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On the Rebound

The Asian gaming market’s comeback and future growth

On the Rebound

Time flies. As 2023 draws to a close, we are approaching almost four years since the onset of the Covid-19 pandemic. While this may feel like a memory for many, the profound and lingering impacts of the

pandemic in most Asia Pacific gaming markets cannot be overlooked.

Nevertheless, a light at the end of the tunnel emerged earlier this year—gaming business volumes are trending at pre-pandemic levels in many jurisdictions, offering distinct signs of a long-awaited recovery. This momentum is expected to continue in the following years, suggesting not just recovery, but sustainable growth of the Asian gaming market in the future.

Prominent Market Leaders: Macau

Macau, the Asia Pacific region’s most renowned gaming destination, is back as the world’s top gaming (soon-to-be gaming and entertainment) hub, according to the most recent data.

After a few tough years when travel plunged due to strict quarantine restrictions, both gaming and non-gaming visitors are flocking back to the city. Since its reopening in February 2023, Macau has seen a rapid recovery in business volume. Fueled by new facilities, additional attractions, and infrastructure improvement, the recovery has been trending increasingly close to 2019 levels in the more recent months, as shown in the table below.

More profoundly, Macau continues to strive to diversify its economy away from gaming, with all six gaming concessionaires committed to investing in non-gaming businesses since renewing their casino licenses last year. With promised investment of no less than US$13.5 billion on non-gaming amenities the next decade, Macau anticipates increased room inventory, higher-end leisure facilities, a wider variety of world-class attractions, additional convention facilities, and further improved infrastructure among the major developments in the years to come.

The recently opened Raffles Macau, Andaz Macau and Galaxy International Convention Center (GICC) by Galaxy Entertainment Group, the Londoner Macau complex by Sands China, and W Macau by Melco represent some of the exemplary properties ushering in Macau’s new era.

As shown in the table, the increase of visitors to Macau has outpaced that of gross gaming revenue, indicating the desired diversification. Not only would further diversification create additional revenue streams for operators, but it also would empower them to attract a wider reach and a richer mix of customers.

Singapore

Singapore, a pioneer in recovery from the pandemic and the region’s No. 2 casino resort destination, also is seeing sustainable growth of tourist numbers and business volume. There were more than 1.1 million international arrivals to the city-state in September 2023, representing a 44.5 percent increase compared to the same period last year. The market’s resurgence following the pandemic has become more competitive than before.

Not only did Marina Bay Sands present strong Q3 results for 2023, they also show that underlying volume has been trending upwards. Resorts World Sentosa, the other integrated resort in the city state, is expected to follow a similar growth path. Per their agreements with the Singaporean government, both properties are investing in expansions and renovations to upgrade existing facilities. This revamp is expected to set the bar even higher and further strengthen the market’s long-term growth.

The Philippines

The Philippines is unequivocally the fastest growing gaming market in the Asia Pacific region, if not globally. This year’s land-based casino GGR is expected to exceed 2019 levels. The four Entertainment City resorts in Metro Manila (soon to be five, with the addition of Westside City) have truly become aligned with those on the Las Vegas Strip, and more renovations have already been planned. Additionally, game-changers in Clark and Cebu, such as Hann Casino Resort, have reshaped the competitive landscape to the extent that they are now considered destination properties rather than regional facilities.

Of note, the Philippine locals market segments, consisting of a large expat population and local demographics with rising incomes, not only have helped carry the industry through the challenging pandemic years, but also are expected to drive significant growth in the future. Aiming to better serve the local segments, Manila-based Bloomberry Resorts Corp. is opening its Solaire Resort North in Quezon City next year, with a third Solaire property planned in Cavite that also is expected to further penetrate the local market.

Moreover, with the privatization of PAGCOR casinos now on the agenda, the regulatory environment in the Philippines is anticipated to improve in the near future, paving the way for  future investments likely to make the jurisdiction No. 2 in the APAC region.

Emerging Markets

The Asia Pacific gaming markets are not short of new supply. Slated to open later this year, the imminent Inspire Entertainment Resort in Incheon, South Korea, will be the latest addition to the country’s portfolio of 17 casinos. With 16 of them open only to foreigners, South Korea’s gaming market has historically relied on international customers from markets such as China and Japan, making the pandemic-related travel and quarantine restrictions particularly devastating here.

Thanks to easing travel policies and improving air connectivity for a wide range of tourists, gaming business volume is expected to recover meaningfully in 2023 with momentum for growth, especially from premium segments, with the addition of new high-end amenities and unique attractions coming on line in the market.

With tremendous potential to become one of the world’s top-tier gaming markets, Japan now has the so-called Integrated Resort District Development Plan of Osaka in place. The developer  consortium is led by MGM Resorts International and Japanese conglomerate Orix Corp. Earmarked at approximately US$8 billion, the Osaka IR at Yumeshima Island in Osaka Bay is estimated to attract more than 20 million visitors per year, a substantial draw of international tourism for the country. While the IR is not planned to open until 2030, the proposed investment is a clear indicator of what the market potential and future revenues would look like. Other locations in Japan continue to mull over IR development plans, which is likely to add more to the future development pipeline.

In Western Asia, the United Arab Emirates (UAE) is poised to become another substantial gaming market. The recently established General Commercial Gaming Regulatory Authority (GCGRA) is expected to release an initial plan for gaming regulation soon. Ras Al Khaimah—an Emirates of UAE adjacent to Dubai — is poised to host Wynn Al Marjan Island, an integrated resort with a development budget of nearly US$4 billion. With construction already in progress, the resort is scheduled to open in 2027 with world-class premium offerings. Additionally, with its existing property in Dubai and close connection to local partners, MGM Resorts International holds the hope that it can be authorized to operate a casino in Dubai in the near future, tapping into a fresh market with substantial potential.

Last but not least, recent dynamics in Thailand imply that casino gaming is likely to be legalized in the country soon. While still in an early planning stage, with solid local segments and strong international tourism, Thailand represents another robust candidate in the region’s gaming development pipeline.

Regional Concerns

One cannot ignore that there are gaming jurisdictions in Southeast Asia that have heavily relied on junket play by premium gaming patrons from China in the past decade or so, and that there have been concerns about links between organized crime groups and the proliferation of casinos in some areas.

According to the U.N. Office on Drugs and Crime, such risks are of “particular concern” in the Mekong countries, which have a long and well-documented history of organized crime and illicit economic activity. Inter-government task forces including Beijing and other Southeast Asian governments have been tackling transnational criminal activity associated with gambling since early 2022 and strengthening regulatory frameworks that govern the licensing, operations, and provision of entertainment industries, such as casinos and online betting.

While such efforts may inevitably impose some challenges on regulated gaming operations, we believe any short-term pains will be offset by the long-term gains of prioritized regulatory enforcement and elimination of illicit activities, thereby securing the industry’s sustainable growth in the region.

Conclusion

Whereas macroeconomic conditions, geopolitics and other uncertainties may impose some bumps in the years ahead, the Asia Pacific gaming markets are expected to grow in a sustainable manner thanks to its major business drivers, incoming supplies, and other competitive advantages. The market leaders in the region have already set exemplary cases for the industry to evolve in a post-Covid era and will continue to build on that by capitalizing on the booming, and increasingly wealthy, middle class in the region, which is followed by a number of emerging markets with promising potential to establish their presence in the region’s gaming landscape.

On balance, the future is once again bright.

 

Michael Zhu is senior vice president, international operations planning and analysis for The Innovation Group.

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