Macau might see its annual casino gross gaming revenue (GGR) reach “US$60 billion to US$70 billion” 10 years from now, suggested Credit Suisse AG’s gaming sector analyst Kenneth Fong (pictured, second left) at a panel session of the Global Gaming Expo (G2E) Asia Macau trade show conference.
“This year hopefully we’ll hit around like [US$]25 billion or 30 billion, in terms of [casino gross gaming] revenue. In ten years I would say double the size…[US$] 60 billion or even 70 billion is actually quite doable, it depends on, of course, China,” stated Mr Fong.
He added: “It depends on… how successfully the Macau operators are transiting into non-gaming as a driver for gaming revenue,” referring to the policy aim of the city’s government for the city’s six operators to broaden their entertainment offer from high-stakes gambling.
The ease of travel to Macau for mainland China consumers remained a competitive advantage compared to other gaming jurisdicitions, the panel heard.
The discussion focused on the outlook for key Asian destinations: Macau, the Philippines, Singapore, Malaysia, Cambodia, Vietnam, Thailand and Japan. Of the latter two, Thailand has yet to legalise such business, and Japan is yet to open a gaming resort.
Panellist Michael Zhu (pictured, left), senior vice president of consultancy The Innovation Group, said mainland China was still an “underserved” market in Asia. He stated: “I would expect Macau to have more repeat customers from mainland China.”
He also mentioned Hengqin island, a piece of mainland territory next door to Macau, which has long been touted as a non-gaming tourism destination for mainlanders, and that would be complementary to Macau. More recently, Hengqin has been targeted by China’s central government as an important place to help drive Macau’s overall mission of economic diversification.
Mr Zhu stated: “With Hengqin, and more efforts on the building of non-gaming amenities, and the [transport] infrastructure improved… in the coming years, I will not be surprised to see Macau have a much larger repeat customer base.”
Credit Suisse’s Mr Fong said under the 10-year gaming concessions that started on January 1, non-gaming revenue for the six operators could grow to the equivalent of “10 percent to 15 percent” of their gaming revenues. But he thought the relative pace of growth would be quicker for gaming.
Macau market shares, Thailand challenge
Mr Fong also suggested there might be “a lot of transfer pricing between the casino and non-casino departments”. That was understood to be a reference to whether certain resort activities – not strictly connected with playing of actual casino games – would get booked under ‘gaming’ or ‘non-gaming’ for accounting purposes.
In response to a question from the moderator, Alidad Tash (pictured, right) managing director at industry consultancy 2NT8 Ltd, Credit Suisse’s Mr Fong suggested that by the end of current concessions, Galaxy Entertainment Group Ltd and Sands China Ltd would be “winners” in terms of market share in corporate earnings before interest, taxation, taxation, depreciation and amortisation (EBITDA). He mentioned as factors their outsized hotel capacity relative to their four market rivals; their gaming table capacity; and how efficiently these tables are deployed.
Thailand could prove a competitive threat to Macau – and to Cambodia, Vietnam, and Singapore – if it legalises the industry and develops at least three resorts, suggested the panellists.
Panel member Andy Choy (pictured, second right) – managing director of Hong Kong-based Choy Consulting Services and a former executive in the Macau market – asserted that in the pre-pandemic year of 2019, Thailand’s gross domestic product (GDP) was “25 percent higher than Philippines,” with Thailand’s per-capita GDP “double that of the Philippines,” while inbound tourism volume that year had been “four or five times that of the Philippines”.
Incremental growth was still expected in existing legalised markets, said the panel.
Mr Choy stated: “I am very bullish on the penetration for gaming activity in China. It is still really low, indexed to other mature markets such as the U.S.”
He added: “There is a tremendous amount of growth potential.”
He asserted: “The operators actually don’t need the GGR… to increase above… their [prior] peak… if they can get a mix more towards mass,” as this was more profitable for the casinos than traditional junket business, he suggested.
