Bay Tower of Solaire consists of a casino with an aggregate gaming floor area of approximately 18,500 square meters (including 6,000 square meters of exclusive VIP gaming areas), with about 1,400 slot machines, 295 gaming tables and 88 electronic table games. Bay Tower has 488 hotel rooms and 15 specialty restaurants.

Contiguous to the existing Solaire Resort and Casino, the Sky tower consists of a 312 all-suite hotel, additional ten VIP gaming salons with 66 gaming tables and 223 slot machines. It also includes a certified 1,760-seat lyric theatre.

The company has a property on Jeju island South Korea and is planning a second IR in the Philippines in Quezon City. It expects to start construction next year, with completion slated for 2022. The resort aims to capture a share of the mass market north of Manila.

EGMs 6,677 7,723 9,019 9,994 8,389 7,522 7,057 8,336 31,142 33,575

1Q 2Q 3Q 4Q

Total

Total 6,617 7,723 6,883 8,545 7,208 9,019 7,725 9,716 28,433 36,524

1Q 2Q 3Q 4Q

Total

23,589 27,846 26,164 30,769 26,141 29,044 26,339 30,518 102,233 118,177 (Source: Pagcor)

Asia Gaming Briefings | August 2018

SOUTH EAST ASIA 19

Asia Gaming Briefings | August 2018

SOUTH EAST ASIA 20

MALAYSIA

Malaysia ops to drive growth at Genting Genting Malaysia is forecast to see stronger earnings growth from next year as the main attractions of its 10-year tourism master plan are rolled out.

T

he company began the revamp of its Resorts World Genting property in December 2013. The MYR10 billion ($2.45 billion) plan involves a new cable car system, retail outlets, more casino space, luxury hotels an indoor theme park and another theme park developed with 20th Century Fox. It will be the first for the Hollywood studio outside of the U.S. The opening of the park has been delayed until the final quarter of this year, though some analysts remain sceptical it will meet its launch deadline.

The Genting Integrated Tourism Plan is expected to be a key driver for growth at the operator, with the added hotel capacity and upgraded amenities expected to help diversify its visitor base and boost arrivals. The company also has properties in the U.K., the Bahamas and a racino in New York.

“We expect GENM’s next leg of growth to come from its capex in Malaysia, which should benefit from the expansion in capacity being undertaken by the group, funded by its monopoly in the Malaysian market, which is a growing cash cow for the company,” Nomura analysts said in a report. “With the bulk of capacity expansion coming to an end, we think earnings should rebound in 2019.”

Nomura expects Malaysia revenue and EBITDA to grow 13 percent and 18 percent respectively in 2018, with a sharper 16 percent

and 27 percent step-up in 2019.

Genting says the new attractions have already had a significant impact on revenue. In Q1, overall revenue was up 8 percent to MYR2.39 billion, with growth coming mostly from its Malaysian operations in both the mass and premium segments of the market.

The Malaysian economy is expected to weaken to 5.1 percent growth in 2018 from 5.9 percent last year, further slipping to 4.5 percent in 2019, according to Nomura analysts.

However, domestic consumption is expected to remain strong due to the government’s decision to zero rate the Goods and Services Tax from June to September, before reintroducing a Sales and Services Tax in September.

Last year, just over 70 percent of visitation to the resort came from local daytrippers, making the company vulnerable to downturns in consumer sentiment.

However, Genting hopes its upgraded facilities will pull in more premium players from around the region.

“The group remains committed to intensifying database marketing efforts to optimise yield management and improve operational efficiencies and service delivery at the resort,” it said in a report earlier this year. “Additionally, the group will place emphasis on strategic marketing efforts and leverage on the introduction of new world-class facilities and attractions at RWG to expand into regional markets.”

Fitch gives Genting Bhd A- debt rating Fitch Ratings has given Genting Bhd a long-term foreign issuer default rating (IDR) of ‘A-’, which also applies to its units, including Genting Singapore and Genting Overseas Holdings Ltd. Fitch said the ratings reflect Genting’s monopoly position in gaming in Malaysia and robust market share in Singapore, which is further helped by a high level of regulatory oversight and resultant barriers of entry, which give Genting a degree of stability to its cash flows. Furthermore, Fitch said that the firm also enjoys diversification benefits from its business in the UK, US and Bahamas, along with its oil-palm plantations, power, property and oil and gas businesses.

Asia Gaming Briefings | August 2018

SOUTH EAST ASIA 21

RWG KEY STATISTICS IN 9M17 Visitors 16.9 m

+11%

MEMBERS 4.1m

Tickets sold 3.7 m

+21%

DAY TRIPPERS 71% (Source: Genting Malaysia)

Berjaya fiscal Q3 profit drops 91 percent Berjaya Assets Bhd saw its net profits decline 90.8 percent year-on-year in the third quarter ending March 31, 2018, down to RM16.6 million (US$4.2 million). The drop was mainly due to a reversal in taxes in dispute, but it also saw a lower contribution from its business segments overall, and higher operating expenses. Quarterly revenue fell 12.2 percent to RM 76.6 million, down from RM 87.2 million in 2017. “The lower group revenue was mainly due to the gaming business segment operated by Natural Avenue Sdn Bhd (NASB) which continued to be impacted by rampant illegal gaming activities.�

Asia Gaming Briefings | August 2018

FOCUS 22

The future for Asia’s IRs: More, bigger and better amenities Asia’s land-based sector continues to attract strong investor interest, both from within and outside of the region, with new markets and opportunities emerging at a breakneck pace.

I

n this edition of Asia Gaming Briefings, our focus piece takes a broader brush look at some of the implications of this proliferation of new properties and potential considerations for investors.

For example, there has been considerable debate over whether bigger is better. As operators jockey for a position in Japan, investment pledges for a coveted license are running at about $10 billion, while around the region, from Saipan, to Singapore, to Vietnam, the mega resort seems to be the preferred operating model. We ask why and more importantly, will this trend continue as the market develops.

In another of our featured items, we consider the merits of the various jurisdictions. Does Macau risk losing any of its clients to Japan, or will the Philippines take a greater slice of Singapore’s pie?

The article considers how much more expansion the Asian market can support, while looking at which locations are most at risk from cannibalization.

As new resorts are built out, operators are also faced with the question as to what will appeal to clients in terms of non-gaming amenities. As they

Asia Gaming Briefings | August 2018

try to reach a broader and perhaps younger audience, what is going to bring in the crowds? In Las Vegas, it has been the club scene that has seen stellar success and there are signs now that operators in Asia are beginning to import that model. Marina Bay Sands is bringing in the world-renowned Marquee Club from next year and Melco Resorts & Entertainment hosts the Pacha brand.

Our piece looks at the potential for nightclubs in the region and what ingredients need to be thrown into the mix to create a must-see destination.

Lastly, no amount of investment in glitzy facilities is worth the money if you can’t keep the customers coming back for more. And, at the end of the day, one of the key differentiating factors is likely to be customer service. Marketing expert Sudhir Kale examines how operators need to drive employee engagement to ensure they are reaching their full potential when it comes to welcoming clients. He argues that simply raising wages, or offering more perks, is not the answer to ensuring your staff buys wholeheartedly into the project.

FOCUS 23

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Asia Gaming Briefings | August 2018

FOCUS 24

Will nightclubs make Asia’s non-gaming revenue dance?

Marina Bay Sands is bringing one of the world’s top nightclub brands to Singapore next year, becoming the latest of the region’s major IRs to add clubbing to the entertainment mix in the hope of duplicating the success of Las Vegas’ vibrant night scene.

T

he property, which is owned by Las Vegas Sands, is teaming with the Tao Group to open Asia’s first Marquee Club. The massive venue will span over 3 floors with 70 ft. high ceilings and an 8-armed Ferris Wheel within its premises.

It follows Melco Resorts & Entertainment in betting on these type of destination venues. The Macau-based operator opened Club Cubic in its City of Dreams resort in 2011 and brought over the world-renowned Pacha Club to its Studio City resort in 2016, while Galaxy Entertainment reopened a revamped China Rouge also in that year. Melco also incorporated the Pangaea Ultra Lounge, by Michael Ault, into its City of Dreams Manila.

Nightclubs have become an increasingly important revenue driver in Las Vegas over the past decade, since the opening of Wynn Resorts’ XS in the Encore Las Vegas

Asia Gaming Briefings | August 2018

in 2008. They have helped change the demographic of visitors to the U.S. gambling hub, with 38 percent of visitation coming from millennials, according to the Las Vegas Convention and Visitors Authority.

Seven of the top 10 highest grossing nightclubs in the country are along the Las Vegas Strip, according to Nightclub and Bar Media Group. XS nightclub at the Encore brought in more than $100 million in 2014 and so did Hakkasan with it’s operation at MGM Grand. The Marquee at the Cosmopolitan is packing them in with a yearly revenue of $80 million.

A spokesperson for Marina Bay Sands said the time may now be right for these clubs in Asia.

“There has been a lot of growth in the entertainment scene in Asia with the entry of prominent music festival brands such as Ultra, of which we have been a key

FOCUS 25

sponsor of since its debut in 2015,” she said.

“Asians are also well travelled and discerning, having experienced a high level of hospitality and entertainment overseas in cities such as London and New York. Partnering with the TAO Group on bringing in world-renowned brands like Marquee to Marina Bay Sands at this stage makes a lot of sense, from a business and programming perspective.”

However, whether a nightclub is a wise investment for an IR is a complicated question.

John Raczka is a senior entertainment executive who introduced Pacha and Pangaea to Asia while overseeing entertainment development for Melco’s Studio City Macau and City of Dreams Manila. He says there are many variables needed to line up for a club to be successful. “ No matter how cool the design of a club might be or its scale, it’s like making a motion picture—you will not know for sure how well it will perform, or for how long, until you open it because of that intangible component,” he said.

Still, he points out that location is critical.

Clubbers like to have convenient options so that if they do not see a crowd they like, or the genre of music playing at one club, they can quickly get to another venue for a fresh crowd to assess.

Even in big cities, critical mass of social real estate gives a competitive advantage. For

example, in Hollywood, you have Dream Hotel with its roof pool bar flanked by Tao on one side and Beauty & Essex on the other—it’s a quad social play providing multiple trendy environments within which to lodge, dine, drink and dance. An IR can mimic this model under one roof through diversity of design, smart placement and functionality, he says.

Raczka points out that in the absence of neighbors, sheer scale can make a difference in pulling in the crowds to a standalone venue.

One-stop shops Marquee’s sister club, Tao Chicago will open in September with a $25 million price tab for fit out, including a sunken dining room, bar, lounge and upper-level club adorned by a 16-ft. tall statue of Quan Yin, Buddhist deity of compassion, and a 10 ft. Japanese bell.

“These mega venues are not targeting club jumpers, but are rather offering one-stop destinations for an entire evening so elaborate, so good in food quality and so different in interior design that you will not want to leave,” he said.

MBS is confident its new club will have these winning characteristics.

“We believe Marquee Singapore will be a game changer in the nightlife scene in Asia with its reputation and dynamic setting in Marina

Bay Sands,” she said. “Set to be one of the largest clubs in Singapore, Marquee will house the most technologically advanced lighting and sound system in the region.”

In a city which charges locals to gamble through a casino entry fee, adding a destination with features that will appeal to the local market is also key, supporting revenues during tourism downturns.

There are few available figures as to how well existing clubs are performing for their owners in Asia. In Macau, non-gaming revenue is rising, but at 12 percent of the total it’s still a far cry from the 65 percent level generated

by Las Vegas. Analysts at Morgan Stanley said in a report earlier this year that they doubted Macau would ever generate this level of nongaming revenue.

Macau’s Club Cubic, owned by the Hong Kong-listed Luk Hing Entertainment, is one of the few to provide a detailed business review of its actual club operations. Last year it tweaked its strategy to include a higher number of small-scale events, which helped drive visitation to 157,000 from 134,000 the prior year. However, these smaller events attracted less sponsorship and had a negative impact on consumer spending which dropped

by HIK$100 to HK$700 ($89.2) in the year.

So will Asia IR’s experience Las Vegas caliber success in nightclub revenues?

Entertainment fusion Raczka says in some select markets, like Singapore, where you have a rich City State with a high density of wealthy millennials and socially active professionals? Absolutely.

“Are you going to sell 5-figure USD bottle service tables in Manila weekly? No.” However, you do have clubs in Las Vegas who have had the highest-grossing independent restaurant in the US as part of their club footprint.

“So fusing a well-designed club with a strong restaurant offering vs. a pure club proposition can potentially be a stronger business model depending on the market and execution,” he says.

This type of entertainment mix is also being deployed by MBS. The operator worked with the Tao Group to launch the LAVO Italian Restaurant and Rooftop Bar in January this year and plans more offerings.

“We will be opening new F&B concepts such as famed New York milkshake and burger joint Black Tap in Q3 2018, and Marquee in 2019.

Marquee Singapore will be part of a new multiconcept dining and entertainment destination.”

Asia Gaming Briefings | August 2018

FOCUS 26

Asia’s emerging casino markets question whether size matters When the 10.5 million-square-foot Venetian Macao opened its doors in 2007, it upped the ante on the scale of casino developments and helped inspire Singapore, Korea and others to undertake major IR projects.

M

ore than a decade on, and with Japan poised to follow a similar path, Asia’s emerging casino markets are left wondering if the IR is now the only game in town, or if a multi-license, boutique approach to development is still viable. “[Emerging markets] are generally understanding that the size of investment which they can attract is not just a function of the market opportunity, but also of the relative uniqueness of a casino license,” David Green, former gaming practice director with PricewaterhouseCoopers in Macau and founder of leading gaming consultancy Newpage Consulting, told AGB. The IR approach to casino regulation has generally proven to be the most palatable to regulators, too. “Most new Asian markets are conscious of the downside associated with disordered gaming,

Asia Gaming Briefings | August 2018

the potential for the industry to be infiltrated by organized crime... and the political will required to regulate an industry comprising many properties and licensees,” said Green.

According to Steve Karoul, president and CEO of boutique casino consulting company Euro-Asia Consulting, LLC, IRs have been the preferred choice for a number of reasons, not least political ones.

“Casino gaming is a very sensitive subject and therefore it is much easier for government legislators who normally depend upon public opinion and votes for re-election to choose to promote a less contentious concept called the Integrated Resort,” he told AGB. “It has a more neutral and more socially acceptable tone than casino gaming, which comes with all of the negative connotations associated with gambling, such as problem gaming, under-age gaming, increased

FOCUS 27

crime, money laundering, etc. In addition, IR’s will serve a broader segment of the overall market than a facility only focused on casino gaming.”

Little wonder But while these factors have helped push newly-regulating jurisdictions towards the IR approach, it is not the only option.

Richard P Loughlin, director of operations at the Asia Pacific Gaming Management & Consultancy acknowledges that while IRs are a “much easier sell from the legislators’ perspective”, there is still room for smaller, boutique casinos to thrive.

He pointed to the more than 40 casinos in Macau, but also to the Cambodian market which combines a monopoly IR in the capital Phnom Penh with tens of licenses issued elsewhere in the country.

The coastal city of Sihanoukville, for instance, has around 30 casinos in operation, with tourist arrivals increasing rapidly as a result. During 2017, the city recorded 470,000 foreign visits, of which 120,000 were from China - double the 2016 figure.

“I think Cambodia is a fine example of how the country is benefiting from the smaller scale properties,” Loughlin told

AGB. “For emerging markets like this it is unlikely to see top tier operators making the investment that comes with an IR, which in turn leaves plenty of opportunity for smaller properties to make headway.”

Karoul agrees that in certain circumstances, a larger number of smaller boutique casinos “may make more sense than a larger IR,” especially in jurisdictions lacking the density of population and ease of access required for an IR to succeed.

But there are problems associated with the multi-license approach as well, particularly in terms of enforcing bans on locals, collecting taxes, and maintaining the value of a casino license.

These factors are likely considerations within those markets that appear to be turning their back on the boutique approach altogether. Vietnam, which operates approximately ten small casinos dotted around the country in which only foreign nationals may gamble, is now placing its chips on a handful of large IRs, including Suncity’s $4 billion Hoiana project.

Healthy competition?

Perhaps the only factor likely to turn the tide against the development of larger IRs

is the risk of cannibalization. If the market were to become saturated, particularly when Japan’s IRs come online in the 2020s, there may no longer be an appetite to build large developments in smaller emerging markets.

Green believes such a reality is still some way off. “I don’t see any indications that saturation of the east Asian market is a risk; certainly pay-back may be a bit slower than was the case with early entrants in Macau post-2002, but there is still enough optimism and demographic support for continuing substantial investment in IRs,” he said.

Indeed, Loughlin noted that fear of cannibalization is nothing new; there were similar worries Cotai would kill off the Macau peninsula some 15 years ago, and more recently concerns Singapore would take a significant chunk of revenues away from Macau, but neither came to pass.

Karoul, however, sounded a note of caution over the loyalty of a limited number of VIP players in the region which is not growing at the same rate as new developments.

He said operators, regardless of the size of their casino, will need to market more intelligently and lean on big data to build sustainable growth.

“I personally do not think that bigger is necessarily better,” he said.

Asia Gaming Briefings | August 2018

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Terms of engagement?

Sudhir Kale*

With competition for customers in jurisdictions such as Macau intensifying, casino operators are realizing the vital role played by their employees in customer retention, but the strategies being used to foster employee engagement, such as higher salaries, are largely ineffective.

T

o understand and foster employee engagement, some casino operators in the region carry out regular surveys of employees, and some organizations are also carrying out short “pulse” research. As well intentioned as the Voice of Employee initiatives are, they often yield erroneous findings that provide little value in exchange for all the expense and time that management devotes to understanding engagement.

The reason for poor returns can be attributed to four causes: (1) Lack of understanding of the employee engagement concept; (2) Poor operationalization of employee engagement in surveys; and (3) Low reliability and validity of the research instruments; and (4) Lack of benchmarking.

Very often surveys are carried out with management having less than a solid understanding of what employee engagement actually means. The meaning of employee engagement is ambiguous among both academic researchers and among practitioners who use it in conversations with clients. Several organizations equate employee engagement with employee satisfaction or with an employee’s tenure with the organization. While employee satisfaction and intent to stay with an organization are often the results of engagement, they do not equate with engagement.

The academic research often views employee

Asia Gaming Briefings | August 2018

engagement as a positive, fulfilling, work-related state of mind that is characterized by vigor, dedication, and absorption. The Gallup Organization defines engaged employees as “those who are involved in, enthusiastic about, and committed to their work and workplace.” There exists a fair degree of consensus among academic researchers as well as practitioners that engaged employees exercise more “discretionary effort” in performing their jobs. Using variants of each of these definitions, CustomInsight LLC provides the following composite definition, “Employee engagement is the extent to which employees feel passionate about their jobs, are committed to the organization, and put discretionary effort into their work.”

As practitioners within the gaming industry, before you invest any time in measuring customer engagement, ask yourself specifically whether you want to invest in assessing employees’ vigor, dedication, commitment, and discretionary effort, and if so, what do you intend to accomplish once the measurement has been undertaken.

Poor Operationalization

Bad choice of questions is the second problem associated with employee engagement surveys. Very

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often, questions within the survey assess employee satisfaction or happiness, not engagement. The link between employee happiness and productivity is not as strong and nowhere as ubiquitous as that between engagement and productivity or profitability.

Also, many questions assess what I call the antecedents of engagement, not engagement itself. For example, the Gallup Organization uses “having a friend at work” as a precursor of engagement. Do all employees feel more engaged if they have a friend at work? More importantly, what can an organization do to ensure that every employee has a friend at work? Precious little.

It is perfectly okay to measure the antecedents of engagement so long as you are extremely confident of the strong causal relationship between the antecedents and engagement, and where the variables leading to engagement are within the control of the organization. Very often, employee traits and personality contributes as much to engagement as organizational climate and culture. In such situations, judicious recruitment to ensure cultural fit between the organization and the employee will yield more fecund results than carrying out elaborate engagement assessments.

Reliability and Validity The third major issue with regard to employee engagement surveys concerns the reliability and validity of the survey instrument.

Reliability, simply defined, is the degree to which the result of a measurement can be depended

on to be accurate. Imagine your doctor making decisions regarding diagnosis of your sickness based on defective or flawed thermometers and glucometers. Yet, management of many gaming companies typically makes strategic decisions regarding employees based on unreliable survey instruments. Even worse, external consultants rarely, if ever, provide reliability figures on the scales and indexes they develop to assess employee engagement.

While reliability assesses the dependability of a survey questionnaire to provide consistent results, validity is an index of whether or not a particular instrument measures what it claims to measure. Just search the Internet for “employee engagement surveys” and you will find scores of surveys, all very different in content and wording, yet supposedly measuring the same concept. Surely, not all these surveys are valid instruments with which to measure employee engagement!!!

Going back to the physician example, while reliability tells you about the dependability of thermometer readings, validity concerns itself with whether a glucose tolerance test or a colonoscopy is an advisable diagnostic test for ascertaining diabetes. Unfortunately, management never quizzes outside consultants or in-house research staff on the reliability and validity of the research that is carried out. Decisions with far reaching consequences are routinely made based of unreliable and invalid research.

Benchmarking The final major drawback of many employee engagement studies is absence of benchmarking or using wrong yardsticks for benchmarking. Imagine how useful just the number associated with your IQ would be if you had no idea about how intelligence is distributed in the general population or, more importantly among your cohorts. Very often gaming companies fail to benchmark their engagement scores with other comparable gaming companies to get a sound understanding of their performance on the engagement dimension. Sometimes, industry consultants provide a so-called industry average (heavily biased in favor of hotel properties) which provides little insight for regional casinos that may be too small or based on reservations. It makes more sense, for example, for Foxwoods to compare themselves with Mohegan Sun, than with the “industry average” for Las Vegas or Atlantic City.

Proper benchmarking allows realistic comparisons of performance and provides actionable insights for gaining competitive advantage through employee engagement.

A survey without benchmarking tells you nothing about your relative performance in comparison with other similar enterprises which face similar challenges.

Recommendations Employee engagement provides valuable information on the employees’ commitment to your organization and the effort your employees put into their jobs. Engagement has been shown to relate positively to productivity, customer satisfaction, organizational profitability, and shareholder return. Engaged employees Say (good things about the organization to fellow employees and customers), Stay (with the organization longer compared to employees that are less engaged), and Strive (for better performance and effort). Investing in assessing and furthering employee engagement definitely yields handsome returns.

However, most organizations do a less than effective job of measuring and benchmarking employee engagement. There is scant regard for identifying the right antecedents of engagement, and the reliability and validity of the survey instrument are almost always in question. Decisions made on the basis of flawed employee engagement surveys can be disastrous both for the employees and for the organization. To pre-empt disasters from happening, organizations need to be aware of what exactly they are trying to measure and change, and how reliable and valid the survey and pulse instruments are. Correctly designed and properly administered and benchmarked surveys of employee engagement can alert management to workforce health and productivity issues that would otherwise lie dormant and create a serious competitive disadvantage. *Sudhir H. Kalé, Ph.D., is Founder and CEO of GamePlan Consultants, a company that provides management and analytics consulting to casinos and clubs. He is also Honorary Professor of Marketing at Bond University.

Sudhir has decades of experience in designing surveys and carrying out sophisticated customer and employee research across many different cultures and geographies. He has consulted with leading clubs and casino operators on five continents. You can reach him at skale@ gameplanconsultants.com.

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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.

O

f course, new regulation and developments do not occur in isolation. Existing markets - not least Macau - will be watching 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

Asia Gaming Briefings | August 2018

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.

FOCUS 31

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.

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SOUTH ASIA

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NEPAL

Nepal’s sticky bureaucracy hinders investment growth Nepal is facing another overhaul of its casino legislation, just five years after new rules were put into place, though some consultants say if the country really wants to attract more foreign investment it needs to cut regulatory red tape.

Nepal Finance Minister, Yubaraj Khatiwada

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SOUTH ASIA

I

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n June, the Ministry of Tourism requested approval from the Council of Ministers for a new casino act which was said to finally put in place measures to properly regulate Nepal’s casino industry.

However, the idea was dropped in July to the dismay of many, with the ministry deciding to instead attach casino-related laws in its Tourism Act. “We will bring the Casino Act, but not separately,” said Tourism Secretary Krishna Prasad Devkota. “We are currently discussing the issue. As per the plan, the casino law will come out as an annex to the Tourism Act that the government is currently drafting.”

Ministry officials said they were clueless about the cancellation of the plan.

“As the ministry wants to integrate the casino law into the new Tourism Act, the plan to enact a separate piece of legislation may have been cancelled,” they said.

The new communist government, formed in February after winning elections, is expected to deliver on its electoral promise to seek economic growth and prosperity in the economically struggling country. But raising funds for big-ticket infrastructure projects and attracting foreign investment mean the government will need to also follow through on pledges for greater efficiency.

Unveiling a $12.18 billion annual budget on May 29, the country’s Finance Minister, Yubaraj Khatiwada, promised to ease registration and other processes for foreign investors in Nepal.

“All procedures from business registration to repeal will be made predictable, simple and transparent. It will be based on information technology,” he told the parliament. “Nepal will be developed as an international investment

destination. We will encourage foreign investment in Nepal so that it complements our national capital formation.”

He said the government will facilitate procedures to register companies by setting up “one-stop services with specific timelines.”

Experience to date for foreign investors entering the casino sector has shown the path is far from smooth. One issue in particular has

“

Nepal will be developed as an international investment destination. We will encourage foreign investment in Nepal so that it complements our national capital formation,

”

been the problem of visas for skilled employees, with the government keen to ensure employment opportunities for locals.

Australia-listed Silver Heritage Group, which opened its Tiger Palace Resort in Bhairahawa earlier this year, faced problems soon after its launch. The company terminated its local partner Rajendra Bajgain after he accused it of illegally hiring foreign workers. A few

GGR: THE MILLIONAIRE’S CLUB US$ 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000

days later, officials from the Inland Revenue Department visited the resort on reports it was selling alcohol without a license.

Mike Bolsover, CEO of Silver Heritage Group, was unperturbed by the incidents.

He told AGB that they had already acquired one excise license to sell alcohol, but secured another after the officials’ insistence.

“The new government under Mr. K.P. Sharma Oli has pledged to improve and we are a great catalyst for FDI and Nepal’s tourism sector,” said Bolsover whose company plans to open a second integrated resort in southeast Nepal town of Dhulabari to target customers across the border in Indian state of West Bengal.

“Developing and frontier markets have many similar challenges. There’s always a need for specialized labor, mostly from overseas.

There’s always a plan to transfer skills to the host country,” Bolsover said, explaining that Nepal wasn’t alone in presenting bureaucratic hurdles.

Silver Heritage Group is not the only foreign company stymied by Nepal’s obdurate bureaucracy.

In January, Dangote Cement, a Nigeriaheadquartered cement manufacturer, was denied a license to operate in Nepal, despite another government agency, the Investment Board Nepal’s approval.

Officials of Nepal’s Department of Mining and Geology said Dangote was disqualified due to a lack of skilled workers, but industry insiders said local manufacturers feared that they will lose their monopoly over the sector after the African behemoth’s entry.

Other multinational companies such as J Walter Thompson, an advertising company, and DHL, a courier service, have also faced problems.

Silver Heritage settles dispute with Nepali partner Silver Heritage has reached a settlement with its Nepali partner, who has sold his stake in a unit of the company to a new investor. The company and businessman Rajendra Bajgain have agreed that their vision and objective in developing Nepal’s first IR has now been met and the partnership between the two has reached its natural conclusion. Bajgain and his brother, Nabaraj Bajgain, have sold their stake in the unit that runs Silver Heritage’s Nepal operations to Tiger Kathmandu Investment, a hotel and general construction company. Tiger now holds 10 percent of SHL Management Services and Silver Heritage the remaining 90 percent.

India and Nepal to push tourism ties

400,000 200,000 1Q16 2Q16 3Q16 4Q16

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 (to 21 May)

(Source: Silver Heritage Group)

India and Nepal held the second meeting of a joint working group on tourism cooperation in July, agreeing to promote Buddhist and Ramayana circuits and adventure tourism. The meeting also decided to set up an industry-led India Nepal Tourism Forum. Most of Nepal’s casinos are eyeing the potential of tapping the Indian market.

Asia Gaming Briefings | August 2018

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INDOCHINA

34

CAMBODIA

Regulation to stimulate growth Cambodia is expected to introduce its long-awaited casino regulation in September, which may attract further investment to one of Asia’s most vibrant markets.

Asia Gaming Briefings | August 2018

T

he government is planning to hold a regulatory seminar, bringing together officials and industry executives and is expected to introduce the updated rules.

Under the new legislation, casinos will likely face a system of taxation based on gross gaming revenue and unified reporting. The rules will also stipulate new minimum capital levels for properties, though there is expected to be a period of grace to allow many of the smaller casinos to comply.

Rhys Jones, managing director of the Ha Tien Vegas casino on the Vietnam border, says the rules should provide more transparency and improve confidence for investors.

Over the past year, Cambodia has seen an explosion in its casino industry, with about 184 licenses having now been issued, Jones said in a presentation to the World Gaming Executive Summit in Barcelona. About 100 of those have been issued in the past year alone, he added.

Rising tourism numbers, especially from China, have been a key driver but also a flood of foreign direct investment under Beijing’s “One belt, One road” initiative.

Tourist boom In 2017, international visitation grew by 12 percent to 5.6 million visitors. Arrivals from China surged 46 percent to 1.2 million visitors, overtaking Vietnam as the leading source of tourism to Cambodia and were up a further 79 percent in the first four months of 2018.

Cambodian nationals are banned from gambling, therefore the majority of the casinos are in border areas to take advantage of foot traffic from neighbouring Thailand and Vietnam, where locals are also forbidden from gaming at home. The largest concentration is along the border with Vietnam, which is home to about 86 casinos, with a further 55 along the Thai border, according to Jones.

However, the area that has attracted the most interest over the past year has been the coastal town of Sihanoukville, which has seen a flood of foreign direct investment, driving a huge construction boom. It now hosts 42 casinos, including plans for one large-scale IR. The investment has been driven by China’s “one belt, one road” project with Chinese investments in about $4.2 billion of infrastructure projects on the Southern Coast. It’s also home to the Kingdom’s biggest Special Economic Zone, which is now the base for more than 100 China-owned factories.

Jones says there are now 100,000 Chinese nationals living in the area, with that figure

INDOCHINA 35

expected to treble over the next few years.

Although the Cambodian government has close ties with China, the influx of so many Chinese has created social tension, pushing up prices for locals and raising questions as to whether the area can support such runaway construction.

In a report last month, Reuters reported that the Dara Sakor Seashore Resort mega project appears to have stalled. The agency says the IR was touted by its Chinese developer as a citysized resort for “extravagant feasting and revelry”.

Mega project stalls Work on the project began in 2008 after Cambodia leased 45,000 hectares of a national park to China’s Tianjin Union Development Group (UDG) for a period of 99 years. It was adopted as a Belt and Road project around 2017, and was described then as “the biggest project of the Belt and Road initiative so far.” Its status is now unclear.

However, another key draw of the Cambodian gaming market is the government’s open stance to online gaming, which is legal out of licensed land-based casinos.

According to Jones, there are currently about 20 casinos offering live dealer games from the actual casino floor, including Ha Tien Vegas.

Many other venues are also offering studio facilities and are a key revenue driver for the border properties, which are otherwise reliant on foot traffic. The casinos bordering Thailand were hit particularly hard last year after a period of mourning for King Bhumibol Adulyadej dented consumer sentiment and spending.

The government doesn’t release figures for Cambodian GGR and Hong Kong-listed NagaCorp, the operator of NagaWorld and Australia-listed Donaco International, which operates Star Vegas, are the only ones to provide detailed figures.

Naga is by far the largest IR in the country and has a monopoly for a 200km radius of the capital Phnom Penh. The resort opened the second phase of its development, Naga 2, late last year, which won praise from analysts for its amenities and quality of service.

Stellar profit As such Naga is seeing a greater share of the VIP market and is one of the most profitable casinos in Asia. In Q2, it reported an 85 percent gain in interim gross gaming revenue, driven by VIP visitation to its new Naga 2 property and strong growth in the mass market.

GGR hit $713.9 million, while EBITDA was up 29 percent to $232.7 million. VIP rollings increased by 117 percent to $16.8 billion, while mass market table buy-ins increased by 53 percent to $573.8 million.

It added Naga 2 is attracting a different clientele base and it has seen very little cannibalization from the original resort.

Its VIP business has been helped by an incentive accord with Macau’s leading junket operator, Suncity group, which set up a fixedbased business operation with fully fledged office facilities from March 1. The company said it has also seen an increase in the number of Southeast Asian players, notably from Thailand as well as a large number of Malaysians.

Star Vegas, which is based in Poipet, was affected by the death of the Thai king, but also by a dispute with the Thai vendors of the property to Donaco, which were operating an illegal operation nearby, despite non-compete clauses.

Naga CEO boosts stake in company NagaCorp said its CEO and Executive Director Tan Sri Chen Lip Keong has boosted his stake in the operator of Cambodia’s largest casino. On June 19th, he made on-market purchases on The Stock Exchange of Hong Kong Limited of an aggregate of 5.4 million shares at an average price of approximately HK$7.3342 per share for a total consideration of approximately HK$39.6 million ($5 million).

He now owns 65.84 percent of the issued share capital of the company.

Macau Legend eyes Cambodia expansion Macau-based Macau Legend Development plans to enter Cambodia and wants to expand its property in Laos. Speaking at the company’s annual general meeting, Chairman David Chow Kam Fai said it is in land negotiations for a property in Siem Reap in Cambodia and will soon unveil further details. However, local media in Cambodia poured cold water on the plans, saying the government will not permit gambling in the area. Siem Reap is home to the Angkor Wat temple complex, the country’s most popular tourist attraction.

Asia Gaming Briefings | August 2018

INDOCHINA 36

VIETNAM

Anti-China protests not denting IR prospects A backlash against a perceived influx of Chinese investment has sparked protests in Vietnam this year, though experts say the outlook remains positive and further investors are hovering.

M

ost recently the protests have with vested interests.”

Lee said the government is likely to centered on plans for three economic zones in Vietnam, revert back to a prior version of the proposal, one in the center, one in Van which set the lease limits at between 50 to Don in the far north and the other at Phu 70 years, but which are renewable.

Still, the unrest shows the power of social Quoc in the south. Both Van Dong and Phu Quoc are home to large integrated resorts media to whip up anti-Chinese sentiment in under development, which will be part of a Vietnam, where about half of the 90 million pilot scheme to allow locals to play in casinos. population is estimated to use sites, such At least eight people have been arrested as Facebook.

In 2014, Beijing’s decision to deploy an in violent protests, which were sparked in part by plans to grant foreign investors oil rig in an area of the South China Sea 99-year leases on the land. Locals fear the claimed by Vietnam sparked months of deadly protests and at zones, which also grant least 21 deaths as mobs generous tax privileges, across the country will be dominated by stor me d fac tor ies Chinese investors.

Gaming and China-owned In Vietnam, the and hospitality businesses.

National Assembly companies will The resentment is has now postponed deep-seated going back a vote on the SEZ need to continue to 1,000 years to when proposals until October monitor the politics Vietnam was a Chinese to give time for more colony and some see consideration. of the region as it China’s Belt and Road However, Ben Lee, may have an impact initiative, financing managing partner of consultancy firm on outbound tourism infrastructure, ports and business along the iGamiX Management from China. old Silk Road between and Consulting, says Asia and Europe as in reality when it a renewed push for comes to gaming, influence. investment in the “As China continues to expand its economic zones is dominated by local interests.

The Sun Group has the only license to and political influence in Southeast Asia, it operate in the Van Don zone, while Vin has raised tensions in the region for various Capital is the license holder for the Phu reasons,” said Andrew Klebanow, a partner Quoc property, which is expected to open at Global Market Advisors. “Gaming and shortly. Hong Kong-listed Sun City Group hospitality companies will need to continue has a management contract only for the to monitor the politics of the region as it may have an impact on outbound tourism Van Don property.

“There’s no Chinese money in Van Don,” from China.”

Given locals are either limited or banned he said. “The protests are being stirred up through social media by former politicians from gambling in both Vietnam and Cambodia,

“

”

Asia Gaming Briefings | August 2018

it’s that outbound China tourism that is seen as being a driving force for the region’s IRs. China is expected to be the biggest source of visitors in the world by 2020.

Still, the unrest has not dampened enthusiasm for the prospects in the market.

“Vietnam has a real chance to be a hot market, given its proximity to China,” Lee said. “It has a strange familiarity with China, but it’s an Asian country with a French influence which makes it exotic,” he said.

It’s as yet unclear what the impact will

INDOCHINA 37

be of the latest unrest. However, recent tourism figures show numbers from China are surging. Arrivals in the first five months of the year rose 27 percent, with those from China up 37 percent, according to government figures.

For some of the IR projects being developed, the sale of condo units to both local and foreign investors was part of the financing plans. According to CBRE foreign investment in this area was forecast to be strong this year.

“Given that many of the IR projects in Vietnam have 20 years to invest the requisite capital amounts we’re not overly concerned about the real estate aspects of these projects,” said Grant Govertsen, principal analyst and managing director of Union Gaming in Macau. “However, just because some of the project costs will be brought down by real estate proceeds doesn’t in and of itself spell success for the IRs. We are most upbeat about the projects in central Vietnam (from Hoi An to Lang Co) given the ease of access and that gaming is already successful there (i.e. Crowne Plaza) despite the fact that the building itself pales in comparison to virtually every other casino in the region.”

Tourism arrivals Tourism arrivals to end June

ARISTO MARCH QUARTER GGR +12.7%

Korea arrivals

+16%

China arrivals

+13.6%

Hong Kong

+12.9%

Rolling chip volume Non-gaming revenue Aristo International March quarter casino visitation

+1% +10% +2%

Government passes new sports betting law

Interblock adds ETG seats in Ho Chi Minh City

The Vietnamese government in June passed a new law that allows locals to bet on government -approved sports events. The Law on Sports and Physical Training is said to be based on the 2017 decree that allows locals to bet on select international football games and horse and greyhound races, which came into effect March 31, 2017. While football betting has been legalized since March 2017, no actual betting has taken place yet. There are currently no betting companies authorized to provide betting services in the country, partly because of a lack of agreement between relevant ministries on how to organize the bidding process.

Interblock has placed its Diamond Virtual Baccarat with seven seats and Diamond Automated Roulette with six seats at a hotel club in Ho Chi Minh City. The addition brings Interblock’s total seat count at New World Hotel to more than 60 seats. The stadium is composed of two roulette generators, one dice generator, and one virtual baccarat with 40 seats. “We only select and welcome Interblock ETGs at New World gaming club like all thirteen gaming clubs do in Ho Chi Minh City,” said Jeffy Hui, general manager of New World Hotel.

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AUSTRALASIA

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AUSTRALIA

Queensland woos IR investors Queensland is set to kick start its efforts to establish new IRs in the state four years after a previous round of bidding ended with little progress.

Asia Gaming Briefings | August 2018

AUSTRALASIA

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he Queensland state government is expected that operations would be in a form of set to invite investors to register their partnership resulting in one integrated resort interest in the development of a new and ultimately one license, the reports indicate. large-scale integrated resort with The government appears keen to replicate a casino license on Australia’s popular Gold the tender process that has seen the go ahead Coast, media reports say. The government is also of the AU$3.6 billion Queen’s Wharf Brisbane already in talks with investors to develop another integrated resort with the casino, now under integrated resort in the coastal city of Cairns. construction. There the incumbent operator The government would issue two new casino Star Entertainment Group formed a joint licenses for the projects. It would also consider venture with Hong Kong-based Chow Tai Fook one operator for both developments and the Enterprises and Far East Consortium to create success of Cairns might be dependent on the the Destination Brisbane Consortium to develop Gold Coast integrated resort going forward, 26 hectares over land and water. the reports say.

A competitive tender process would likely However, this time around the investment attract big brands, ensure transparency and the proposals are expected to be far more modest highest standards of probity as well as spell out than the more than $8 billion mega projects commitments to generate local employment that were mooted in 2014. Those proposals and use local suppliers and companies during were criticized as being too large for the region the construction process. to sustain and ultimately failed.

The government originally put three licenses Investments in the up for tender, but only new developments the Star development are likely to be A$3-5 has moved ahead. The billion in Cairns and other projects would The proposed AU$1.5 billion in the have been significantly project has been Gold Coast. larger than any current There are already resort developments in rejected by the significant expressions thestateandwouldhave Queensland State of interest in the Cairns relied heavily on being resort with around 10 able to bring in tourist Government, investors registering an dollars, particularly however, ASF still interest, including some from Asia, amidst weak believes in the from the United States. domestic spending.

Queensland PreThe Aquis Group, benefits it would bring backed mier Annastacia Paby Hong Kong to the community laszczuk recently travinvestor Tony Fung, elled to Las Vegas and had planned an $8.15 and region.

Macau and reportedly billion project on 343 met investors. hectares of land 13 The new IR develkm north of Cairns opments in the Gold Coast and Cairns would but chose not to proceed with the casino be expected to create jobs and reinvigorate key component. It is instead building a $440 locations across the state. The Queensland million hotel in Surfers Paradise. government is reportedly working with the A separate project by the China-backed ASF Gold Coast city council to identify suitable Group also ran into trouble amidst concerted blocks of land there. opposition from locals and environmental Identification and purchase by the state groups. The Australia-listed group scaled back of a suitable block of land removes some of its $7 billion proposal for a Gold Coast resort the risks to the bidders as they do not have to $3 billion but the plan was rejected by the to first purchase the land without necessarily state government. securing the license.

“The proposed project has been rejected by The government has already revealed the the Queensland State Government, however, ASF Cairns City Port precinct is its preferred site for still believes in the benefits it would bring to the an integrated resort which includes four hectares community and region,” it said earlier this year. of waterfront already owned by the state. The The government is seeking to boost tourism development would likely see Cairns issued numbers and create more local jobs. The Gold with its second casino license alongside current Coast is already highly popular with Chinese license holder the Reef Hotel Casino, but it is tourists, who now make up a quarter of all arrivals.

“

”

GROSS GAMING REVENUE Total gambling expenditure 2017 $23.65b

+3.9%

Casinos $5.19b

+0.4%

Gaming machines $12.07b

+4.2%

Sports betting $920.6m Racing $2.94b

+13% +4.1%

Tourism arrivals 2017 visitor numbers A$8.1m

+6%

Expenditure $41.3b

+6%

China arrivals 1.3m

+12%

Overall betting declines, mobile gains Australians are increasingly using mobile devices to place bets, however, there are fewer punters taking bets overall compared to six years ago, said a report from research firm Roy Morgan. According to the report, in the twelve months ended March 2018, some 3.4 million Australians placed a bet on a sporting event, horse racing, harness, or greyhound racing, down from 3.7 million Australians in 2012.

When it came to online betting (which includes mobile betting), the results saw 34.1 percent of Australians using the internet to place bets, double that of 15.7 percent from six years ago.

Synthetic lottery ban to take effect next year The Australian government has dealt a massive blow to lottery betting providers, after parliament voted to outlaw so-called synthetic lotteries. The landmark law will come into effect in 2019, which will prohibit sites that accept bets on lottery outcomes without requiring punters to buy a ticket in the draw. The decision is a win for Australia’s traditional lottery providers, including Tabcorp-owned Tatts Group lotteries, and a nail in the coffin for lottery betting providers such as Gibraltar-based Lottoland.

Asia Gaming Briefings | August 2018

AUSTRALASIA 40

CNMI

IPI pulls out stops for hotel completion Imperial Pacific International is doubling down on its efforts to speed the construction of its long-delayed hotel, which will be a key factor in improving group cash flow.

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he company, which is building an IR on the island of Saipan, is considering adding night shifts for its construction workers to get the project finished.

The hotel portion of the casino, which opened last year, will fail to meet an August deadline and the company has now reportedly asked for an extension until December.

Eric Poon, vice president for construction said in early July a possible second work shift is in discussions with its contractor Pacific Rim Contractors that will start after 7pm until midnight. “The exact date we still have to iron out with Pacific Rim because right now, we have to put the safety features needed especially at night before we put a date for the second (work) shift,” he said.

The project has been plagued by problems, mostly related to labour. It has faced a shortage of available workers on the island and its initial construction company ran into hot water for using illegal Chinese employees who had come in on tourist visas.

Poon said the lack of manpower was one of the main reasons for the resort’s delay. However, he said that over the last few months the situation has improved.

“For the past few months, IPI has significantly increased manpower, especially from IPI’s side as we have H2-B workers.

It helped us a lot to put our schedule even further… Moving along I can say we are back to normal like the way we want it.” he said.

Construction now is focused on the resort hotel, the hotel tower, which includes the building facade and roof and external works.

The first phase of construction calls for a minimum of a 329-room four or five star luxury hotel, 14,140 square meters of gaming area, with 193 tables and 365 slot machines.

While it waits for completion of the hotel, it’s

Asia Gaming Briefings | August 2018

putting up guests in 3 villas and 5 yachts, as well as in rooms in other local hotels.

The request for the construction extension will be the sixth amendment to the group’s casino license agreement and the patience of some lawmakers on the island is wearing thin.

Commonwealth Casino Commission Chair Juan Sablan told IPI that it should come up with a realistic deadline in its request for the extension.

Still, even without the hotel being open the company continues to generate an eyepopping level of revenue. For 2017, unaudited table game rolling hit $49 billion, although net profit fell by almost a third.

Imperial Pacific is not yet working with any junket operators, apart from a small Korean operation, and has been extending credit to its high rollers. This has resulted in a spike in gambling debts to HK$8.5 billion, up from HK$5.3 billion in 2016. Impairment losses came in at HK$4.75 billion, a nearly nine-fold increase on the HK$547 million the company booked in 2016.

Recently, the company filed 13 more lawsuits in an effort to recover $12.75 million in debts from Hong Kong and Chinese players.

The customers allegedly owe a total of $19.1 million. The 13 customers allegedly took out loans ranging from $100,000 to $6.2 million, according to local media reports.

The biggest borrower is Wenlong Cui, a resident of Hong Kong, who allegedly made two loans for a total of $6.2 million and failed to pay $3,096,970. Cui took out a promissory note for $1 million in October last year and subsequently asked for the amount to be doubled. Cui defaulted on that loan, however in a second trip a month later he executed a second promissory note to borrow $2.2 million.

AUSTRALASIA 41

U.S. concerned at Chinese investor interest in CNMI A ramp up of Chinese interest in the CNMI has caused concern amongst U.S. security officials, who see the island as a “strategic asset” for the U.S. military, according to a U.S.-China Economic and Security Review Commission report. “Over the past four years, Chinese companies have ramped up their investments into the CNMI, a U.S. territory just north of Guam and a strategic asset for the U.S. military.” According to the report, current plans for two multi-million dollar resorts on the island of Tinian are located close to land leased by the U.S. Department of Defense.

The DOD has plans to redeploy 4,100 Marines from Okinawa, Japan, to Guam, a move that will require greater use of CNMI land for training and exercise purposes.

CNMI targets financial fraud The CNMI government has announced the introduction of a bill aimed at preventing casino financial fraud. The “Prevention of Fraudulent Misuse of Financial Instruments in Casino Gaming and Other Transactions Act,” aims to ensure that Saipan’s exclusive casino, Imperial Pacific Hotel & Resort will be protected from fraudulent misuse of financial instruments.

Senate President Arnold I. Palacios, who introduced the bill, noted that casinos in the U.S. have had a long history of dealing with financial fraud, and that the Saipan casino could be vulnerable to a variety of fraudulent activities such as counterfeit money, fake credit cards and other illegalities.

Tourism arrivals 2017 visitor arrivals 659,741

+24%

Korean arrivals

+65.8%

China arrivals

+11.06%

Hong Kong

+177%

Asia Gaming Briefings | August 2018

SUPPLIER SPECIAL REPORT 42

AGE 2018

AGE revamps seminars, adds new features Industry leaders from across the globe are flocking to Sydney, Australia for the 29th edition of the Australasian Gaming Expo.

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he three-day exhibition is a ‘must-attend’ for buyers and sellers in the hotels, clubs and casinos sector, with technological innovation, international networking opportunities and education seminars on offer.

Since moving back to the newly renovated International Convention Centre (ICC), the expo has seen a dramatic increase in visitors and exhibitors.

Last year, exhibitors welcomed over 6,000 attendees across the 19,000 m2 of exhibition space.

Key exhibitors include Ainsworth Game Technology, Aristocrat Technologies, Aruze Australia, Atlas Gaming, IGT, Independent Gaming, Interblock Asia Pacific, Konami Australia, Maxgaming, Paltronics Australasia, Scientific Games, Tabcorp, Utopia Gaming Systems and Wymac Gaming.

The organizers are touting some very exciting new additions to the expo this year, including a Networking Zone, a new First Timers Program, and a revamped AGE Seminar program, produced by Asia Gaming Brief.

The Networking Zone will be the heartbeat for the event where business networking and meetings take place, with suites also available for private bookings.

“We’re making it easier than ever to make valuable business connections, with a range of networking opportunities and a dedicated Networking Lounge to bring together the whole gaming and hospitality community,” said Ross Ferrar, CEO of Gaming Technologies Association.

A First Timers Program will welcome newcomers to the event, with easily identifiable lanyards, a guided show floor highlights tour and an exclusive networking event to help guests visiting for the first time get the most out of the show.

Asia Gaming Briefings | August 2018

“It’s valuable opportunities like these that help our attendees do a lot of their business for the year at the Expo,” said Ferrar.

The exhibition will also provide visitors with an expanded emphasis on education and professional development. This year, the AGE has partnered with Asia Gaming Brief to produce its successful seminar program, which first made its debut in 2017.

The seminars will include three full days of sessions covering issues in technology, gaming, hospitality, marketing, media, events, and F&B and much more.

“We’ll be introducing new educational sessions to the event, with almost three full days of seminars on offer. That’s a whole extra day more than last year, with almost double the content,” Ferrar adds.

Among the famed speakers includes Justin Baird, who is a leading innovationist and technology futurist with expertise in digital, media and marketing futures.

The program also dives into the “Gaming Product of Tomorrow”, discussing disruptive technology in the gaming product space, such as virtual reality, skillgames, AR-technology and will ask the regulators how they are responding.

The AGE Seminar also features a half-day IMGL Masterclass™, covering international and domestic legal trends of relevance to the Australian gambling industry, including operators, regulators, venues and other stakeholders.

For those in the hospitality sector, the seminars will also cover topics related to food & beverage, events, esports and much more.

Australasian Gaming Expo is the world’s third largest hospitality and gaming tradeshow and the biggest event of its type in Australia.

SUPPLIER SPECIAL REPORT 43

Asia Gaming Briefings | August 2018

SUPPLIER SPECIAL REPORT 44 ARISTOCRAT

What’s inside

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ristocrat is thrilled to welcome its customers to AGE to once again demonstrate “it’s all about what’s inside.”

This year, Aristocrat has creatively aligned its stand design with its content strategy.

The content strategy focuses on four unique player experiences including brands, on trend, innovation and next gen content.

As pioneers of the Hold ‘n’ Spin game mechanic, Aristocrat is committed to supporting and innovating in this space to address this significant segment. After the successful launch of Dragon Link, Aristocrat will be rolling out brand extensions of the product to support the growing linked progressive category.

You can expect to see the latest iterations of both Lightning Link and Dragon Link in their unique themed areas on the stand.

‘On trend’ content is an experience that innovates on what’s popular right now.

Building on the popular Hold ‘n’ Spin mechanic, the company will bring Welcome to Fantastic Jackpots which addresses the growing linked progressive segment.

Debuting at AGE is Cash Boost, the company’s latest innovation that aims to boost the potential of your gaming floor.

Cash Boost features an innovative free games feature incorporating a ladder style mechanic.

This package includes player selectable multi denominations of 1c, 2c, 5c and 10c and will launch with two standalone progressive titles, Mystical Light and Mystical Jungle.

Our next gen content strives to create new product segments through new and alternate player experiences.

Aristocrat facilitates a culture of innovation and welcomes our top industry talent to create next gen content through our Think Bigger initiative; Aristocrat’s innovation accelerator.

This initiative is dedicated to challenging our people to think outside the box and let their imagination run wild in creating revolutionary ideas that will change the gaming industry.

Join Aristocrat at AGE 2018, and find them on stand 100.

Aruze continues to develop a strong business and more importantly a robust roadmap of products that supports its customers.

The original series’ “Jungle Cash” and “Cash Locomotive” are still venue favorites.

Aruze’s latest titles include the first “True Multi Denominational” game titles.

Being launched at the AGE is the “Blissful Paradise” series available as Standalone progressive, and Link progressive. These are “True Multi Denominational” game titles, where players will experience a variety of gameplay and surprising riches.

Regarding ETGs, “Express Roulette” is being launched, allowing operators to select the number of stations, enabling them to be suitable for any size venue, and any size floor space.

Aruze looks forward to meeting you at stand 990.

ARUZE

Cube X Plus

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ruze will be showcasing the Cube X Plus cabinet at AGE this year, featuring dual 23” monitors, LCD button panel, fast processor, superior sound and ergonomic design, along with a suite of game titles we’re sure will excite.

Asia Gaming Briefings | August 2018

SUPPLIER SPECIAL REPORT 45 AINSWORTH

EVO cabinet line

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insworth Game Technology will be presenting their comprehensive lineup of themes for their full line of innovative cabinets, including the EVO and A640.

On the EVO cabinet line, Ainsworth will showcase Golden Link, their latest MultiDenom Multi- Game Link Progressive that will stand out on gaming floors with one Link Progressive, three levels of Bonus Prizes, unique game experiences and world-class graphics.

Another highlight on Ainsworth’s stand is Crazy Jackpots. Crazy Jackpots is a MultiDenom Link Progressive that incorporates a one level Link Progressive, one level Standalone Progressive and three bonus levels. Launching with four entertaining titles, Desert Sun, Persian Empire, Midnight Money and Wild Nights, Crazy Jackpots will attract a diverse range of players.

In addition, Ainsworth will present Triple Challenge on the A640 cabinet. Triple Challenge offers players a unique and exciting feature experience with a one level ‘Sic Bo’ Progressive, three levels of Bonus Prizes and multiplying dice features.

Ainsworth invites attendees to learn more about their rock-solid line-up of thrilling themes, see them on stand 900.

BMM

BMM Testlabs to Bring Quality Services to AGE 2018

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MM Testlabs, the world’s leading gaming testing laboratory and technical consultancy, is pleased to bring our quality services to the Australian Gaming Expo at the new ICC Sydney in Darling Harbour NSW. EVP and General Manager Australia Asia-Pacific and Africa, Kirk White commented; “AGE provides us with a fantastic opportunity to discuss our testing services with existing and new customers.

It also gives us the opportunity to highlight how BMM has set new standards for quality in testing, improved project completion times and cost effective services.”

White concluded, “BMM continues to evolve our capabilities as gaming technologies are becoming more complex. As an ISTQB Platinum Partner, BMM engineers around the world are qualified to the highest standards, enabling us to fully align our testing capabilities to meet the needs of modern-day gaming technologies.”

“We have built a strong reputation as the best test lab in Australasia and we look forward to providing our expertise to visitors at AGE this year.”

BMM provides comprehensive services to the industry including: • Testing & Certification • iGaming • Gaming Host Monitoring and Jackpot System Testing • Lottery Product Testing Services • Gaming Machine Testing Services • Mathematical Testing services: RNG & RTP etc.

• Manufacturer Product Testing Services • Operator Inspection, Audit and Performance Verification Services • Regulatory Services • Training & Education programs For more information, please visit BMM during AGE 2018 at stand 346.

INTERBLOCK

Industry-leading ETGs

I

nterblock will exhibit a wide range of its industry-leading ETGs at the Australasian Gaming Expo.

On display will be ETGs including Diamond Stadium, StarBar, Diamond Video Blackjack, MiniStar Roulette, Keno and Bingo Diamond Station The Diamond Stadium at AGE will demonstrate an entertaining video experience for blackjack, roulette, and baccarat and its ability to connect to external automated and video generators.

With compelling audio and visual effects, side bets and themed virtual dealers that interact directly with players, the Diamond product line gives ultimate flexibility to operators and provides an enhanced gaming experience. Any desired number of play stations can be connected to a single unit.

The multi-game StarBar is a play station designed for the bar top. StarBar allows players to interact with up to four games simultaneously. A variety of different games are available at the player’s fingertips

including, craps, multi-hand blackjack, roulette, video poker and more.

Diamond Video Blackjack will feature an enhanced Virtual Dealer with fast-deal graphics that have reduced waiting time for participating players resulting in more hands per hour. Each play station offers 27-inch high definition screens that allow players to play up to three industry-leading side bets at a time.

The MiniStar Roulette delivers more than 120 results per hour and provides most of the features offered on Interblock’s Diamond Roulette product line but in a smaller footprint. MiniStar Roulette is available with six, eight or ten seats in a single or double zero roulette wheel.

The Diamond Station also allows operators to offer keno and bingo in a fastpaced, standalone format. It has the same footprint as a traditional poker machine, fitting perfectly into smaller venues, and game cycles can be as fast as a standard spin cycles on poker machines.

See Interblock at stand 451.

Asia Gaming Briefings | August 2018

SUPPLIER SPECIAL REPORT 46 IGT

JCM

Play among the stars

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GT will present a range of performance-driven, market-attuned innovations in its booth at AGE under the theme “Play Among the Stars.”

The three-day event will present a platform for IGT to reveal new products within its revitalized Crystal hardware family, and to demonstrate the company’s progress in delivering regionally attuned games and solutions.

IGT’s “star studded” AGE portfolio will be anchored in the CrystalDual-i 27 cabinet, and will be complemented by exciting themes such as the Star Stax and Wheel Shot, games, and the internationally celebrated Fortune Gong multi-level progressive. The company will also spotlight its Multistar games and gaming management systems within the company’s lively AGE stand.

“A focal point of IGT’s AGE stand will be the Crystal cabinet series which has now evolved to include the CrystalCurve-i, the CrystalSlant and the evolution of our most successful hardware in the region, the CrystalDual-i cabinet,” said Andrew Hely, IGT managing director of Asia Pacific. “Over the last 12 months IGT has made measurable progress in localizing our content and services to maximize opportunities in Australia and New Zealand with solutions that can drive growth for our customers.”

Building on the success of IGT’s CrystalCurve-i

Asia Gaming Briefings | August 2018

games such as Fortune Fury and Wild Fury, IGT will introduce the Star Stax game – an innovative game that includes a unique bonus feature that is triggered when the game’s star symbols align in gameplay.

Another IGT “star on the rise” game is the Wheel Shot game with its Wild Gold and Hero of Greece base games. Housed on a variety of Crystal series cabinets, Wheel Shot features an interactive bonus where players spin in-game wheels to collect rewards and earn an opportunity to the title’s coveted jackpot wheel.

IGT will also showcase the Fortune Gong game, with base game titles Dragon Dynasty, Guardians Treasure, and Phoenix Rising. These new showcase games will progressively be compatible with the entire range of Crystal cabinets. Fortune Gong can be configured as a linked progressive game, or a standalone game.

IGT’s player-favorite, Multistar games will be another must-see within IGT’s stand.

Featuring a range of multi-game, multidenomination options to choose from, IGT will launch Multistar Big 3 – reprising the game of Bingo - and Multistar Hot Dollars game packs.

Meet the team at IGT at stand 590.

Security and customer connections

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CM Global has been helping Australian operators increase security and customer connections for decades, and now JCM will showcase its latest solutions at AGE 2018.

“Our Australia-based team is keenly focused on the unique needs of Australian operators. We are excited to showcase our solutions at AGE because they exploit JCM’s global technological expertise while also giving Australian operators the flexibility to tailor our solutions to their needs,” said JCM Australasia general manager Ian Payne.

JCM’s secure solutions start with its awardwinning UBA and iVIZION bill validators.

Operators throughout Australia rely on the UBA, which is updated and accepts the new Australian currency. iVIZION is trusted by operators worldwide because of its powerful CIS technology, which scans more than 9.5 million data points of every note, twice that of the nearest competitor. Its powerful combination of optical and mechanical sensors and mechanical antifishing technology offers supreme protection.

Rounding out JCM’s bill validation solutions is the TBV bulk note feeder, which gives operators the added convenience of accepting multiple notes and currencies simultaneously.

Player convenience increases with JCM’s GEN2U and GEN5, which are fast, flexible, and powerful with more memory and faster print speeds.

When coupled with iVIZION and GEN5, JCM’s FUZION technology gives operators the potential to offer a wide range of convenience options to their customers, including real-time currency exchange with exchange rates, along with a wealth of other functionality.

The ICB Intelligent Cash Box system is globally proven to decrease errors and increase drop accuracy, saving operators time and money, while also increasing compliance.

Last, JCM will showcase its BlueWave DX firmware upload tool that allows users to quickly update bill validator firmware with less downtime.

Visit JCM on stand 372 at AGE.

SUPPLIER SPECIAL REPORT 47 KONAMI

First class player experience

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onami will release a record mix of original progressives and base game themes to market at AGE 2018.

Top developments, from the Concerto and Concerto Stack to next-generation windowing systems technology, will be featured at Konami’s stand.

AGE 2018 marks a milestone for Konami standalone progressives, which all have unique math and mechanics. On debut is All Aboard, which consists of a hold-and-spin feature that invites players to win

all credit and bonus prizes displayed on the board up to nine times!

Another one of Konami’s top symbol-driven standalone progressives on display is Thunder Arrow, featuring a hold-and-spin feature, three unique base games, multi-denomination options, and multiple mega jackpot opportunities.

Other standalone progressives on show at the AGE will include the exciting Pick n Spin and Cash Galaxy series.

This year’s AGE event will also host the premiere of Konami’s 43-inch Concerto Stack machine. The portrait orientated cabinet makes each win a big celebration. Spinball will be the first portraitorientated game series to be launched with the Concerto Stack; however, this machine will also be compatible with the latest Concerto games, such as All Aboard and other new titles.

As in past years, guests will have the opportunity to explore Konami’s award-winning SYNKROS casino management system across the booth in a comprehensive demo environment. Leading advancements in True-Time Windowing – including web services, service requests, portrait-screen compatibility and more – will be among the latest features. Business intelligence solutions will also be on display through SYNKROS Dashboards, an intuitive dashboard interface built to provide accurate and actionable data points that drive both daily operations and long-term strategies.

‘This year’s AGE will showcase some of our latest products such as ‘All Aboard’, which has recently been approved for NSW and Thunder Arrow Link, which is proving to be a top performer in QLD and NSW. Further to this, Konami is committed to ensure we make products that meet and exceed market requirements and I am excited to be on board to work with the team to deliver these objectives.’ says David Punter, national sales manager at Konami Australia.

Guests are encouraged to visit Konami at stand number 390 to explore these and other important Konami releases.

QUIXANT

Innovative portfolio showcased

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he Australasian Gaming expo will see Quixant showcase its innovative portfolio, including the QXi-400, QX-60, and an extraordinary generation of Quixant processing and graphical tech.

Australia is a core market for the UKheadquartered company, making the AGE an ideal platform to promote their fundamental differentiators in the region.

The QXi-400 is a new two-screen controller offering unprecedented performance in its tier, which will be shown alongside the QX-60, featuring an optional high-power discrete graphics card and long-term Windows 7 support.

Fully complimenting this diverse suite of control boards, a pioneering selection of monitors and button decks including a variety of “floating” options and the contemporary, customizable

13.3” Playdeck will also be present.

In addition, the new, extraordinary generation of Quixant processing and graphical technology, driven by AMD Ryzen Embedded APUs, will make its regional debut.

Harnessed within the QMax-2 and QXi-7000 products, the long-time gaming industry objective of multi-screen, intensive 4K graphics and ultra-fast processing has now been truly realized.

“We’re very excited about AGE. It’s a crucial event for us due to the fact that we have a very strong presence in the market, and as such it provides excellent opportunities for discussions with our existing customers, not to mention those experiencing the benefits of Quixant for the first time”, comments John

Malin, group sales director.

“There will be a multitude of new platform and display solutions on show, however equally as important a focus will be education; our Gaming Ecosystem is sure to be a primary topic of discussion, being the unique bedrock upon which our customers can facilitate development resource optimization and quick time-to-market.”

Quixant can be found at stand 377 at the show.

Asia Gaming Briefings | August 2018

SUPPLIER SPECIAL REPORT 48 Scientific Games

Happy Chance

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cientific Games will present its leading digital gaming and sports products alongside its revolutionary gaming and lottery products this year at AGE 2018.

This lineup is the most comprehensive offering available from a gaming supplier combining a range of category leading brands alongside exciting new innovations. There will be three products that deserve special mention and warrant a visit to their stand: HAPPY CHANCE: Headlining new games for the DUALOS cabinet and designed uniquely for Australian players, Happy Chance is an exciting new two level Standalone Progressive series that has been created by the same team that brought the phenomenally successful 88 Fortunes, Duo Fu Duo Cai and most recently

Jin Ji Bao Xi games to the world. Happy Chance launches with two game titles: HAPPY CHANCE CAT and HAPPY CHANCE PIG combining an exotic Asian-style theme with exciting features and gameplay.

CASH CONNECTION: Following the highly successful Locked & Loaded series, SG Gaming Australia has been concentrating on bolstering its multi-denomination standalone progressive game line up. Recently debuting games from the Cash Connection series are proving to be a hit with players. Launched with two games Sweet Tweet and Wild Country, Cash Connection offers the popular ‘Dropand-Lock’ free game feature concept and is part of the expanding multi-denominational game library.

Offering game play from 1c to $1, the local game design team behind this exciting series has focused on ensuring that these new games can bring a thrilling entertainment experience to gaming rooms with the chance for big rewards that are available for players.

VEGAS STAR: With a fresh logo to herald a new era, Vegas Star has been at the forefront of electronic terminal gaming for over a decade. Vegas Star has enabled club and casino operators to maximise their floor performance and profitability locally and around the globe. The new Quartz terminal is a major development to the product line, with a key feature bringing all the big screen action right onto the player terminal.

Visit Scientific Games at AGE on stand 190.

Aura is known for its comfort, dedicated space for personal belongings and drinks, wide screen and intuitive user interface, luxurious softness of natural materials, while operators appreciate Aura’s customization options, modularity, compatibility and stability.

Aura offers a right dosage of comfort and fun, which guarantees longer gaming sessions, says Spintec.

“We are confident that our Aura amphitheater solution will have a great success on the Australian market. We are now finalizing the certification process and we plan to start selling our gaming solutions to the Australian market in the coming months,” says Primož Krševan, Spintec’s regional sales manager.

Spintec looks forward to welcoming everyone at stand 750.

SPINTEC

Aura on display

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pintec and its Australian distribution partner – Independent Gaming, are bringing their amphitheater gaming solution Aura to the Australasian Gaming Expo this year.

After an extraordinary success at G2E Asia in May this year Spintec will showcase its innovative portfolio for amphitheater set-ups, featuring an ergonomic design for the best comfort of the player and virtually endless customization options.

Asia Gaming Briefings | August 2018

SUPPLIER SPECIAL REPORT 49 SUZOHAPP

Focus on innovation

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t this year’s AGE, SUZOHAPP is excited to introduce new innovations for the Australian market.

The Nanoptix advanced printing solutions will be presented for the very first time, including the PayCheck NextGen, the PayCheck Terminal and the PayCheck 4.

The brand new 27” Touchscreen Kiosk will be also in the spotlight. This solution offers an optional LED display and is fitted with a Nanoptix HSVL Advance Thermal Printer.

Further innovations include the DPS (Dynamic Panel System) featuring PKT technology which takes touch button technology to the next level, and the CashComplete SDS-35, the Smart Deposit System that secures cash and

prevents shrinkage and counterfeits. A special focus will be also put on the range of VisionPro LCD slot machine screens which are available for most EGM models and in a range of sizes.

Visitors looking for the latest technology in coin and banknote counting/sorting will enjoy seeing the SCAN COIN desktop solutions, including the SC-8220, the DTC-2, SC-303 and the SC-360. Comestero Easy Pro and Twin Jolly Pro, the best-selling change machines, will be also taking center stage at AGE. SUZOHAPP is a global provider of high quality products for cash handling technology and, at AGE, manufacturers will learn more about the features and benefits of a rich selection of components. For coin-in, show

attendees will see the Comestero RM5 electronic coin mechanism that offers excellent coin discrimination and market-leading anti-fraud technology. For coin-out, they will appreciate the advantages of a variety of hoppers. For banknote validation and recycling, the MFL banknote reader and the Bill-to-Bill 300 recycler will be highlighted.

“The AGE is a perfect networking event, giving us the chance to show our innovative approach to the industry,” explained Mr. Peter Noye, vice president commercial & strategy at SUZOHAPP APA. “Come visit us and discover how our solutions can support and improve your business.”

Visit SUZOHAPP at stand 470 at AGE 2018.

ULTRAPLAY

Partnering for e-sports success

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dvanced betting solutions provider UltraPlay has been offering innovative concepts from sports, e-sports and in-play betting to white label, online casino and blockchain solutions since 2010.

As an e-sports betting pioneer, the company offers an unrivaled platform and data to the iGaming brands. UltraPlay’s award-winning e-sports betting solution ODDS.GG comes with 25 game titles, 3000+ events per month, 1500+ live events a month and 200+ markets growing exponentially with the new titles added, such as King of Glory, Gwent, NBA 2K League.

E-sports was again a hot topic at iGB Live, in Amsterdam, where UltraPlay’s team presented an exclusive e-sports betting data accumulated

from the company’s broad client network (2017 to June 2018). Average bet, net profit per player, bets per player, turnover per player were among the key statistics discussed with the exhibition delegates. Among the conclusions were that e-sports betting will continue to grow and go to the top tier of gambling verticals. To benefit from e-sports, brands need to understand the specifics of this offering. E-sports should be separated from any other sport. Brands have to tailor their offering to catch the attention of

e-sports’ fans and treat them as a main target for that product. Knowledge and experience in e-sports betting is crucial for the online operators to start gaining profits out of it, and that needs to be done with a company that specializes in e-sports betting rather than an in-house trading team to do it. Choosing the right partner to enter the e-sports betting vertical is key to success for any betting website willing to attract the target audience of millennials who go into e-sports as fans, enthusiasts and bettors.

Asia Gaming Briefings | August 2018

SUPPLIER SPECIAL REPORT 50

AUGUST Australia Gaming Expo 14-16 August 2018 ICC Darling Harbour, Sydney https://10times.com/australasian-gaming-expo

SEPTEMBER International Masters of Gaming Law (IMGL) Autumn Conference 5-7 September 2018 Prague, Czech Republic https://www.imgl.org/conferences/autumn/ overview/2018 International Association of Gaming Regulators (Annual conference) 17-20 September 2018 Hotel Scandic, Copenhagen, Denmark https://iagr.org/conference Betting on Sports 18-21 September 2018 Olympia, London https://sbcevents.com/betting-on-sports-2018/

October Affiliate Summit APAC 2018 1-3 October 2018 Marina Bay Sands, Singapore http://affiliatesummit.com/events/asapac18/ Global Gaming Expo 9-11 October 2018 Las Vegas Sands Expo & Convention Center, Las Vegas http://www.globalgamingexpo.com/

NOVEMBER Asia Gaming Summit 6-8 November 2018 W Taipei, Taiwan https://taiwan.asiagamingsummit.com/ Macao Gaming Show 13-15 November 2018 Venetian, Macau https://10times.com/mgs SIGMA 2018 28-30 November 2018 Malta https://sigma.com.mt/

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Asia Gaming Briefings | August 2018

FEBRUARY ICE Totally Gaming 5-7 February 2018 ExCel London https://totallygaming.com/eventblog/ice-live-2018/savedate-ice-2019 Spice India (Strategic Platform for iGaming Conference and Exhibition) 26-27 February 2018 Goa, India http://affiliatesummit.com/events/asapac18/

CALENDAR OF EVENTS 51

Asia Gaming Briefings | August 2018

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Asia Gaming Briefings | August 2018

LAST WORD 54

Curbing enthusiasm Sharon Singleton

Managing Editor, AGB

After two decades of trying, Japan has finally bulldozered its IR Implementation Bill into law, paving the way for casinos at some point in the next decade.

I

nternational operators have been salivating at of casino area, GGR of US$4 billion, VIP and mass the prospect of access to a large and wealthy table yield of US$36,500 and US$8,500, respectively, domestic market, with a propensity to gamble, are necessary. That’s much higher than Singapore,” combined with a vibrant tourism market. The the firm says.

There are also many other issues that still have not purpose of the legislation was initially to attract more tourists, though Japan pulled in 16 million visitors been determined, such as the level of foreign ownership.

David Bonnet, managing partner at Delta State in the first half of this year, up 16 percent, without Holdings, reckons foreign operators may only wind the help of casinos.

Forecasts are for Japan to rapidly become Asia’s up holding a minority stake in the first round of resorts, which is unlikely to sit well with some. second-biggest gaming market after Macau.

To date, few Japanese companies have put their heads However, the irrational exuberance shown by above the parapet to suggest an many towards gaining a license interest in stepping into the IR in Japan may now need to meet business. Though that’s expected a hard dose of reality.

Forecasts are to change now the bill has actually Many operators have been passed, perhaps giving a working on the ground for years for Japan to rapidly been clearer picture of the potential to build up a network and base become Asia’s shape of the industry. for a license push, already having Another element not to be spent many millions of dollars in second-biggest underestimated in the rush to the process. But at the end of the gaming market open up an IR in Japan is the level day, in the first round of bidding of public opposition. Although only three IRs will be permitted, after Macau. trillions of yen are spent each which will leave a great many year on pachinko, the industry disappointed stakeholders. has not yet won over hearts and Add to that, the industry will be tightly regulated and highly taxed, with a minds when it comes to the idea of casinos.

Three opinion polls taken by major media maximum ratio of casino floor size to total IR set at just 3 percent. Visits by locals will be restricted to outlets the weekend after the bill was passed showed three times a week, or ten times over four weeks, while disapproval levels running at 60 percent and above. operators will need to pay 30 percent revenue tax, Prime Minister Shinzo Abe and his cabinet have also on top of consumption, property and income taxes. raised public ire in the way they have handled the As a result, some analysts are cautioning that the bill, showing little regard for public opinion or tact returns may not be as high as had initially been expected. in pushing on with debate on the legislation despite Morgan Stanley has run the numbers on what it deadly flooding.

These factors may come back to haunt the industry will take for a resort in Osaka to make a reasonable return of 14 percent (EBITDA/total investment) on if IR friendly local politicians are unseated in the an US$8 billion investment. “Assuming 15,000 sq. m next round of local elections.

“

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Asia Gaming Briefings | August 2018