Weakness in Asia’s two largest casino markets is providing new opportunities in secondary Asian jurisdictions, say several Hong Kong-based investment analysts.
Macau gaming revenue fell 2.6 percent year-on-year in 2014 to a still impressive US$44 billion. Singapore, a circa US$6 billion market in 2014, has seen a fall off in VIP gambling volume. In both cases, this has been attributed by analysts to changes in behaviour by Chinese high rollers. Mainland China currently has a campaign against official corruption that is said to have inhibited many Chinese high rollers from playing in Macau.
Deutsche Bank AG said in a note on Thursday it expected a 33 percent rise year-on-year in Philippine casino gross gaming revenue (GGR) in 2015 mainly on the back of new venues opening. But it also expected some of that growth to come from Chinese tourists looking for new places to gamble.
The Philippines and South Korea are currently both developing clusters of casino resorts close to the centre of their respective capitals. Some analysts have said that could be an attempt to recreate the allure that Chinese tourists already accord to Las Vegas and Macau as must-visit gambling and entertainment destinations.
Some of the shine has recently come off Macau, but the investment community consensus seems to be that the city’s challenges are more political than image-related.
Deutsche Bank meanwhile expects a likely 16 percent growth year-on-year in GGR for South Korean casinos that cater for foreigners-only, as more Chinese tourists visit that country.
Its team of analysts, headed by Karen Tang, wrote: “In 2014, [South] Korea surpassed Thailand to become the number one destination for Chinese tourists, receiving 6.1 million Chinese visitors (+42 percent).”
“Similar to Macau, we think Chinese VIP demand will fall further in Singapore in the first half of 2015,” wrote Deutsche Bank. “Hence, even with mass recovery, we forecast Singapore GGR would only grow 2 percent to US$6.2 billion in 2015,” it added.
Growing pie: CLSA
Aaron Fischer, regional head of consumer and gaming research for brokerage CLSA Ltd, and his team, pointed out in a report on January 16 that the Asian casino story is affected by the growth in the overall numbers of outbound Chinese tourists as well as the likely displacement of some gamblers from Macau into other markets.
“Outbound travel [from China] is accelerating at a phenomenal speed and we expect departures to soar from 98 million in 2013 to 200 million by 2020, an 11 percent compound annual growth,” wrote CLSA.
Its view on China as expressed in the report was supported by proprietary research from CLSA unit China Reality Research Ltd (CRR) on attitudes of Chinese travellers.
The report said CRR had recently spoken to 401 experienced outbound travellers – more than 90 percent of them living in tier one and tier two cities – to check the latest trends in Chinese outbound travel.
“We believe Japan, France and [South] Korea will be the Chinese darlings with our five-point model indicating a score of 73-77 out of 100 for these places,” said CLSA.
Japan is currently mulling legislation to allow casino resorts. South Korea currently has 16 casinos for foreigners-only and one for locals, according to the University of Nevada Las Vegas Center for Gaming Research. Korean authorities have also approved two new foreigners-only gaming resorts at Incheon, near Seoul’s international airport, and on January 18 announced they would accept bids for a further two permits within the country.
CLSA stated: “The slowdown in Macau, especially in the VIP gaming segment, is opening up opportunities for other regional gaming jurisdictions. In addition to [South] Korea and the Philippines, which investors are more aware of, places like Sihanoukville in Cambodia, Ho Tram in Vietnam, Saipan [Northern Mariana Islands] and Cairns [in Australia] are also emerging to compete with Macau to attract Chinese VIP players.”
City of Dreams Manila, partly developed and wholly managed by Macau casino investor Melco Crown Entertainment Ltd, has its official opening on February 2, including a likely ramping up in the marketing of its VIP offer.
Japanese entrepreneur Kazuo Okada’s US$2-billion Manila Bay Resorts – also within the Entertainment City casino zone in the Philippine capital Manila – is on course to open at the end of 2015, management told GGRAsia in September.
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”The notion that somehow the Macau gaming companies can be used by China as negotiating pawns in a geopolitical negotiation with the U.S. is definitely without merit”
Vitaly Umansky, Louis Li and Kelsey Zhu
Analysts at brokerage Sanford C. Bernstein Ltd