AGBriefings May 2020

Jurisdiction Updates May 2020 Edition

In focus

Road to recovery

Pathway to a brighter future pg.18

Philippines

Time to privatize PAGCOR properties? pg.10

Singapore

Regulatory revamp pg.14

Macau

VIPs seen first through the doors pg.6

Korea

Jeju IR plans plod along pg.32

SUPPLIER SPECIALS pg38

2

Asia Gaming Briefings | May 2020

MESSAGE 3

Road to recovery

T

he industry is facing its darkest days. Properties have

We also look at each jurisdiction’s efforts to bounce back

shut down, manufacturing supply chains have been

amid the challenges. In Macau, VIP gamers are expected to

shattered, F&B and retailers have no one to service.

lead the recovery, but there is still no clarity as to when the

For the first time in modern history Macau’s casinos

markets will improve, with estimates for revenue continuing

were shut down - something that not even the wildest storm

to be revised downwards and forecasts for the potential

accomplished. Macau might have turned on the lights, but

turning point pushed further down the road.

around the region every other operation has been shut, with

Over to the Philippines, the Covid-19 crisis has rekindled

many announcing rolling extensions to the lockdown.

debate over the potential privatisation of the PAGCOR

The Covid-19 pandemic is arguably the biggest crisis that

casinos to raise funds to fight the pandemic, but ROI

most of us have faced and without a doubt will change the

remains hard to determine with all the unknowns around a

way we live and work. It’s hard not to be gripped by a sense

re-opening of the properties.

of panic, however, there will be light at the end of the tunnel

Singapore has taken the opportunity to update gambling

and our focus section in this edition of Asia Gaming Briefings

oversight and announced a major overhaul of its highly

tries to offer a path towards recovery.

respected regulatory regime to make sure it keeps abreast of

In our first article, we report on comments made by

new product developments and technologies.

Canadian entrepreneur Earle Hall in the inaugural session

Traditionally our Supplier Special Report is dedicated to

of our webinar series in April. Hall, who is CEO of Axes

new products and solutions to be showcased at the next

Network, points out that periods of great creativity and

major industry event, but every other gathering has been

opportunity have historically followed great upheaval. In

scrambling to reschedule. In place of our normal format, we

our second article, gaming lawyer David Green tackles some

have asked suppliers to highlight how their businesses and

of the regulatory changes that we may see emerging in the

working practices have changed as a result of the pandemic.

industry. Professor Wolfgang Arlt tackles one of the biggest

What measures have they taken and will they remain in place

industry drivers -- that is what the road to recovery will look

once the crisis has passed? The clear majority stress that

like with regard to Chinese visitors? Meanwhile, companies

the digital solutions that have been put into place to ensure

will need to optimise their operations to keep costs to the

work can continue from home do have some advantages,

minimum while the revenue picture improves. We speak to

but will never replace the face-to-face meetings and staff

experts about what tools can be adopted to help managers

interactions that spark the creative juices.

ramp up their various properties

Happy readings, stay safe, keep healthy.

Rosalind Wade

Luis Pereira

A measure of a company is taken in the face of adversity.

Particularly how they deal with their employees and their

On behalf of Asia Gaming Brief

customers, and most especially how they support the local

Rosalind Wade & Luis Pereira

communities within their reach. In this edition we take an

Publishers

in-depth look at how the local operators have all stepped up to the plate to help out the local community, donating

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millions in aid, as well as medical and other supplies to help the needy. We highlight their efforts, which have all been

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undertaken at a time when they are generating close to zero

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revenue due to the closure of the borders.

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MAy 2020 EDITION Series II • Issue XIX

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Asia Gaming Briefings | May 2020

CONTENTS 4

GREATER CHINA

SOUTH EAST ASIA

6

MACAU

PHIlippines

10

SINGAPORE

14

JApan

30

south korea

32

russia

34

16

18

36

AUSTRALIA

SUPPLIER SPECIAL REPORT

38

22-23 September 2020 Shangri-La at the Fort Manila, Philippines

Asia Gaming Briefings | May 2020

CAMBODIA

AUSTRALASIA

NORTH ASIA

special focus

INDOCHINA

LAST WORD

42

5

Asia Gaming Briefings | May 2020

6

GREATER CHINA

6

MACAU

VIP to lead recovery, but no reprieve in the near term VIP gamers are expected to lead the recovery in Asia, but there is still no clarity as to when the markets will improve, with estimates for revenue continuing to be revised downwards and forecasts for the potential turning point pushed further down the road.

Asia Gaming Briefings | May 2020

GREATER CHINA

E

7

arly optimism for a swift snap back past history it will be the VIP segment to is fading as the virus rages across recover first.

The World Bank has warned that the Europe and North America and Asia suffers with a new wave of coronavirus may bring China’s economy contagions, largely imported from elsewhere. virtually to a standstill this year, potentially Macau’s Gaming Inspection and Control driving 11 million people into poverty. It would Board (DICJ), reported that gross gambling be the worst economic performance in the revenue for March had plunged 80 percent to world’s second-largest economy in 44 years.

More than 460,000 Chinese firms are MOP5.3 billion ($664 million) The decline for estimated to have closed down in the first the first quarter as a whole was 60 percent.

The casinos in the world’s biggest quarter, while 3.2 million businesses were gambling hub are open, with social distancing established, a 29 percent drop on the prior restrictions in place, however the territory year, pointing to a big dent in the finances has all but closed its doors to the outside of Macau’s player base.

Still, analysts say, the territory’s six world, implementing even tighter controls in operators are all well late March to stop the placed to weather the spread of imported current storm. cases. With 90 percent They have enough of t he c ustomer Galaxy is liquidity for the next base coming from clearly the least six months before overseas, visitation they are likely to has again slowed to risky operator with need to draw on debt a trickle and analysts abundant cash on financing, Bernstein are predic ting a noted. slump of at least hand, no debt and Concerns about 90 percent for the in a worst case liquidity have month of April. scenario, 40 months e x a c e r b at e d t h e Morgan Stanley declines in Macau cut its forecast for or so of breathing gaming stocks, the 2020 GGR for Macau room before needing firm notes, but in March to a drop adds even if the no of 35 percent and to draw on any new revenue environment said it doesn’t see a liquidity. continues, the tipping point until late c o mp a n i e s h av e October. Bernstein about 15 months Research forecasts a of breathing space fall of 37 percent.

Ben Lee, managing partner of iGamiX before additional funding would be needed, Consulting and Management said he isn’t with the exception of Studio City, which expecting meaningful signs of recovery in has about a year.

“Galaxy is clearly the least risky operator Macau until mid-2021.

“Global tourism (with gaming as part of with abundant cash on hand, no debt and that), with a huge chunk of that attributable in a worst case scenario, 40 months or so of to the Chinese, that we know of no longer breathing room before needing to draw on exists,” he says. “It will be months, possibly any new liquidity,” it said. “Other operators years, for the Chinese economy and psyche have between 6 and 17 months of headroom with existing cash balances and 15 to 25 if to recover to the 2018/2019 levels.”

He argues that Chinese customers will be the full amount of each company’s revolver focusing on building back their businesses is drawn. These figures assume a worst-case and savings and discretionary spending will outcome of no revenues, limited reduction in operating costs, minor reduction in be low on the list of priorities.

“This means re-writing a lot of the maintenance capex and other company feasibility reports that have been predicated specific items.”

The firm also notes that the companies on the Chinese outbound market. It also means lowered domestic gaming for other are able to negotiate waivers and other jurisdictions as the mass struggle to recoup amendments to clauses on their debt from the massive job losses currently being financing, with MGM China and Sands experienced,” he said, adding that based on China having already done so.

“

GROSS GAMING REVENUE GGR 2019 MOP292.4b

-3.4%

Q1 GGR

-60%

March GGR

-80%

2020e -35% 2021e +40% (Source: Morgan Stanley)

2020e -37% 2021e +74% (Source: Bernstein)

”

Paradise withdraws from management of Casino Waldo Paradise Entertainment said it has withdrawn from management of the Casino Waldo, citing the need to invest in additional monitoring systems and equipment and the adverse impact of the coronavirus on business. Following the expiration of the related service contract on February 29, 2020, the group decided to cease providing casino management services in Casino Waldo from March 1, 2020 and did not request for renewal or extension of the service contract, it said, adding it would put its focus on maximising returns from Casino Kam Pek Paradise.

For 2019, total revenue amounted to HK$1.18 billion (US$154 million), which was up 1.5 percent year-on-year, and Adjusted EBITDA came in at HK$87, which was down 28 percent on the 2018 figure.

Asia Gaming Briefings | May 2020

GREATER CHINA 8

MGM china

Galaxy Entertainment Group Wynn macau

MGM China (2282:HK) is operating two casinos, with its MGM Cotai IR opening in February last year. The HK$27 billion IR features 1,400 hotel rooms and suites, meeting space, high end spa, retail offerings and food and beverage outlets and its ramp up has helped the company gain market share in the latter half of 2019.

For 2019, the company saw revenue up 19 percent year-on-year, driven by non-VIP gaming.

Said revenue reached HK$22.8 billion.

Adjusted EBITDA grew by 28 percent year-onyear, reaching HK$6.2 billion. MGM said that 86 percent of its profit was driven by non-VIP businesses in the year.

Fitch Ratings recently downgraded MGM Resorts International’s and MGM China Holdings’ issuer default ratings as well as their unsecured debt due to “decreased financial flexibility following the recent sale-leaseback transactions as well as the severe disruption to global gaming caused by the coronavirus outbreak.” Fitch also revised the firms’ rating outlook from stable to negative.

MGM also announced that Bill Hornbuckle, COO and president, will be acting CEO, replacing Jim Murren who announced his resignation in February.

Galaxy Entertainment Group (27.HK) has three main properties and runs three City Club casinos inside hotels. Galaxy Entertainment reported full-year net revenues at US$51.9 billion, down 6 percent year-on-year, while adjusted EBITDA was US$16.5 billion, down 2 percent year-on-year. The final quarter of 2019 contributed to these soft results.

The flagship Galaxy Macau and StarWorld Macau both saw declines in revenues and profitability in 2019, with only Broadway Macau making progress over the 2018 figures.

Bernstein Research said that some of the decline was anticipated by analysts “due to ramp up of newer Cotai properties such as Melco’s Morpheus Tower and MGM Cotai,” which added enhanced competitive pressures.

The company was ordered to cease work on the Phase 3 expansion of Galaxy Macau in late March after three workers were killed in an accident when scaffolding collapsed.

Phase 3 of Galaxy Macau is to feature 1,500 hotel rooms, some casino space, a largescale arena with 16,000 seats, and 400,000 square feet (37,161 sq metres) of MICE space. The launch is scheduled for the first half of next year.

Asia Gaming Briefings | May 2020

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 is non-gaming. In November, the company opened elements of its new Lakeside Casino at Wynn Macau.

For Q4, Wynn’s results came in below expectations. Operating revenue at Wynn Palace dropped 20.3 percent, with adjusted property EBITDA down 21.6 percent, while at Wynn Macau operating revenues dropped 5.1 percent, with EBITDA off 1.5 percent.

Overall gross gambling revenue at Wynn Macau was down 20 percent year-on-year to $1.24 billion in the quarter, giving it a share of 13.9 percent of the Macau market, down from 14.2 percent in the prior quarter.

The comp any re cent ly rais e d its commission rate to junkets for the first time in 14 years to tempt back its share of the rolling market in Macau.

“As per our checks, Wynn lifted junket commission from 40 percent to 42.5 percent effective 1 March, matching its Cotai peers,” said analysts at Credit Suisse, which notes

GREATER CHINA 9

Wynn’s share of the VIP market dropped to 16 percent at end-January from 23 percent in Q1, 2019.

31 2022 and March 31, 2023. The company said the shares are in lieu of a cash bonus that would have been payable.

Melco resorts & entertainment

Sands China

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. It is also developing a resort in Cyprus and maintains a strong focus on Japan. For Q4, total operating revenues were US$1.45 billion, representing an increase of approximately 3 percent year-on-year – in line with analyst estimates. Net income attributable to Melco, however, fell to US$68.1 million, compared with US$126.6 million a year earlier.

The company granted restricted shares worth about $19.3 million to CEO Lawrence Ho, in part to preserve its cash position during the Covid-19 crisis.

The executive was granted restricted shares in respect of 1,553,780 American Depositary Receipts under a share incentive plan. They represent about 0.32 percent of the company’s issued shares and will be granted in two equal tranches on March

Sands China (1928:HK) has five properties in Macau. The company has 12,000 hotel rooms and suites, making up for 48 percent of hotel rooms run by casino operators in Macau. For 2019, the company reported profit of US$2 billion, which was an 8.4 percent advance over the previous year’s figure. Net revenues of over US$8.8 billion represented a 1.7 percent increase.

In the fourth quarter, Sands beat estimates by 2 percent, with adjusted property EBITDA up 3 percent at $811 million. It gained market share in the quarter to 24.3 percent from 23.2 percent in the same quarter a year earlier. The results were driven mainly by a strong performance in base mass, though premium mass was weaker.

Moody’s recently placed the ratings of Las Vegas Sands on review for a downgrade given the steep drop in gaming revenue at its Macau and Singapore operations as a result of the coronavirus.

The ratings review will focus on LVS’ ability to preserve its liquidity during this period of significant earnings decline.

Sjm holdings SJM Holdings (880:HK) has 22 casinos in Macau, though the former monopoly has been losing market share to new IRs on Cotai. The company posted a 12.5 percent gain in profit for 2019 and said it was in a solid position to weather the challenges posed by the Covid-19 outbreak.

Profit attributable to owners of the company was HK$3.2 billion ($411.8 million), while adjusted EBITDA rose 13.2 percent to HK$4.21 billion. The company said net gaming revenue dipped 1.5 percent to HK$33.16 billion. The company said its flagship Casino Grand Lisboa had a decrease in gross gaming revenue for the year of 17.6 percent and an increase in adjusted Grand Lisboa EBITDA of 12.9 percent.

Grand Lisboa Hotel’s occupancy rate decreased by 1.7 percent to 93.8 percent for the full year, whilst the average room rate increased by 0.9 percent to HK$1,508.

SJM said it has now completed construction work on its Grand Lisboa Palace on Cotai and it has applied for the relevant operational licenses for late 2020. It gave no further comment on the likely opening date in its earnings release.

Ponte 16 investor reports 2% gain in 2019 revenue Success Universe, an investor in Macau’s Ponte 16, said group revenue for 2019 gained two percent to HK$1.14 billion ($147 million).

The company’s share in the profit generated from Ponte 16 was $116.8 million, up about 71 percent. Success Universe says gross gambling revenue at the property outperformed the wider Macau market during the year, which saw a 3.4 percent decline. Gross profit was down 12 percent to about $30.3 million, while profit attributable to owners of the company was $74.2 million, up from $54.5 million the prior year. As of Dec. 31, the casino of Ponte 16 had 109 gaming tables, consisting of 98 mass gaming tables, 7 highlimit tables and 4 VIP tables. The group warned that the impact of the coronavirus outbreak on the group’s operating results and cash flow may be “significant,” but can’t be reasonably estimated at present.

Asia Gaming Briefings | May 2020

SOUTH EAST ASIA

10

PHILIPPINES

Corona crisis restarts talk of PAGCOR casino sale The Covid-19 crisis has rekindled debate over the potential privatisation of the Philippine Amusement and Gaming Corp (PAGCOR) casinos to raise funds to fight the pandemic.

T

he regulator has so far resisted calls to sell off the properties, arguing that they are profit making and already generating funds for the government. However, concern has been raised on multiple occasions about PAGCOR’s dual role as regulator and casino operator.

The latest call for a sell off came from Senate Minority Leader Franklin Drilon, who has asked economic managers to review state assets that may be sold off immediately to generate funds. Among those mentioned were PAGCOR’s casinos and the Philippine Charity Sweepstakes Office (PCSO).

According to Jade Entertainment CEO Joe Pisano, any such sale would likely attract considerable interest amongst both local and international investors.

“As PAGCOR operates under a congressional franchise, I expect that the sale of assets would require congressional approval,” he notes.

“As PAGCOR doesn’t own the properties I would imagine that the sale would be for Operational and Leasehold rights.”

PAGCOR has nine branch casinos operating collectively under the Casino Filipino brand and a further 32 satellite casinos spread in popular tourism destinations across the country.

Industry experts say many of the properties are outdated and will need investment to bring them up to international standards.

However, they are seen as attractive assets, giving an entry point into what has been one of the best-performing markets in Asia over the past few years.

In 2019, Philippine gross gambling revenue rose just over 15 percent to PHP248.4 billion.

However, revenue from PAGCOR’s casinos came in at PHP36.9 billion, underperforming the market with a gain of just 2.8 percent.

The casinos operated a total of 472 tables and 9,581 electronic table games as of the end of last year.

The Philippines is one of the only countries in the Asian region where locals are allowed to gamble, providing an underpinning of domestic support. Its economy has been Asia’s star performer over the past few years and tourism numbers had been rising.

If the privatisation gets the go-ahead, advisers will have the daunting task of how to price the assets.

“Prior to the pandemic, it would have been a fairly easy exercise to place a valuation on each gaming property,” said Andrew Klebanow of Klebanow Consulting. “Based on historical operating performance for each property and future demographic trends within each market,

SOUTH EAST ASIA 11

determining a fair price for each property would reduction in gaming capacity with the elimination have been straight-forward. There would also of chairs at gaming tables and slot machines have been a number of casino operators, both being the simplest measures. Casino operators domestic and international, that would have been may also have to adhere to government mandates interested in acquiring some of those assets.” as to how many patrons can be in a casino at “The challenge today is that it is now very any given time, much like grocery stores limit difficult to determine gaming revenues once the number of patrons that can be in the store the casinos re-open. Without a predictable at any given moment. Patrons may be forced revenue forecasting to wait in line outside model, it will be imand wait their turn for possible to accurately admission. determine future cash Casinos may also The challenge flows and the amount have to come up with today is that it is of debt that each propsome sort of reservation erty could support if system for their players, now very difficult to they were to be sold,” much like restaurants determine gaming Klebanow says. take reservations today.

Some of the questions “These kinds of revenues once the that will need to be restrictions will certainly casinos re-open. answered include how impact gaming revenues. fast revenues are able The questions are, what to return to 2019 levels. will be the scope of Although the Philippines those restrictions and does have support from the local market, many how long will those restrictions last before small business owners will have taken a major revenues recover to pre-pandemic levels?” knock from the crisis-imposed lockdowns.

PAGCOR will be under maximum pressure Gross domestic product had already been to receive the best price possible for its casino slowing, coming in at six percent in 2019, assets. And while there are players with the the lowest level in eight years. This year, the available capital to make a bid, they are unlikely economy may even tip into recession, according to agree to pay top dollar until there is greater to government forecasts. clarity over future gaming revenues.

It’s also highly likely once the properties “Given all these variables, it is unlikely that do reopen that some kind of social distancing the seller (PAGCOR) and potential buyers will measures will be put in place. be able to agree on fair prices for those assets Klebanow says these will probably include a at this time,” Klebanow says.

“

”

U.S. court finds in favor of Bloomberry Bloomberry Resorts said that a court in the United States dismissed an attempt by Bangladesh’s central bank to reclaim funds that were stolen from its accounts and subsequently laundered through Philippine banks and the Solaire Resort & Casino. The United States District Court, Southern District of New York granted the defendants’ joint motion to dismiss for failure to state a Racketeer Influenced and Corrupt Organizations Act (RICO) claim or RICO conspiracy claim, the company said in a statement to the Philippine Stock Exchange. The court declined to exercise its supplemental jurisdiction over the remaining state law claims.

Asia Gaming Briefings | May 2020

SOUTH EAST ASIA 12

Tiger Resort Leisure and Entertainment 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.

Parent company, Universal Entertainment said revenue at Okada Manila fell by more than 54 percent year-on-year in March as a result of the March 15 suspension of business.

Total GGR came in at more than PHP1.5 billion (US$30 million). Adjusted EBITDA was recorded at a PHP248 million loss for the month of March.

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 hotel room count for the group’s three hotels (Maxims Hotel,

Remington Hotel, and Marriott Hotel Manila) remains at 1,226. The property is currently in the third phase of its expansion, which will add approximately 940 rooms. It will also include new gaming and retail spaces.

gaming assets. It said it has no current plans.

Bloomberry is currently constructing Solaire North which will be its second Integrated Resort in the Philippines. Solaire North is located in the populous and highly urbanized Quezon City.

Bloomberry Resorts

City of Dreams

Bloomberry Resorts’ Solaire was the first IR to open in Entertainment City and 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. The Sky tower consists of a 312 all-suite hotel, additional ten VIP gaming salons with 66 gaming tables and 223 slot machines.

In April, the company said in future Bloomberry will consider a broader universe of possible investment opportunities, which include gaming, hospitality, and other non-

The $1.3 billion City of Dreams Manila is owned by Belle Corp and Melco Crown Entertainment’s local unit. 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 and a 4,612.44 square-meter family entertainment center in collaboration with Dreamworks Animation. In 2019, City of Dreams Manila had an average of approximately 2,265 gaming machines and 311 gaming tables. The company has warned in recent reporting periods that it is beginning to feel the impact of increased competition in the Philippines.

CASINOS GROSS GAMING REVENUES 2019

Suncity gets investor goahead for Manila investment

(in million PhP)

2018 36,934

PAGCOR

35,895

Entertainment City

165,284 141,436

Clark

12,146 8,622

Thunderbird

2,026 1,588 (Source: PAGCOR)

Asia Gaming Briefings | May 2020

Suncity Group has won shareholder approval to invest in three parcels of land located at Manila Bayshore Integrated City. Suncity has approval to pay, through Suntrust Home Developers, an initial US$200 million as provided under a co-development and lease agreement with Westside City Resorts World and Travellers International Hotel Group. The shareholders also approved Suntrust’s lease agreement with Westside and Travellers as lessor of the parcels of land. The agreement comes as part of moves by Suncity to operate a casino in the Philippines, which began in October last year when Suncity acquired a controlling stake in SunTrust for the rights to build a five-star hotel with at least four hundred rooms and a casino with four hundred gaming tables and 1,200 slot machines for both the mass and VIP markets.

13

22-23 September 2020 Shangri-La at the Fort Manila, Philippines

Asia Gaming Briefings | May 2020

SOUTH EAST ASIA 14

SINGAPORE

Singapore to update gambling oversight Singapore has announced a major overhaul of its highly respected regulatory regime to make sure it keeps abreast of new product developments and technologies.

T

he central plank of the overhaul will be the expansion of the powers of the casino regulator, the Casino Control Commission, into a new umbrella body that will encompass all forms of gambling in the city state. The new body is intended to be up and running by 2021 and will be known as the Gambling Regulatory Authority, the Ministry of Home Affairs (MHA) said.

At present, the Casino Control Commission regulates Singapore’s two integrated resorts, while a gambling unit within the MHA

Asia Gaming Briefings | May 2020

regulates fruit machines and remote services.

Racing and wagering activities carried out by Singapore Pools come under the Singapore Totalisator Board.

Online gaming, outside of activities carried out by Singapore Pools, is strictly prohibited.

The government said that regulators in Singapore have done a good job of protecting the public, however there are emerging trends that can have a significant impact on the gambling landscape. For example, technology has changed the way people

gamble and made it more accessible. While business models have evolved to suit changing customer preferences by introducing gambling elements in products that are traditionally not seen as gambling.

The GRA will consolidate and optimise gambling regulatory resources within a single agency. “This will allow GRA to stay even more effectively abreast of technological and global trends, respond faster to emerging products in particular those that cut across different

SOUTH EAST ASIA 15

GROSS GAMING REVENUE RWS 2019 gaming revenue $1.12b MBS 2019 casino revenue $2.16b

-4%

-0.5%

Singapore extends closures until June The Singapore government has extended its lockdown of non-essential business through to June 1st to stem the spread of the coronavirus. The island’s two integrated resorts are considered non-essential. They were initially told to close on April 7th for a period of one month. Even prior to the closure they had been operating increasingly strict social distancing measures, with only annual entry card holders and carded VIP players allowed to enter the casinos. After initially enjoying considerable success in keeping the virus under control, Singapore saw a spike coming in from imported cases. The focal point for new infections appears to be among work permit holders living in crowded foreign worker dormitories.

domains, and take a more holistic approach to gambling policies and issues,” the MHA said.

Singapore’s regulatory framework for its gambling industry has been widely copied as a model around Asia, with policymakers in Japan looking at how casinos are regulated there as a basis for its own nascent industry.

The MHA said its framework has been effective, with casino crimes making up less than one percent of overall crime and the number of people arrested for illegal gambling decreasing by 28 percent from 2011 to 2019. Probable pathological and problem gambling rates have remained relatively stable, at less than one percent over the past five years.

Among the areas up for review will be the need to regulate products such as “mystery boxes.” It will also review the penalties it hands down for any transgressions.

The MHA said that as it updates its laws, the government will retain a “generally prohibitive stance” towards gambling and will maintain a risk-based regulatory approach.

It gave no indication that it may relax its laws banning online gambling, which are amongst the most draconian in the world. Only Singapore Pools is allowed to take online bets on horse racing, TOTO and 4 D bets.

The government last year announced it would allow its two integrated resorts -- Resorts World Sentosa and Marina Bay Sands -- to expand and add more gaming capacity. However, it also increased taxes and entry fees for locals.

From April last year the annual entry levy went up by 50 percent to $150. At the end of a current tax moratorium in February 2022, it will also introduce a higher tax structure, which will also include more tiers. For premium gaming the rate will rise to 8 percent from 5 percent on the first $2.4 billion in GGR and will rise to 12 percent thereafter.

For mass gaming, the tax rate also gains by three percentage points to 18 percent for the first $3.1 billion in GGR and then 22 percent thereafter.

Genting execs agree pay cuts Genting Singapore said its executives and senior management have agreed to pay cuts to help to offset the impact of the coronavirus on its earnings, which it warns is likely to be significant. The operator of Resorts World Sentosa said it has seen a major drop in visitor attendance and revenue across all its facilities. It said it will reduce non-executive director fees by 15 percent in the first quarter, while its executive directors will take an 18 percent reduction in base salary. There will also be a cut of between 9 percent and 18 percent for all managerial staff and it’s encouraging employees to take unpaid leave, or annual leave.

Asia Gaming Briefings | May 2020

INDOCHINA

16

cambodia

Naga 3 plans take shape NagaCorp has further refined the plans for the third phase of its NagaWorld property in Phnom Penh and plans to begin pile driving for the resort in the second half of the year.

Asia Gaming Briefings | May 2020

INDOCHINA

L

17

ike the majority of other properties across Asia, NagaWorld has closed its doors to halt the spread of the coronavirus.

However, it was one of the later operators to turn out the lights and before doing so reported “relatively stable” financial results in the first quarter of 2020 “despite such challenging times,” including a 15 percent year-on-year advance in gross gambling revenue.

GGR for the quarter reached nearly US$369 million, most of which came from VIPs. GGR for the VIP business increased by 25 percent and rollings increased by 18 percent, generated mainly from players coming from North Asia and some from South East Asia, it said.

The Hong Kong-listed company noted it had benefited as junket operators with bases in its Naga 2 property continued to bring in VIP players, while IRs in Macau, the Philippines and Malaysia all closed.

“NagaWorld was the only casino in the Asia Pacific region where there was relative ease of entry to the casino without much administrative difficulty and yet having all the protective measures against the Covid-19 in place, both at the level of Cambodia and at the level of the company.”

NagaCorp was founded 25 years ago by Malaysian tycoon, Tan Sri Dr Chen Lip Keong, and has expanded to become one of the most successful casino groups in Asia. The operator has a monopoly position within a 200km radius

GROSS GAMING REVENUE 2019

2018

(in US$’ 000)

Mass Market Public Floor Tables 318,315 235,712

EGM 158,054 235,712

VIP Market 1,243,107 1,069,426

Overall GGR 1,719,476 1,434,420 (Source: Nagacorp)

of the Cambodian capital Phnom Penh, which runs through to 2045.

The group opened Naga 2 in late 2017, doubling its capacity and also introducing a new standard of service and non-gaming entertainment to Cambodia. The new facilities drove significant gains in revenue, in particular in the VIP business.

Naga 3 is scheduled to be completed by 2025 and will increase the capacity of the combined complex by at least two times. It will feature 5,000 hotel rooms, 1,300 gaming tables and 4,500 electronic gaming machines.

It is expected to be one of the largest integrated resort complexes in the world.

In its recent results announcement, the company gave no indication that the current crisis would create significant changes to its plans.

“Despite the Covid-19 fear, the group shall continue the development of Naga 3 and the expected successful completion of Naga 3 by 2025,” it said. “The company believes the long term prospects and outlook shall remain stable.”

In December, the company approved a new design concept, incorporating changes suggested

by Chicago-based Skidmore, Owings & Merrill, which is working on the project alongside original architect, Steelman Partners.

Under the new design, the number of towers has been reduced from five to three to improve views for guests and to create a more “elegant

look” on the Phnom Penh skyline. It will also now incorporate an Upper Podium from the 57 floor, which will include VIP gaming, but also a Marina Bay Sands-style swimming pool deck overlooking the Mekong River.

The three towers will rise from a mixed-use Lower Podium, which will be connected by a series of horizontal and vertical “streets.”

“This design will set a new standard for urban gaming resorts in Cambodia, and the world,” Naga said.

Cambodia’s casino market has seen an explosion in growth over the past few years.

Although a large part of that expansion came from the fact that land-based casinos were able to host online operations up until January this year, there are still solid indicators underpinning the industry.

The local economy is estimated to have expanded by about 7 percent in 2019, driven by foreign direct investment. The total number of International tourist arrivals last year gained 6.6 percent to 6,610,592, led by the Chinese. The government is aiming to more than double China arrivals to 5.5 million by 2025, with a targeted marketing program and China-friendly service policies.

With signs that the Covid-19 situation in China may be stabilising, Cambodia expects to be one of the key beneficiaries once travel flows normalise.

Donaco clears up legal disputes with Star Vegas vendors Donaco International says it has settled its various legal disputes with its former Thai vendors for the Star Vegas casino in Poipet, including the proceedings in Singapore, Australia, Thailand, and Cambodia. “The settlement reached provides certainty of tenure for the Star Vegas business and will conclude all disputes between the parties,” it said. “It will also allow the company and management to now focus on the forward momentum of the profitable Star Vegas business, and continued improvements to the company’s balance sheet and financial position ahead of any Covid-19 impacts to second half revenue and earnings.” Donaco Chairman Mel Ashton commented, “We have reached a pragmatic and fair settlement of this long running dispute, in what we believe is a timely manner. Most importantly the remaining value of the Star Vegas business is retained for shareholders, and we do not expect any changes to the carrying value of the asset as a result of this settlement.”

BBIN teams with Cambodian childrens’ charity TGB Charity, a subsidiary charity brand of BBIN, partnered with the Cambodian Children’s Fund (CCF) this year and donated US$40,000 to various educational projects to support vulnerable children in Cambodia. The donation will be used by CCF to pay for children’s school fees, stationery supplies, various school subjects, and maintenance of school facilities.

Cambodian Children’s Fund is a local non-profit organization in Cambodia. Founded by Scott Neeson in the capital of Cambodia, Phnom Penh, in 2004, it specializes in providing a variety of important healthcare and education services to children who are living in poverty or have been maltreated.

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Creating opportunity from crisis The Covid-19 pandemic is certainly the biggest crisis that most of us have faced in our lifetimes and without a doubt will change the way we live and work. With the number of infections and deaths mounting by the day, economies crippled and personal freedoms removed on an unprecedented level, it’s hard not to be gripped by a sense of panic!!

H

owever, there will be light at the end of the tunnel and our focus section in this edition of Asia Gaming Briefings tries to offer a path towards recovery.

In our first article, we report on comments made

Asia Gaming Briefings | May 2020

by Canadian entrepreneur Earle Hall in the inaugural session of our webinar series in April. Hall, who is CEO of Axes Network, points out that periods of great creativity and opportunity have historically followed great upheaval. Although much of the world’s population is undergoing enforced isolation, this is not something that will leave a long-term imprint as human beings are social animals and crave contact, he argues. Ultimately this bodes well for land-based casinos, although in the short term, it’s likely to be the local properties that will benefit rather than those reliant on tourism and travel.

In our second article, gaming lawyer David Green tackles some of the regulatory changes that we may see emerging in the industry. Online gaming companies, both social gaming and for cash, are seeing a surge in activity that’s going to be hard to reverse even when travel returns to some degree of normality. Authorities may need to take another look at potential regulation to ensure fairness and transparency.

Green also points out that the crisis has highlighted the vulnerability of land-based casinos, which will need to be factored into future feasibility studies. It may even have an impact on how much the Macau government can demand of the concessionaires during the license renewal process, given this business risk.

Staying in Macau, the operators have all stepped up to the plate to help out the local community, donating millions of patacas in aid, as well as medical and other supplies to help the needy. We take a look at their efforts, which have all been undertaken at a time when they are generating close to zero revenue due to the closure of the borders. How are they allocating funds, to which sectors of society and have they done enough to help?

Lastly, casinos across Asia will eventually open their doors again, though the outlook will remain far from certain. Companies will need to optimise their operations to keep costs to the minimum while the revenue picture improves. We speak to experts about what tools can be adopted to help managers ramp up their various properties.

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Social instincts to ensure casino survival The future may seem bleak for the land-based casino sector at present, though traits fundamental to human beings will ensure that once normality is restored visitors will return to the gaming floors.

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hat is one of the takeaways from Earle Hall, CEO of Axes Networks, appearing on the inaugural session of Asia Gaming Brief’s webinar series.

Hall is an entrepreneur and visionary speaker who was invited to give his outlook on how the current pandemic will shape the way we live and work.

Although the bulk of the world is in isolation in an attempt to stop the spread of the virus, with borders closed, travel shut down and nearly all global casinos closed, the crisis won’t eradicate the basic human need for interaction. Isolation is toxic for the human race, he says.

“People need to be in a social setting. People want

Asia Gaming Briefings | May 2020

to get up and go out. 4000 years of humanity won’t change because of a pandemic,” he argues in response to a question from the audience.

Hall argues that local casinos are likely to get back up to speed quickly, perhaps with additional support coming in from technological tools to support player engagement and retention. There may also be more impetus for convergence between the land-based and online gaming sectors given the vulnerability of the former to the type of shock we are now seeing.

However, he adds that there are concerns over Las Vegas and resorts that rely on tourism and major MICE events for revenue generation.

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“Las Vegas, where travel, hotel and expensive restaurants are included and where conferences are the main motor of this, we’re going to have to have incentives to get people moving again,” he said.

The inaugural webinar was focused on key ways that the current crisis may change our work and lifestyle patterns and not just on gaming. The tone was upbeat, with one of the key messages being that great opportunities spring from great crises once the panic and fear subside.

“Online everything” will be a key mantra and any business that is not already operating on the cloud will be forced to do so. In the retail sector this will have major implications, especially for the lower end of the market, which may struggle to survive the shift and where we may see major consolidation. At the higher end of the spectrum, however, there is likely to be continued demand for bricks and mortar.

Hall argues there will need to be a rethink of global supply chains, with the run on toilet paper highlighting the crisis in the just-in-time model that has been so successfully deployed by major retailers.

Some kind of stockpiling for pandemic readiness will need to be considered.

This doesn’t mean the end of globalisation, or ultimately of travel. While there is likely

to be a greater embrace of locally sourced goods, once the pandemic fear begins to fade, economics will take centre stage, with consumers seeking out cheaper alternatives.

“Local sustainability is going to be a big

“

Local sustainability is going to be a big thing and it’s going to stick around.

While people like to pretend they are loyal to local, they are loyal to price.

”

thing and it’s going to stick around. While people like to pretend they are loyal to local, they are loyal to price,” he says. “If the local product can be built and distributed at a competitive price then local will be awesome, but once people forget about this, the size of your wallet will determine the

product you buy.”

Hall argues that there will be a rise in socialism. “Health is not a luxury item. We have seen way too many people dying from this virus. I really do think there will be a way of rethinking health as a basic need.”

“How do we create some new safeguards in the social safety net to make sure we have access to a healthier life.”

The crisis will also accelerate trends that are already underway, such as a move to digital currencies and towards greater use of artificial intelligence and robots, “which don’t get sick.”

This greater use of AI will mean improved standards of service in the casino industry.

“AI is all about predicting who you are and what you love so we can give it to you better, faster and more, so that the experience is unforgettable. It’s about personalised individual marketing and the sooner this message gets to the casinos so they stop sending out those stupid coupons and stop destroying trees.”

While at present, it seems hard to envisage getting back to normal, or what the “new” normal may be, Hall is clear that it doesn’t have to be negative.

“Crisis is opportunity, it’s just disguised as fear. Once you get past being scared to death there is opportunity everywhere.”

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Prof. Dr. Wolfgang Georg Arlt*

Founder and director, COTRI

China tourism - the road to recovery The good news first: Chinese will remain Chinese. After the number of persons globally suffering from CoViD-19 has come down to a socially acceptable level, the majority of Chinese will, as before, not wait for gods or emperors to help them, but will diligently and persistently work for the greater fortune of their families.

T

hey will still combine long-term strategies of investment in real estate and in the education of the next generation, with the short-term strategy of chancing their luck with cards or dice. The admiration of mindless bling-bling consumption might have taken a hit. Nevertheless, the Chinese passion for the thrill and fun of gaming has survived condemnations from Confucius to today and it will not be ended by a virus.

There is no doubt that the world will change in the post-Covid-19 period, as open borders, globalisation and fragile supply chains will be set back a decade or

Asia Gaming Briefings | May 2020

so to the disadvantage of the Chinese economy. It will take a couple of years to climb out of the pit the global economy fell into in the first half of 2020.

For the 20 percent of the Chinese population affluent enough to travel to Hong Kong, Macau and Taiwan and especially for the 10 percent of Chinese holding passports, who have already travelled further afield in recent years, the insouciance of spending will probably decrease a bit until the memory of Wuhan vanishes into oblivion. But their ability to spend will be less damaged, and it is rather wealth than income

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that fills the pockets – or Alipay accounts - of Chinese gamers.

One clear result of the Coronavirus crisis is the increase and acceptance of the use of IT and AI in controlling the movements of people and money in China and abroad in terms of face recognition, automated localization and cash flow control. Illegal activities will be easier to detect, helping the gaming industry to get rid of some black sheep.

What will the road to recovery look like for the Asia-Pacific region with regard to Chinese visitors? China declared in the first half of March that the worst was over and that Chinese airlines were already starting to open up again especially to neighbouring countries.

Chinese citizens answered in surveys that they were already making plans for outbound trips during the May holidays.

The restart of Chinese outbound tourism within Asia seemed to be near. However, by the end of March this policy changed completely after imported infections, with China almost completely forbidding entries and exits to and from the country on a level not seen since the last century.

Still, the economic importance of the transport

of goods and people to and from China in the Asia-Pacific region is so big that a reopening of borders at least within Southeast and East Asia will happen as soon as possible. It can be expected that everything will go back to normal in summer, with a bigger than ever number of Chinese outbound travellers going on the trips they postponed in the first third of the year.

Qualitatively, the group of Chinese outbound travellers insisting on quality and authenticity, on immersion and participation will grow further, with family groups of two or three generations more often travelling together. Countries which showed compassion and empathy for China during January and February will receive positive media coverage in China. For Europe and Australia, and especially the USA, it will take more time before travelling to these destinations will be perceived as safe again. Therefore the wave of post-virus Chinese travellers will rather have Thailand than Germany, and rather South Korea than the USA as preferred destinations.

As long as the White House insists that the “Chinese” virus is to blame and Overseas Chinese living in the USA, fearing racial attacks, feel the need to stock up on

small firearms and ammunition, it is hard to imagine that Chinese leisure tourists will visit the country in large numbers.

UNWTO forecasted a decline of 20 percent for 2020 in international travel. If Asia manages to restart international travel by June, this forecast hopefully will turn out to be too pessimistic.

What becomes more and more clear is that trust will be one of the main elements we will have to rebuild, trust between people, who again can start to use tourism as a joyful way to meet new people and to make new friends across borders.

Therefore, all destinations and tourism service providers should use the opportunity to prepare for the new wave of Chinese visitors by training their staff and adapting their products more precisely for the different segments of the Chinese outbound market to prove to their future customers that they are still welcome. * Prof. Dr. Wolfgang Georg Arlt is the founder and director of COTRI China Outbound Tourism Institute. He first visited the People’s Republic of China in 1978. From 1991-1999, he owned Inbound Tour Operator China-Europe.

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David Green*

Principal, Newpage

Covid-19 changing the rules of the game?

It is indisputable that the COVID-19 pandemic presents an existential threat both to the physical and fiscal viability of nations, such as we have never seen outside a world war in our lifetimes.

U

nlike earlier iterations of coronavirus pathogens, such as SARS (2002-2004) and MERS (20122014), COVID-19 threatens to provide an epitaph for the passing of globalisation and connectedness as we have known it. Infections have now been reported in more than 200 countries.

Borders are sealed, tourism is virtually non-existent, freedom of movement has been severely curtailed and equity markets are highly volatile. The implications for the casino industry globally are profound, and I see no

Asia Gaming Briefings | May 2020

likelihood of a snap-back to the way things were when the virus disappears, or is eradicated by mass vaccinations.

COVID-19 has laid bare the serious distributional disadvantage associated with bricks-and-mortar casinos in an online world.

The oft-quoted mantra supporting the Integrated Resort arms’ race globally has been “Build it and they will come”. The underpinning assumption is that people can come, and that it is safe for them to do so. Events of the past couple months suggest that the assumption

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is not immutable. Pandemic risk needs to be factored into financial sensitivity analyses. So too does the risk of massive patron and revenue leakage to online gambling sites, and to social gaming platforms.

The flip side of crisis is opportunity, and the rising volume of spam hitting my inbox for every conceivable form of online betting or social play suggests that those operators are enjoying a substantial uptick in business.

Migration to online gaming, both hard and soft, will be difficult to reverse. Regulated sites generally provide reasonable to high levels of game integrity and cyber protection for personal data and monetary transactions. Of course not all countries allow their residents to access or play online games, but rapid cycle technological developments, and the sheer inventiveness of players and operators alike makes it extremely difficult to effectively enforce such prohibitions.

For many years, banking transactions were only conducted over-the-counter. Banks,

casinos close cousins, have been abandoning branch networks across the globe in favour of electronic and online platforms.

I anticipate that online social gaming will be looked at afresh by governments to see whether, and how it should be regulated.

Operators argue that it is not gaming, because no prizes are ever paid out. However, many sites offer simulated casino gaming, using virtual coins. Successful platforms, like Double Down and High 5 reportedly enrol thousands of new players daily, and generate revenues in excess of US$50 million annually. Given their low cost structure, broad range of games, both stand alone and tournament, and accessibility, these are comparatively high margin businesses, when compared with terrestrial casinos. Without regulation, there is no certainty that the games are fair, that payment mechanisms (sometimes activated through social media) are secure, or that players exhibiting disordered gaming are identified and supported.

I expect fresh impetus for the elimination of cash entirely in casinos. Contactless, cardenabled payments have become the new norm for consumers, as evidence of the longevity of the virus on metallic surfaces has emerged.

While there has been an inexorable trend towards cashless gaming, and the adoption of either pre-paid “dumb� or smart, incrementedvalue cards to enable play, and to link to loyalty programs, constraints are often encountered.

These include the cost and development time of back-end systems needed to support cards, such as loading value into cards, whether by electronic funds transfer, credit or debit card, transferring money from the cards to patron accounts and providing adequate cyber security to prevent hacking attacks. Moreover, who should regulate such cards? If bankingstyle transactions are involved, then it may be inappropriate for a gaming regulator to be the primary regulator of the transactions and systems which support them. Smart cards have significant benefits. Biographical data can be captured and stored, and used to generate AML reports, without the need for supplementary ID checks. Customers can be barred simply by having their player card cancelled or suspended. All play is digitally recorded, without the need to agglomerate information from multiple sources. And cages and count rooms could be consigned to history, just as catwalks were when camera surveillance was adopted.

There are ramifications also for the concession re-tender process which is expected to get underway within the next 12 months in Macau. How will concessionaires and prospective new participants dimension the risk that a new pathogen may emerge to decimate their business? Is the government ready to make allowances for the likelihood and magnitude of this risk in setting its own expectations for what tenderers should pay for new concessions? Beyond Macau, will we now see a US$10 billion integrated resort developed in Japan?

It is hard to see investor sentiment being as supportive now as it may have been before COVID-19. And who will be left standing anyway among major casino operators? Like the virus itself, so many questions, so few answers! * David Green is a principal at Newpage Consulting, experts in gambling regulation.

The company advises in the three key areas of regulatory frameworks, market analysis, and taxation regimes.

Asia Gaming Briefings | May 2020

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Courtesy: Macau Photo Agency

26

Casinos to face reopening headaches The Covid-19-mandated lockdown of global casinos is one of the biggest crises the industry has had to face and getting the reopening right once the pandemic subsides is also going to present a major challenge.

“R

eactivating a moth-balled business operation, particularly one as complex as a casino, major club or hotel isn’t just as simple as opening the doors and turning on the lights, taps, tables, machines, burners,” said Geoff Wohlsen, an Australian gaming consultant.

“Property operations will be like an athlete going back to the field after some time off with injury. Things will be clunky. Some key staff team members won’t be there to paper over the deficiencies of new staff. So ‘Business As Usual’ conditions won’t be what you’ll get in the immediate post COVID world.”

Part of this process is figuring out the demand conditions of your market post-COVID-19.

Tangam Systems’ Ari Mizrachi, SVP of Casino Operations & Strategy recently delivered a webinar on casino reopenings in which he warned that uncertainty in demand will likely be one of the key challenges for operators.

“The industry has seen consistent and predictable year over year growth over the past six years, but the pandemic brings unpredictability in the future demand.

Operators will need to be ready to adapt rapidly as demand conditions change to find the right balance between guest satisfaction, labour costs and profitability.”

“Are there still restrictions in travel, length of stay, has

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consumer sentiment improved, has disposable income from your target market improved?”

Wohlsen, who is looking mainly at the Australian gaming market, said he expects “pent-up” demand from customers in the post-COVID-19 period.

“They’ll want some light and excitement in their lives; a sense that ‘the war is over and that we can get out again and enjoy ourselves’. So be ready for big crowds and some anticipation,” he said.

This may not necessarily be the case, especially in Macau, which caters to foreign visitors, argues Andrew Klebanow of Klebanow Consulting.

“The closure and subsequent re-opening of casinos in Macau offers many valuable lessons. Just re-opening the casinos did not lead to a flood of customers returning.

Macau’s casinos suffer from a dearth of customers who have been prevented from returning to Macau due to government restrictions on cross-border traffic,” he said.

“Each jurisdiction that re-opens will do so under different circumstances. Casinos in the Philippines, many of which are dependent in part on foreign visitors, also serve local residents and they will return more quickly than gamers from other countries. Korea’s casinos, with one sole exception, will experience a much slower path to recovery since they are wholly

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Courtesy: Tedward Quinn

dependent on visitors from China and Taiwan.”

One thing is for certain though, the operating environment will change as a result of the COVID-19 pandemic.

The greatest challenge for operators is to assure customers that it is safe to return to their favorite properties and that they are taking every precaution to ensure their safety, noted Klebanow.

“Casinos, by design, bring a lot of people together into a fairly confined space, it was never designed to provide social distancing...

The greatest challenge for operators will be to create and maintain space between customers as well as their employees.”

“Operators need to look at every place where employees and customers congregate and develop strategies to mitigate bottlenecks.

Elevator lobbies are one such example. Queues at the Cashier’s Cage and player rewards center are other examples. Every place where there is a potential for people to get too close to each other needs to be examined and mitigated,” he said.

“In the post-COVID-19 world, we are all far more aware of hygiene and cleanliness,” adds Wohlsen. “Properties that are obviously and overtly clean and hygienic will do better than those that aren’t.”

Wohlsen suggests that casinos and venues should be ‘loud and proud’ about their hygiene policies.

“I can imagine that great properties will be making short announcements to customers like “Please have patience with our team members while they clean our slots in the interests of the health of our valued customers…” Properties may even appoint ‘hygiene team members’ whose sole role it is to ensure public areas are clean and hygienic. The words might even be on their shirts or badges. A brand new hygiene policy might be posted for everyone to see.”

And it’s the best time to be thinking about these things, says Wohlsen, comparing the COVID-19 crisis to a global “reset switch”.

Mizrachi said it’s a great time for operators to reassess your game mix, floor layout, pricing strategy, and operating procedures. Operators should also work now to become “data ready.”

“As an operator you may manage thousands of employees and are constantly putting out fires.

Now for the first time ever as an operator, you have a chance to reset.”

“Let data help you drive your decision making when running your casino. Work with your current strategic analysis teams to build automated reporting. Take this time to ensure you are using your current systems to the best of their abilities, and more importantly to be agile,” said Mizrachi.

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Macau operators make CSR push amidst coronavirus crisis As the Covid-19 crisis descended upon, first, China, then the world, the six Macau operators have not been idle in their CSR efforts, in spite of the mandated casino closures and reopenings under difficult economic conditions.

T

he coronavirus came down like a hammer blow on Macau’s gaming industry, but the six operators remained core players in the local community, needing to step up in the time of greatest need.

There has been some variation in the approaches that the six operators have taken, including differences

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in the degree to which they have publicized their respective CSR activities. It is not clear that there has been much coordination between them.

Nevertheless, at the initial stage in late January and February, it would seem that all six operators pledged about MOP20 million (US$2.6 million) to mainland China to assist its efforts to combat the

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such as taxi drivers, coach drivers, and tour “family bonding” during the crisis period, guides, their families, and more.” There were sponsoring the Sheng Kung Hui Social Service few additional announcements, perhaps Coordination Office for a donation of three because Melco had effectively outsourced hundred parent-child picture book gift kits, and jointly organizing a parent-child coloring the specific uses of its donations.

A week later, on February 23, the company contest to enrich stay-at-home activities.

Somewhat related as well was Sands’ announced a MOP 3 million (US$390,000) donation to Women’s General Association of decision to speed up its investment projects in Macau, including forty Macau as funding for large scale construction surgical face masks and and renovation projects an allowance scheme to o f T h e L o n d o n e r, benefit those including Sands China Four Seasons Hotel, single mothers and and St. Regis Hotel. families with children says it was the By accelerating and with special needs. It first operator—on increasing investment also supported a public and construction, this health awareness and February 1—to was expected to support wellbeing online video donate 500,000 a large number of local series by Macau Daily enterprises, including News to further publisurgical masks nearly a hundred SMEs. cize the government’s to the Macau Facility maintenance coronavirus prevention and repair projects, government. appeal. such as upgrading the On April 14, Melco company-wide computer announced the donation software system, involves of 500,000 surgical masks to the Macau government and the more than MOP100 million (US$13 million), local community, with 200,000 such masks expected to benefit many local enterprises, being donated directly to designated NGOs including more than twenty SMEs. On February 2, Galaxy Entertainment under the Social Welfare Bureau. The masks went to help vulnerable groups such as the announced its own donation of MOP20 elderly, single families, long-term patients, million (US$2.6 million) through the Liaison Office of the Central People’s Government and medical patient support staff.

Finally, as a longer term initiative to in the Macau, as well as a donation of support local people and to help minimize MOP5 million (US$650,000) to support the socioeconomic impact of Covid-19, on prevention initiatives within the Macau March 16 the company announced the hiring community, much like the others, but on of a hundred local resident construction March 5 followed up with a subscription workers, providing them with one-year of HK$100 million (US$13 million) of the employment contracts and on-the-job SMEs themed Covid-19 Impact Alleviation training. The program aimed to advance local Social Bonds issued by Bank of China’s talent and support sustainable development. Macau Branch, aimed at easing the operating Many of Sands China’s local CSR efforts pressures and providing assistance to local were directed through Sands Cares. The SMEs affected by the epidemic. Moreover, earliest initiatives were directed at families and on April 13, Galaxy made an additional children suffering the burdens of living under donation of MOP75 million (US$9.8 million) conditions of isolation, as well as financial through the Galaxy Entertainment Group support for a variety of local NGOs. Under Foundation to mainland China’s campaign the same fund, Sands Cares helped deliver against Covid-19.

That meant Galaxy’s total contribution hand sanitizer, medical gloves, and shower caps to local community organizations; as by mid-April was MOP200 million (US$26 well as support a service for live-alone elderly million), apparently much larger than most of during the epidemic involving telephone calls the other operators, based on the publicized statements of each company. to ensure their well-being.

In these various ways, the six Macau Sands China says it was the first operator— on February 1—to donate 500,000 surgical operators have been making efforts to fulfill their social responsibilities as key pillars of masks to the Macau government.

They also gave special attention to the community.

“

”

coronavirus—made in coordination with the Liaison Office of the Central People’s Government in Macau—and MOP5 million (US$650,000) for local efforts in Macau.

However, this initial uniformity appears to have diverged in more recent weeks.

Sticking to the operators about which a more complete picture of their CSR efforts is available, it can be noted that Melco Resorts & Entertainment was perhaps the earliest mover, announcing anti-infection measures on January 27 and a HK$20 million (US$2.6 million) donation to support anti-coronavirus initiatives for Wuhan and Hubei on January 29.

On February 16, it followed up with a MOP5 million (US$650,000) donation to set up the “Special Aid Fund for Workers in Need” in collaboration with Macao Federation of Trade Unions. The main beneficiaries of the fund were expected to be “workers and self-employed persons

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NORTH ASIA

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JAPAN

Daniel Cheng*

Olympic delay may shake up IR race The cancellation of the Tokyo 2020 Olympics, a seventeen-day summer extravaganza with a sticker value estimated to be in excess of US$13 billion, may have knock on implications for the IR process.

Asia Gaming Briefings | May 2020

NORTH ASIA

T

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he Olympics and IRs are meant to MGM still saddled with over US$11 billion of be the jewel in the crown of Japan’s debt, and Orix a whopping US$42 billion of longest-reigning prime minister, liabilities, albeit mostly in long-term securities.

Shinzo Abe, to usher him into Collectively, both companies still have over the sunset in a blaze of glory come next fall. US$5 billion of cash in their war chest, but Olympics Minister Seiko Hashimoto, who also how much that will dwindle depends on how happened to be an IR proponent, has kept a long the coronavirus stays around.

In comparison, the professed local stalwart brave front thus far, but time is not on her side.

An Olympics cancellation entails an for Yokohama is Keikyu Corporation, a enormous political and economic cost for Japan. minnow relative to Orix. Transportation and For the real estate sector, it is a double real estate constituted three quarters of its whammy. The prospect of no summer Olympics US$3 billion annual revenue, segments that and an IR limbo will feel like a vicious are among the hardest hit by the coronavirus. uppercut-left hook combo knockout blow. With only about US$500 million in pocket A Nikkei Asian Review article on March 14 change, Keikyu might have to taper, or even elucidated how the local real estate companies reassess its IR aspirations.

The hardest hit local and the Olympics are IR candidate has to be joined at the hip.

Tokyu Land, whose stock Close to a dozen price suffered over a Japanese real estate Gambling is more than 40 percent companies had bet the only business loss at the height of the substantial capital in crisis. The company the development of known to thrive have to consider the Olympic Village regardless of a good may refinancing its US$12 with a view to flip it in billion debt, or dig the market as private or bad economy, into their under US$2 condominiums for a but its much billion of cash reserves, handsome profit after vaunted immunity if the repurposed and the Games. With the renamed Olympic Viluncertainty, investment met its match in the lage, the Harumi Flag, analysts have been quick to coronavirus. gets literally flagged downgrade the companies’ by the postponement earnings forecasts. Lost of the Games. It is a too was the eagerly scenario that might anticipated so-called “Olympics showcase effect” which would diminish Tokyu Land’s bargaining power have buoyed property related equities trading. with the casino companies eyeing Yokohama.

The travails of these Japanese Big Cs will be The same real estate firms were the leading local brides-in-waiting to form a union with another under-the-belt shot out of the blue for international casino companies for IRs in Japan. the already much beleaguered Japan IR ambition.

Gambling is the only business known to A protracted bloodbath in the equities market might put a large dent in their capital position, thrive regardless of a good or bad economy, but and unnerve them from jumping into another its much vaunted immunity met its match in the coronavirus. As equities everywhere went into high-capital intensive venture.

Leading the local brigade is Orix Corporation, a tailspin, casino companies were among those which is technically not a real estate company that bore the greatest brunt. The various levels but a diversified conglomerate. An international of lockdowns and travel restrictions around behemoth in its own right, with over a third the world also meant none of their executives of its profit derived from outside Japan, Orix are visiting Japan anytime soon.

This culminating situation in Japan is is no shrinking violet when it comes to big ticket investments. The company shelled out shaping up to be a perfect storm to foil Prime over US$10 billion in investments in the last Minister Shinzo Abe’s going-away party. fiscal year, of which the largest slice went to a 30 percent equity stake in Irish aircraft lessor, Avolon, for US$2.2 billion. The company dwarfs * Daniel Cheng is a hospitality industry its Osaka IR partner, MGM Resorts, bringing professional, and formerly held senior executive in almost twice the top line of the Las Vegas positions with Hard Rock International and firm. But it is also a union of large debtors, with the Genting Group.

“

Osaka accepts IR timetable delay Osaka has thrown in the towel on the prefectural government’s long-cherished cherished prospect of opening its Yumeshima IR before the 2025 World Expo. Osaka Mayor Ichiro Matsui explained, “People currently cannot travel between Japan and the United States. Opening before the World Expo was already going to be a tough climb, but with movement now stopped, we can’t avoid the conclusion that there isn’t enough time.” Rather than selecting its IR consortium partner in June, the selection will be delayed until September. However, there is, as yet, no indication that the MGM-Orix consortium will face any challenger, even on the slightly longer timeline. According to the revised schedule, the approval of the prefectural assembly and the city council will be sought in February or March of 2021, and if the national government approves the license, Osaka will stipulate that the Yumeshima must open before the end of March 2027.

”

Nagasaki ups IR job creation forecast Nagasaki Governor Hodo Nakamura told his prefectural assembly that the establishment of an IR at Huis Ten Bosch could result in the creation of 28,00036,000 new jobs in the local economy, a sharp revision upward from the 22,000 job estimate the prefectural government made in April 2018. Nakamura’s new figures are based on the various proposals that the prefectural has received from IR operators and private investors. Investment amounts now expected to come in between JPY350 billion (US$3.2 billion) and JPY460 billion (US$4.3 billion), and annual visitation between 6.9 million and 9.3 million people.

Asia Gaming Briefings | May 2020

NORTH ASIA 32

south korea

Jeju projects face headwinds Plans to build two of South Korea’s biggest resorts on the southern island of Jeju are facing headwinds, amidst financing shortfalls and declining revenue.

H

ong Kong-listed New Silkroad However, the casino performed poorly in 2019 Culturtainment admitted in a due to trade tensions.

For 2019, New Silkroad reported that revenue recent filing that land development for its Glorious Hill project has not from continuing operations decreased by 7.3 begun due to a lack of funding, despite having percent to HK$211.2 million. Revenue from the received the relevant development approvals group’s wine business was up 3.5 percent, though revenue from entertainment fell 20.2 percent. in March 2019.

The South Korean unit has also faced The company, which is active in the real estate sector and operates wineries in China, ongoing litigation, with the Jeju Prosecutor’s announced its entry into the IR business in Office filing an appeal against a decision to late 2015. The group said it saw the potential acquit Megaluck on charges of violating the to broaden its revenue base and was seizing Tourism Promotion Act. The case involves an the opportunity posed by the increasing indictment for outsourcing the management of slot machines to popularity of the Korean Global Game Co. culture in China.

Another Hong The HK$7.5 billion Kong-listed company, Glorious Hill project Revenue from Landing International is on a site spanning gaming plunged Development, is in the about 1.3 million square process of developing metres and was due to from $1.48 billion what will be the biggest comprise a five-star hotel to $213 million IR on the island and also with about 570 rooms reported weak gaming in the first phase, as last year, it said, figures for last year. well as commercial and giving no further Landing is seeking residential real estate, an to raise $137.1 million entertainment complex, explanation. ($17.6 million) through a healthcare, a theme park placing of shares to support and a golf course. ongoing operations.

Jeju island is a popular For 2019, the company said revenue dropped destination for South Korean honeymooners, but in recent years has also drawn more by about 61 percent to HK$815.5 million, while Chinese tourists, helped in part by its visa- its loss ballooned to $2.1 billion from $705.1 free entry policy. It boasts a cluster of smaller million the prior year.

Landing attributed the fall in revenue and casinos, though larger projects have been broader loss to a decline in its gaming business. slow to progress.

New Silkroad gained control of the Jeju It said a fair value loss on investment properties, Government’s Gaming License No. 8 through the impairment of property plant and equipment the acquisition of a stake in a local company as well as an increase in depreciation charges in December, 2015. The license permitted the had also been contributing factors to the loss.

Revenue from gaming plunged from $1.48 company to operate a casino in the KAL Hotel, which had about 29 tables and 24 electronic billion to $213 million last year, it said, giving no further explanation. gaming machines.

Landing operates Jeju Shinhwa World, which It subsequently renamed the property MegaLuck to appeal to its Chinese clientele. spans an area of about 2.5 million square metres.

“

”

Asia Gaming Briefings | May 2020

NORTH ASIA 33

The company transferred its casino license from the Hyatt Regency Jeju in February 2018 to the new resort. The casino has a gaming area of approximately 5,500 square meters.

It’s the largest foreigners-only casino in Jeju with 155 gaming tables, 239 slot machines and electronic table games.

While acknowledging the current crisis will have a major impact on the business, Landing said it would continue to roll out facilities at the integrated resort. In Q2, the company expects to open a seasonal garden park to cater for what it says is “increasingly popular nature tourism.”

GKL 2019 profit slips Grand Korea Leisure saw its profit fall 6.9 percent to KRW72.4 billion (US$61.2 million) in 2019. In a regulatory filing, the company said it posted KRW 96.8 billion in operating profit for the year, while annual revenue rose 2.2 percent to KRW490.8 billion. The casino operator said it delivered strong fourthquarter results, however, with net income up 167.5 percent year-on-year, while revenue rose 17 percent. GKL operates the Seven Luck foreigner-only casino in Gangnam Seoul, Gangbuk Millennium Seoul Hilton and in the Busan Lotte.

Paradise March revenue falls 60% Paradise Co. reported a sharp decline in its March casino revenues by 60.5 percent on a year-on-year basis. Sales in the casino division amounted to KRW19.73 billion (about US$16 million). Both table and machine performance were down over 60 percent during the month. Paradise Co. had started the year strong in spite of the coronavirus crisis, recording a casino revenue rise of 16.2 percent year-on-year in February, reaching KRW64.3 billion (US$54.2 million), driven by table games revenues. In late March, however, Paradise Co. revealed that it would suspend its four foreigner-only casinos in Seoul, Incheon, Jeju, and Busan as a measure to help prevent the spread of Covid-19 infection.

Asia Gaming Briefings | May 2020

NORTH ASIA 34

russia

Primorye project seen advancing despite crisis The Primorsky Krai Development Corp (PKDC), which is responsible for management of the Primorye gaming zone, expects a key project to move ahead this year, despite the outbreak of the coronavirus and remains upbeat about the region’s longer-term prospects.

R

ussian entrepreneur Maxim Smolentsev, who formerly operated two casinos in the Azov City zone, began work on the Shambhala casino project in 2018. The Shambhala Company is now finishing construction, with a view to press ahead with a planned opening in May this year.

The RUB8 billion project will involve an entertainment project with a 270-room luxury hotel, a casino, nightclub, restaurants and entertainment venues. The project will open in two phases, with the first stage involving the casino to coincide with the beginning of the tourism season in the region. The casino will

Asia Gaming Briefings | May 2020

have 32 gaming tables and 650 slot machines.

The first stage of the resort will spread over an area of about 38,000 sq.m.

Primorye is one of the four original designated gambling zones in remote areas of Russia, which were established after President Vladimir Putin banned gaming in 2009.

It is viewed as having the most potential of the hubs, given its close proximity to the northern Asian markets of Mainland China, Korea and Japan. About 420 million people live within a two-hour flight.

It also has an advantage over many other gaming jurisdictions in Asia, boasting the

lowest tax rate, paying a levy per unit and table rather than as a percentage of gross gambling revenue as is the norm in most other markets.

While the charges in Russia vary between RUB50,000 and RUB250,000 per table and between RUB3,000 to RUB15,000 per machine, the rates in Primorye are RUB125,000 per table and RUB7,500 per machine.

However, the vision to create a Macaustyle gaming hub has been slow to materialise, with Summit Ascent’s Tigre de Cristal the only property currently open, more than a decade after the zone was established.

NagaCorp, which operates the NagaWorld

NORTH ASIA 35

casino in Cambodia, was scheduled to open a $350 million resort last year, but that has been pushed back to 2021.

Others such as Diamond Fortune’s Selena resort, which has been renamed to Imperial, were set to open this autumn but there are some delays, PKDC said without elaborating.

Still, the corporation says overall the development has met its expectations, with investment agreements totaling RUB74 billion.

“Rome wasn’t built in a day”, the Corp’s Head emphasized. It concedes that visitation to the area has been hit by the disruptions from the coronavirus, but the crisis hit during the quieter winter months.

“The gaming zone in Primorye is mainly focused on the Chinese audience; after all, the Chinese are the most gambling nation on earth.

At the moment, the flow of punters from China has decreased, which affected attendance, but it is not possible to talk about serious financial losses,” PKDC General Director Olga SunZhaiu told AGB. “The same casino is visited

by Russian players, Koreans and Japanese,” she said referring to the Tigre de Cristal.

“In general, we hope that the situation will soon stabilize and Primorye will again fully resume its relationship with China.”

Summit Ascent opened the Tigre de

Cristal in November 2015. Phase 1 covers about 36,000 square metres, with a 121-room luxury hotel. It’s operating about 21 VIP tables, 35 mass and 335 slot machines. The company has delayed the opening of the second phase of the resort to amend design

In general, “we hope that the

situation will soon stabilize and Primorye will again fully resume its relationship with China.

”

plans after SunCity Group became a major shareholder, buying a 24.66 stake from Taiwan’s First Steamship Company and its chairman.

“After the closure of flights with northeast Asia, the gambling zone in Primorye lost customers, most of which were citizens of China.

Accordingly, this affected the attendance of the

GROSS GAMING REVENUE Rolling chip business Mass table business Slot business Net revenue from gaming operations

Tigre de Cristal in early 2020,” said Executive Director, LLC G1 Entertainment Stylianos Tsifetakis. “Winter is always a low season for us, therefore, this situation did not affect us as noticeably as if it occurred during the peak summer months.”

He added it’s too early to give any firm forecasts of the fallout, but the company expects the flow of guests to Tigre de Cristal to snap back quickly once air traffic in Northeast Asia normalises.

In the short-term, the gambling zone has been reorienting its efforts to attract Russian visitors, though says this is a temporary measure.

The PKDC noted the project was designed to target foreign inflows into the gambling zone, especially from Asia Pacific.

The PKDC estimates that the gambling hub once built out will create tens of thousands of jobs and additional revenue for the region through taxes. Eventually, there will be 12 hotel complexes with casinos.

There are also large-scale plans for nongaming entertainment on a 619-hectare site on Muravyinaya Bay. It has already signed an accord with a Korean company to create an 80-hole golf course. There are further plans for a water park and ski slope, as well as cultural, entertainment and sports facilities.

(in HK$ ‘000)

122,460 174,140 185,633 482,233

Bookies ask for aid, casinos close Russian bookmakers, struggling with the mass cancellation of sporting events, have asked the government for aid, while the country’s casinos have extended their lockdown. The bookies have asked for tax and rates relief, including foregoing their mandatory annual contribution of 5 percent of their betting revenue – with minimum payments of RUB15m (US$190k) per quarter – to local sports leagues. The companies are also seeking alternatives, with Fonbet taking bets on the new eWBSS Heavyweight Legends virtual boxing tournament, while Liga Stavok is taking wagers on FIFA 2020 virtual soccer. Meanwhile, Russia’s casinos are to remain closed as the pandemic deepens. The properties were among the last of the world’s casinos to shut their doors.

Summit Ascent executive director quits over strategy Summit Ascent executive director, Eric Landheer, quit the company due to differences of opinion with the board over strategic business development.

The operator of the Tigre de Cristal said it had received Landheer’s resignation letter on March 23 and had decided to use its discretion to terminate his employment by giving him payment in lieu of notice. He now holds no position within the group. According to his resignation letter, Landheer said he disagreed with the company’s future investment plan and allocation of financial resources. He also disagreed on the business development plan and the timing of its implementation, as well as corporate governance matters in relation to future or potential actions of the company.

Asia Gaming Briefings | May 2020

36

AUSTRALASIA

36

australia

Covid-19 latest blow in difficult year Australia’s operators are limping towards the end of a dismal fiscal year, with the coronavirus coming hot on the heels of disruption to tourism from bushfires and weak VIP traffic on international trade tensions.

Asia Gaming Briefings | May 2020

AUSTRALASIA

P

37

roperties across Australia were forced to close their doors from mid-March as the government ramped up efforts to combat the pandemic. Domestic consumer spending was already weakening and now the country’s properties are likely to receive zero support from VIP at least until the end of the year, according to J.P. Morgan research.

The firm says it’s unlikely that earnings will return to 2019 levels until at least 2023. In the second half of the fiscal year to June, Crown is likely to see a 54.7 percent drop in revenue, while Star will fall 58.1 percent.

Australia’s casinos derive the majority of their revenue from the domestic market, where unemployment is likely to rise to 5.7 percent at least as a result of the virus. The borders are closed to international travel, possibly until next year and the reopening of the economy is likely to be phased, with small pubs and clubs first and casinos potentially the last to resume operations.

For the first half, Crown saw an 11 percent decline in normalised NPAT, mainly due to a 39 percent decline in VIP program play. Its main floor gaming revenue was flat, reflecting softening consumer confidence amongst Australian players.

Star reported a strong performance on a normalised level, with NPAT up 2.1 percent.

However, on a reported basis, profit fell 48 percent due to an exceptionally low win rate of just 0.73 percent, the weakest since 2008. That compares with 1.62 percent the previous calendar year.

Star, which has operations in Sydney, the Gold Coast and Brisbane, had already been restructuring to trim costs, seeing $20 million in benefits in the first half.

It has now announced it is standing down 90 percent of its workforce in an effort to preserve cash flow during the crisis.

A company statement explained, “The Star has taken a very difficult, but necessary, decision in relation to its workforce. We are in the process of temporarily standing down over 90 percent of our approximately 9,000 employees. These stand downs include senior management. To assist our employees at this time, The Star has provided two weeks of paid pandemic leave. In addition, employees will be able to access any accrued annual and long service leave entitlements.”

Star estimates that a three-month shutdown until June 30 would carry a cash requirement of A$220 million (US$140 million), and that a six-month shutdown until September 30 would cost the firm A$320 million.

In response, Star has executed additional debt funding from its existing relationship banks for A$200 million.

Crown Resorts is standing down 95 percent of its staff, which it says will cut its underlying operating cash costs to between A$20-30 million per month. It said construction on the Crown Sydney resort would continue during the crisis.

Fitch Ratings has said it believes the company

is in a good position to weather the storm due to its low debt and variable cost structure.

These factors give the operator the “headroom to absorb the effect of the government shutdown of casinos,” the agency said.

The company has closed its entertainment venues, although some restaurants are providing takeaway meals. It has also retained some hotel capacity, including rooms provided to the government to isolate arrivals to the country.

“Importantly, Crown has no significant bond maturities before the financial year ending June 2025 (FYE25) – although around AUD230 million in committed credit facilities mature within the next six months, which Fitch expects Crown to be able to renew – and manageable covenant risk, and available liquidity to meet operating expenses over the duration of the shutdowns,” the note said.

Fitch says it expects Crown’s key leverage metrics to remain well below the level at which it would take negative ratings action.

“We then expect Crown to deleverage quickly from FYE22 as normal operations resume for the full-year and Crown Sydney commences operations in early 2021.”

Elsewhere in Australia, Aquis Entertainment also said it was standing down 90 percent of its staff and executives are taking a pay cut after the closure of its Casino Canberra property.

The company laid off 190 of its 235 personnel.

Casino VIPs Summary Property

1H20 Turnover

SGR SYD

-13.8%

SGR QLD

+34.5%

CWN MELB

-39.6%

CWN PER

+1.8%

SKC ADE

+95.7%

Win Rate

Unique Visitation

Online to buoy Aristocrat during crisis

(Source: Source: J.P. Morgan)

Melco/Crown probity hearing delayed A public hearing into probity and licensing issues related to Crown Resorts and Melco Resorts & Entertainment has been postponed due to the Covid-19 outbreak, local media reports. “As a result of the recent reports and impacts of COVID-19 and in alignment with the changes that have been advised by the Commonwealth and state governments … it is with regret that the public hearings of the inquiry will be deferred to a date to be fixed,” the NSW Independent Liquor and Gaming Authority was cited as saying. The hearing is looking into the acquisition of a stake in Crown by Melco.

Aristocrat Entertainment is likely to emerge from the current crisis with a larger land-based footprint in the medium-term and may be well placed to expand through acquisitions of weaker rivals, JP Morgan said in a note. The company is likely to weather the current Covid-19 storm relatively well, given the strong performance it is seeing in online operations in both Australia and Italy, the firm said. Aristocrat is likely to see a decline of 24.8 percent in 2020 earnings due to lower sales and fees from gaming operations, but is likely to snap back to see an increase of 38.5 percent in EBITA in 2021, the note said.

The firm is being helped by an increase in average digital play time of about 134 percent in Italy as workers are forced to stay at home under the lockdown imposed by the government. In Australia, that figure is up by 74 percent. “More active players are more likely to invest in ALL’s (Aristocrat’s) titles, supporting bookings (we expect digital EBITA growth of +15.4 percent in FY20).”

Asia Gaming Briefings | May 2020

SUPPLIER SPECIAL REPORT 38

RECOVERY INTRO

Adapting to change and coping with crisis The world is now about six months into the coronavirus crisis, which is having a deeper, longer and further-reaching effect on the global economy than anyone anticipated at the start of 2020.

T

he land-based gaming industry, together with tourism and events have been brought to their collective knees, with borders restrictions, grounded airlines and mandatory quarantine periods.

It’s still far from certain when any of these measures may be lifted and it’s not a stretch to forecast that they will be some of the slowest areas to return to normal.

Our supplier special section of this magazine would normally have been dedicated to new products to be showcased at Macau’s G2E Asia gaming show, one of the key events on the region’s gaming calendar.

It has now been pushed back to December, joining the majority of others in scrambling to reschedule.

In place of our normal format, we have asked

Asia Gaming Briefings | May 2020

suppliers to highlight how their businesses and working practices have changed as a result of the pandemic.

What measures have they taken and will they remain in place once the crisis has passed. The clear majority stress that the digital solutions that have been put into place to ensure work can continue from home do have some advantages, but will never replace the face-to-face meetings and staff interactions that spark the creative juices. Humans are social, as we have heard in the pages of this magazine, and we all look forward to being able to intermingle at networking events.

There are also some key takeaways from suppliers in the need for flexibility in business practices. Those able to adapt and learn will hopefully come through the other side stronger.

SUPPLIER SPECIAL REPORT 39 genesis gaming

Remote working more manageable than expected

H

ow fast do you expect business to bounce back and when?

It’s still very difficult to say at this point given the unprecedented nature of the pandemic and its global scale at an economic level. There is still a lot of uncertainty, but we are hopeful that normalcy will return at some point in the near future, once any sort of vaccine becomes widely available to the general public. We think this will be key if we are to see any sort of bounce back in economic activity.

Has the pandemic changed the way you work and if so, can you see any of these changes becoming permanent?

The pandemic has definitely required us to be creative in maintaining the level of connectivity across our workforce while we

practice social distancing across our various office locations. Thanks to the proliferation of many online productivity tools, remote work has proven to be much more manageable than we initially anticipated. Depending on the sectors and the nature of work, I wouldn’t be surprised some companies may adopt longer term remote working policies for some roles.

Are there any upsides to these changed working patterns?

Like anything, there are always pros and cons.

Face to face meetings are definitely a better form of interaction for cross-functional teams needed to solve problems and generate ideas. This is especially true for what we do, where creativity and innovation play an important role in our product development process. However, without

some of the day-to-day office distractions, I am sure working from home does provide a benefit of giving employees the time to focus on tasks that require more concentration.

What’s the biggest lesson the industry has learned, or needs to learn?

No one is immune when it comes to a pandemic. But we can choose how we respond to it. As a business, we just need to be better prepared for left-tail events and develop internal resilience across major functions and limit external dependencies.

IGT

Standalone progressives to benefit in social distancing era When it comes to ‘when’, for Macau, it’s likely that we will see some return to a more ‘normal’ business in the last quarter of this year. As for the other countries in Asia, well not even some of the greatest minds can predict when that will be - as we’ve seen, every country is different in the measures they take and the success of those measures.

H

ow fast do you expect business to bounce back and when?

Well, as we know, Macau is already in the early stages of ‘bouncing back’ - testing the waters of the new normal for the short-term as we learn to deal with the aftershocks of COVID-19. Macau is a heavy focus for gaming and tourism in Asia and will set the example for the bounce back in other countries in Asia.

Everyone is hoping that the business will bounce back in the second half of this year, but the reality is that recovery is likely to be a staged process with many casinos continuing with social distancing on machines and tables for many months. Key in the recovery will be the opening of the Chinese borders and the ability for the VIP sector to be able to travel.

Has the pandemic changed the way you work and if so, can you see any of these changes becoming permanent?

The virus pandemic has changed the world, and of course changed the way we work. We, like most others, have moved a lot of our business interactions online. We are now utilising online platforms to run presentations to customers with online game videos, and focusing on IGT’s online showroom. Luckily much of this infrastructure was already in place. This is helping maintain our customer connections across the different countries.

I think we will use online tools more readily in the future and it will play a bigger role permanently – but there will never be a better way of transferring information and growing customer relationships than a face to face meeting.

In the short to medium term the new social distancing rules may well affect the floor configurations and designs to comply with the regulations. Plus, it will negatively

affect link products if 50 percent of the link product is switched off, which will affect both the atmosphere on a bank and a reduction in the jackpot increment pool. So, if this happens, it may favour more standalone progressive type products where we, IGT, have a strong presence.

Are there any upsides to these changed working patterns?

There’s always a silver lining to every cloud. We are finding we now have a bit more time for creativity in our game studios as we evaluate new game ideas and our roadmap.

Plus, even though we are not working in the same office we are actually more connected as we use social and video tools to connect and share more ideas both internally, and externally with customers and suppliers.

What’s the biggest lesson the industry has learned, or needs to learn?

A simple lesson is ensuring that venues have game variety, especially when up to 50 percent of the game floor might have to be switched off – to ensure that venues have the right mix of products to suit the different player types at different times of the day.

Also, it’s important that there is a strong locals focus in a venue’s product set and in the customer marketing – ensuring that when borders close, the locals market is catered for and are able to sustain a business in times like these.

Asia Gaming Briefings | May 2020

SUPPLIER SPECIAL REPORT 40 Jade entertainment

Time to consider convergence

W

hen and how fast will business bounce back?

We can expect that social distancing will remain a way of life until a vaccine is developed and estimates from the medical community are 18 -24 months. Land-based properties will reopen, however, patron registration and tracking while on the property floor will need to be incorporated into the properties’ surveillance and casino management system. We can expect reduced visitation from the mass market, while travel restrictions will also impact the VIP market and my estimate is that it will be 2023 before we are back to 2019 revenue levels. One has to be prepared that as the world emerges out of the COVID-19 pandemic, we can expect major changes to what can best be described

as social norms, such as habits, routines, ethics and other social philosophies.

Has the pandemic changed the way you work and will it become permanent?

What we know from the past few months is that we were not prepared and work practices need to be developed to ensure business continuity.

Digital acceleration of our daily processes will be a must. Travel will be restricted for some time to come and customer engagement will need to be electronic.

Are there any upsides to the changed working patterns?

Living in a congested city like Manila means a lot of time is wasted in traffic. Developing

“work from home” guidelines for our admin staff will be included in our plans moving forward. The upside is less time in traffic, reduction in office space requirements and an increase in productivity. Downside is the loss of face-to-face social interaction with other employees.

What are the biggest lessons?

The lesson learned is that we were not prepared. It is time for land-based casinos and regulators to integrate internet gaming into land-based casinos. It is time for a convergence of land and internet gaming. The land-based properties that integrate and start their digital acceleration will be those that will thrive moving forward.

suzohapp

Innovative safety solutions to help bounce back

H

ow fast do you expect business to bounce back and when?

I think we will see a faster bounce back of some of the smaller facets within the industry, such as sports betting and digital gaming, but it is difficult to speculate on the entire industry. In my mind there are two potential scenarios: One, that once restrictions are lifted, people will look to the gaming industry for that escape from the heavy atmosphere and isolation that currently surrounds us all. This would mean a strong return in casinos, albeit with social distancing and additional sanitizing measures. While this may seem optimistic, we know that casinos are actively preparing for this by coming up with innovative solutions to increase those safety measures with new ideas for sanitizing screens, buttons, and handles, and ways to strategically enforce social distancing. On the opposite side of the spectrum, people may instead remain cautious and limit travel and spending. If this becomes the case, it will take time for everyone to bounce back and we will have to get creative with how to motivate people to spend money in ways that best benefit the industry as a whole.

Has the pandemic changed the way you work and if so, can you see any of these changes becoming permanent?

As a global company, we’ve had a lot of remote work already so that wasn’t a huge adjustment for us and we still have some critical staff working in our distribution centers as we’re open for our

Asia Gaming Briefings | May 2020

customers who are currently in need of products or services. We were very fortunate to already have that infrastructure and hardware in place from an IT perspective and have a very motivated, capable staff that is easy to trust when it comes to working remotely. For those on our team that weren’t working remotely before, I think they’ve adapted quickly and handled the change well. It has, however, allowed us to evaluate how much physical office space we need. It is something we might consider changing in the future to lower our costs and lower our carbon footprint. There is a lot that we’ve had to adapt with travel that we hope to resume soon. While it is possible to conduct these meetings digitally, there is still something to be said for conducting a deal in person and having those person-to-person interactions.

Are there any upsides to these changed working patterns?

There are definitely upsides. I think we’ve seen a stronger sense of community within the industry as everyone is equally in this tough place and recognizes just how much we’re all interconnected. Companies, competitors and suppliers alike, have been relatively flexible and cognizant of each others’ need to survive past this. We’ve also seen how well and how quickly we’ve all adapted to the ‘new normal’ and having that ability to adapt can only serve to benefit us in the future. Lastly, we’re learning how to innovate in ways that push our limits

and challenge us as we try to figure out how to modify our products or create new products to facilitate sanitization or be antimicrobial so that everyone can resume that sense of normalcy as quickly as possible.

What’s the biggest lesson the industry has learned, or needs to learn?

I think the biggest and hardest lesson that’s been learned has been that nothing is certain.

We never thought we’d see the day that the big casinos would close their doors. There are stories of operators having to get new locks because they’ve never locked their facilities or haven’t done so in years. In an industry that we believed never slept, the stark contrast to the way things look now has really just settled in that concept that what we have and are today isn’t guaranteed tomorrow.

SUPPLIER SPECIAL REPORT 41 tcs john huxley

Flexibility key moving forward

H

ow fast do you expect business to bounce back and when?

This is impossible to answer as we have no idea how long travel restrictions and social distancing measures will be in place. The gaming industry is quite resilient but the current situation has highlighted many challenges we face in terms of our businesses and also ensuring the wellbeing of our staff and customers. Our teams around the world have continued to work throughout the pandemic so we are well positioned to respond to our customers’ demands as they reopen their businesses. We are ready to support the industry in every way we can.

Has the pandemic changed the way you work and if so, can you see any of these changes becoming permanent?

We have continued to operate throughout the pandemic with many of our teams working well at home. Where this is not possible in manufacturing and service/support, we have put in the place all the appropriate health and safety requirements along with the correct social distancing measures to ensure their safety.

tvbet

Player activity up 31 percent in March

H

ow fast do you expect business to bounce back and when?

According to the International Monetary Fund, the effect will be a 3 percent decrease in the global economy in the current year.

We can conclude that in a year or two everything will come to normal. Even though the igaming market has been less affected by restrictions than other sectors, every market participant will sense it. For instance, we’re already seeing a drop in our partner’s average check.

Has the sports suspension changed the way you work and if so, can you see any of these changes becoming permanent?

The TVBET games were originally built at the boundary between sports and lotteries in a live format. In fact, we don’t have to change anything now, because sports cancellations haven’t affected our supply side.

Are there any upsides to these changed working patterns?

We can indicate a daily activity increase of players after sports cancellations. Thus, in March the daily number of bets on TVBET games increased by 31 percent overall. We understand that our live-games have now appeared as a perfect betting alternative for newcomers. And our goal now is to make TVBET products more accessible to a global audience.

What’s the biggest lesson the industry has learned or needs to learn?

The first and most important lesson is gaming market participants will need to be flexible and adaptable to the specificity of each situation. Those companies that were able to adjust their business processes to circumstances are benefiting at these challenging times.

Are there any upsides to these changed working patterns?

Having to adapt and change the way we work provides a great opportunity to assess our current processes and systems.

We will probably revert to many of the original practices but this has given us the opportunity to look at some interesting alternatives, that are possibly smarter and more productive.

What’s the biggest lesson the industry has learned, or needs to learn?

As we emerge from this, flexibility will be key. We will need to reassess our businesses and mid-term goals to ensure we can weather the major disruptions the pandemic has thrown at us. Being able to quickly adapt to customer demand and re-shaping the offering to fit the ‘new normal’ could be the difference between success and failure. We are all still learning…

Asia Gaming Briefings | May 2020

LAST WORD 42

Sharon Singleton

Managing Editor, AGB

Time to regulate Asian online gambling?

While the land-based gambling industry is suffering an unprecedented crisis as a result of the coronavirus pandemic, its online cousin has been raking in the cash.

T

he online market in Asia is already huge and online gaming during the crisis, while Spain has also growing and it’s no stretch to imagine that warned operators to restrict their marketing efforts.

That’s all very well in regulated markets, but in once players are locked down at home, they will turn to the internet for entertainment. Asia all bets are off. The Philippines has temporarily There are few reliable estimates as to the size of suspended operations of its Philippine Offshore Gambling the market in the region, given the fact that online Operators on concern employees cannot work from gaming is illegal apart from in the Philippines, but home. Elsewhere, online gambling websites are finding elsewhere there have been some interesting glimpses new and ever more imaginative ways to take bets.

For example, a number of sites have sprung up as to how the crisis is pumping up the sector.

In Australia for example, analytics firm AlphaBeta encouraging punters to place bets on the last digit of Advisors and credit company Illion, calculated there daily new cases announced by Singapore, Malaysia, was a 67 percent increase in online gambling activity Thailand and Indonesia. They can also bet on whether in the first week after pubs, clubs and casinos were shut the number is odd or even, or if the number is higher down. The survey was based on a sample of transactions or lower than the prior day.

In the absence of regulation of 250,000 Australian consumers. and hence taxation, governments Similarly, in the U.S. online across Asia are undoubtedly social poker room Global Poker, losing vast amounts of revenue said it had seen a 43 percent In the absence to online gambling. This is also increase in the use of online poker of regulation and at a time when many are facing sites in the United States since their worst economic crisis in social distancing and lockdowns hence taxation, a lifetime. took effect, including a 255 governments So, could this finally be percent increase in first-time the tipping point for reluctant poker players. across Asia are administrations to consider In the U.K., online gaming undoubtedly losing legislation? Many jurisdictions site 888 Holdings told the stock were slow to wake up to the exchange that it’s seeing a hit vast amounts of potential of land-based casinos. to its sports vertical due to the revenue to online The path blazed by Macau with its pandemic, but that it expected new integrated resorts, followed a migration to its casino and gambling.

by Singapore’s world-beating poker products to mitigate the properties lead to a change of impact, at least in the short term. heart, with many now embracing This spike in activity has not escaped the attention of regulators, who are casino investors with open arms.

Much is likely to depend on the attitude of China, expressing concern over the potential increase in problem gambling. Especially if players are also on which many regional economies will be relying drinking more than usual and seeking escapism from for support. To date there has been no sign Beijing is interested in doing anything other than stamp out the grim global reality.

The European Betting and Gaming Association online gambling targeting its citizens.

However, there may be a case to at least allow some put out a guidance note in late March telling online gambling firms to act responsibly and strongly urged kind of convergence. There have been murmurings against the use of any reference to the coronavirus in that land-based properties should be allowed to offer advertising materials. It also warned against portraying some kind of online activity, especially in the sports gambling as a solution to potential financial woes betting field, or potentially live dealer operations.

Those murmurings may swell into a chorus of and told firms to step up their know your customer demand if the crisis protracts and Asia’s casino floors and other best practices to mitigate harm.

Portugal is considering imposing some limits on remain empty for too much longer.

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Asia Gaming Briefings | May 2020

CALENDAR OF EVENTS 43

august

MAY ICE North America 11-15 May 2020 Online https://www.icenorthamerica.com/welcome

june Russia Gaming Week 2020 3 June 2020 ECC Sokolniki Pavilion, Moscow https://rgweek.com/en?utm_source=PR_Pukalo&utm_ medium=calendar&utm_campaign=igamingcalendar.com ICE-Sigma Asia Digital 8-10 June 2020 Online https://www.ice-asia.com/

Australasian Gaming Expo 11-13 August 2020 ICC Sydney https://austgamingexpo.com/ SPICE 26-28 August 2020 Goa Marriott Resort, India https://www.sportsbettingevents.com/spice-india

september ASEAN Gaming Summit 22-23 September 2020 Shangri-la, Manila https://aseangaming.com/

october G2E Las Vegas 5-8 October 2020 Sands Expo, Las Vegas https://www.globalgamingexpo.com/

December G2E Asia 1-3 December 2020 Venetian Exhibition Centre, Cotai, Macau https://www.g2easia.com/en-gb.html World Gaming Executive Summit 7-9 December 2020 W Hotel, Barcelona https://www.terrapinn.com/conference/world-gamingexecutive-summit/index.stm

iGB Live 22-25 September 2020 RAI, Amsterdam https://www.igblive.com/

july Phil-Asian Gaming Expo 30 July 2020 SMX and WTC Exhibition Centres https://www.phil-asiangamingexpo.com/EN/

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Asia Gaming Briefings | May 2020