LAST WORD

Is the pie big enough?

Sharon Singleton | Managing Editor, AGB

As investors dip into the tasty pie that is the Asian gaming industry, producing integrated resorts from Nepal to Vladivostok, some analysts are beginning to sound a sour note.

Billions of dollars have been invested over the past decade into new resorts, or property upgrades and that’s even before Japan comes online. Those competing for a license there have pledged to build world-beating resorts, with a price tag of $10 billion and maybe beyond.

Macau’s main building boom is coming to a close now, with just SJM Holdings in the pipeline to open its Lisboa Palace on Cotai towards the end of this year. But South Korea has several multi-billion projects in the works in the Incheon area and on the southern island of Jeju, as does the Primorye Gaming Zone near Vladivostok in Russia.

Cambodia reported a 53 percent jump in casino licenses granted last year, while neighbouring Vietnam saw the debut of the Corona Resort & Casino in January and will see the entrance of the $4billion Hoiana later this year to name but a few.

In the Philippines, President Rodrigo Duterte has curbed the enthusiasm of casino investors by putting a moratorium on new licenses, but there is still plenty of new development taking place from those who slipped in before the cap was put in place.

Australia has a new six-star IR in Sydney under construction, as well as new properties in Queensland, while Singapore

recently announced it would permit an S$9 billion expansion of its two gaming resorts, the first major growth since the IRs opened in 2010.

Asia is undoubtedly now the world’s largest gaming region, producing revenues north of $80 billion from those licensed casinos that report their figures. The trouble is, some analysts see these resorts as all competing for the same clientele.

“Billions of dollars were invested in the last decade to build casinos that cater to wealthy Chinese consumers in APAC,” Fitch Ratings said in a recent report.

“The premium segment has already plateaued in markets such as Singapore and Australia but investment is continuing across the region, even as China’s economy goes through a structural slowdown,” it adds.

The ratings agency forecasts China’s GDP will grow 6.1 percent in 2019 and 2020, down from 6.8 percent in 2018.

Billions of dollars were invested in the last decade to build casinos that cater to wealthy Chinese consumers in APAC.

The problem is exacerbated by the fact that many jurisdictions across Asia ban, or restrict, locals from gaming, meaning most will be relying on foreign visitation for growth. The Philippines is a notable exception, as casinos there enjoy solid, mass market local support. However, the sector of the market that has been growing the fastest in recent years has been the VIP, which accounts for about 28 percent of GGR at private casinos and which is vulnerable to heightened regional competition.

Without a doubt, the China outbound tourist will continue to be the most targeted demographic for the foreseeable future. More than 200 million are expected to be travelling abroad from 2020 and the number of Chinese passing the threshold that makes travel affordable is surging, with 240 million to hit the income distribution hump in the next seven years, according to research from Jefferies.

The bulk of those, however,won’t be VIPs and analysts agree the best-positioned operators will be those with the largest exposure to the mass market rather than the volatile VIP segment.

All of that said, the Chinese aren’t the only game in town. Household incomes are rising across the region creating alternative markets for operators prepared to cast their net wider.

Thailand has always been a source market for border casinos in Cambodia, but wealthy Thais are increasingly being courted by higher-end properties in both Vietnam and Cambodia. Donaco’s Star Vegas in Poipet has been adding junkets to rebuild its VIP business and saw its main hall turnover treble in Q1, propelled by the introduction of mass tour groups from Thailand.

Bangkok is seen as underserved and improved transport links, such as flights between the Thai capital and Sihanoukville, will expand horizons beyond a dusty drive to the border.

And, then there’s India, with its vast and largely untapped potential.

India’s middle class is set to grow rapidly from up to 80 million today to 580 million people – or about 41 per cent of the population – by 2025.

Competition is rising in Asia, but so is the pie and with the right property and marketing strategy there should still be enough to go around.