IAG December 2014 - page 4

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Keeping theFaith
preciseUSdollar figure would be hard to come by, but roughly $30 billion
would give you a conservative idea of the scale of the investment in resort casinos
inEast AsiaandAustralia sinceMacaufirst sold theworldon thebelief, asSheldon
Adelson has expressed it (and I paraphrase), that
“The only way to stop the Chinese
from gambling is to lock the doors.”
It’s abelief thatweathered theglobal financial crisis, theBoXilai scandal andawholesale
change in the leadership of the Chinese Communist Party and emerged not only unscathed
but stronger than ever. It has inspired the creation of two of the world’s iconic destinations
in Singapore. The Philippines is looking for its rewards to alight onManila. James Packer is
building an altar to it 60-stories highonDarlingHarbour inSydney.
But then, everywhere you look now, from South Korea to Saipan to the beaches of the
SouthChinaSeacoast inVietnam, it’s takenasanarticleof faith:Build it and theywill come—
, of course, being thenewly richof aChinese economicmonster that’s been fatteningup
on the lunch of its neighbors’ export-driven business models for the last 20 years—they’re
coming togive itbackat thebaccarat tablesandshoppingmallsand themeparksandcondos
…mostly, or so it’s hoped, at those baccarat tables.
Well, certainly somewill. Some are. It is impossible todiscount the impact of the current
boom in China outbound travel. More than 100million Chinese went abroad in 2013. Their
numbershavebeengrowingatdouble-digitannual rates for the lastdecade.Theynowaccount
formore than 10%of all international travel, according to theUnitedNationsWorldTourism
Organisation. CLSAAsia PacificMarkets forecasts their numbers tohit 200millionby 2020.
Massive amounts of money are chasing them even fromwithin China, where investors are
scoopingupoverseas assets to the tuneofmore thanUS$100billion a year, according to the
ChinaOutboundTourismResearch Institute.
But howmuch are they gambling? And gamble theymust, andheavily, to justify even the
fractionofwhat actuallygetsbuiltof themore thanUS$50billion incasino-related investment
proposed for theAsia-Pacific regionover thenext fiveor so years.
On Cotai there’s around $19 billion on the table that says they will, and the first big bet,
$5 billionor so, goes downnext year in an environment whichnoone couldhave foreseen at
the start of this year, andwhich suggests, at least currently, that there is a bottom after all to
what we believedwas abottomlesswell.
In Singapore, as we know, the faith is being shaken to its foundations. China visitation
was down 30% in the first half of this year in amarket whereVIPplay generates around 80%
of gambling volume. Trade receivables, a key indicator of credit extended to gamblers, is
rising faster than revenuesat bothMarinaBaySandsandResortsWorldSentosaas theywork
tostema year-longdecline inhigh-endplay in theabsenceof aMacau-style junket network to
handle recruitment andbanking.
Elsewhere, results have beenmixed. At the $500million Grand – Ho Tram in Vietnam,
the country’s first full-scale gaming resort, they’re 18 months into operations and talking
about turning their first profit earlynext year. Thefirst of thenewManilasuper-resorts, Solaire
Resort&Casino, appears tohave found its legsundernewmanagement after a troubled2013
debut. But the first real test of the Philippines’ credibility as an international VIP destination
comes thismonthwith the soft opening of its $1.3 billion neighbor, City of DreamsManila,
under thedirectionofMacau’sMelcoCrownEntertainment.
InQueensland, there is viability in theUS$1 billion resort in the capital of Brisbane that
will go to one of Australia’s domestic casino giants, either Crown Resorts and its Chinese
partners or EchoEntertainment and itsChinesepartners.
South Korea is compelling as well, especially with Japan out of the running. The country
is enjoyinga surge in travel from that vast part of Chinanorthof theYangtze thatMacau isn’t
capturing in large numbers. Chinese gamblers now generate the lion’s share of revenues at
Paradise Group, which operates five casinos and dominates the country’s foreigners-only
market. Paradise and Japanese pachinko giant Sega Sammy are joining forces on a $750
million destination casino right next to the main international airport at Incheon about 40
kilometers fromSeoul. It’s slated toopen in 2017. An investment consortium ledby Caesars
Entertainment plans to enter the fray the following year with an $800million resort nearby.
Chinese travelers also love South Korea’s island of Jeju, which is home to eight casinos
already andwhereResortsWorldSentosaownerGentingSingapore and itsChinesepartners
look todowell withplans for a resort pegged at a relativelymodest $300million.
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