Inside Asian Gaming

INSIDE ASIAN GAMING | August 2012 12 but sitting on the shoulder of China’s east coast, there’s no denying Matsu’s strategic importance. Critically, according to Mr Fong, the archipelago’s military bearing affects the scale of any potential development. “Matsu is a very important strategic location so I don’t think they will develop very large scale properties,” he explained. “If there were a lot of investment, the political riskwouldbe very high. If I were an investor I’d prefer to invest small scale because nobody knows what will happen in the future.” Add to that China’s inclination to push its citizens to gamble in Macau rather than Taiwan, and Matsu seems destined to fall or prosper according to the whims of Beijing. China’s influence won’t be limited to controlling visitor numbers either. Assuming the Taiwanese government legalizes gaming and opens the bidding process for Matsu, Beijing will dictate how truly open that process is. “The operators who know the market best are already based in Macau”, explains Mr Govertsen. “But they’ve got to tread very lightly in Taiwan lest they anger someone in Beijing who could then make their life very difficult in Macau.”Essentially, if Beijing doesn’t want Macau-based operators expanding toTaiwan, theywill pressure them to abstain from the bidding process. Such a scenario would open up the field to casino operators lacking representation in Macau. Mr Govertsen suggests companies such as Genting and Caesars would form an orderly queue behind Weidner Resorts, and the nature of the bidding process could prove decisive. “If the legislature says the government of Matsu gets to make the Matsu Islands unlikely that Matsu will ever present a more attractive destination for Taiwanese high-rollers than Macau does. Where Matsu is likely to make a difference, however, is informally: namely to the perception of gaming in Asia. “Let’s assume it comes to fruition and the Chinese are allowed to gamble there”, says Mr Govertsen. “It would be another notch in the Asian gaming belt that just shows how big the pie really is. It will emphasize how lightly penetrated the Chinese/Asian market is, and it could—quite frankly—put pressure at the margins in places like Japan to join the industry sooner rather than later.” Matsu has a strong chance of welcoming Taiwan’s first casino in the next five plus years (and if not, somewhere else in Taiwan will). The island chain lies in a tricky position economically, geographically and politically. Even if the Taiwan government and the eventual bid-winner manage to overcome the localized problems, the success of any integrated resort development on Matsu will ultimately depend on Beijing. That, in turn, will be influenced by China’s evolving relationship with Taiwan. decision then that might very well help Weidner, given the leg work the company’s already put in,” he said. “If, on the other hand, the process is run out of Taipei then it would be more of an open race. But as I said, in that case you could also end up in a position where none of the six Macau guys feel welcome, based on pressure that might be put on them by Beijing. That would obviously be great for Weidner.” Small Bite Out of the Pie Whichever company wins, Matsu’s direct impact on regional competitors is likely to be small. The archipelago will have one or two resorts tied to Fujian visitors with Weidner Resorts predicting annual gaming revenues of NT$10 billion (US$330 million) from its proposed casino. Macau will barely feel the arrival of gaming on Matsu (and certainly not for another five years) because gamers from Fujian constitute only 2% and 5% of Individual Visit Scheme and group visitors from China to Macau, respectively. Also, only 7.6% of visitors to Macau came from Taiwan in the second quarter of this year, and it’s Tranquillity-rich, infrastructure-poor—Matsu’s picturesque east coast Market Outlook