Inside Asian Gaming

inside asian gaming October 2014 10 Cover Story been tightened, resulting in fewer allowable trips from the mainland, and the government is cracking down on use of its popular state- owned UnionPay debit card system to withdraw cash for gambling in excess of the statutory limit of 20,000 yuan (US$3,200) a day. Gaming revenue growth has fallen eight of the last nine months and went negative year on year in June, and so it’s stayed every month since, declining by 11.7% in September, the worst performance in five years. The downward pressure is coming mostly from VIP, which went revenue-negative in May. It’s down 19% year on year in the third quarter and 4% year to date. Analysts don’t expect a turnaround before mid-2015, when the first resorts of Cotai’s much-anticipated “second wave” come on line, and some are doubtful even of that. Morgan Stanley estimates that more than 30 junkets have The analysts at Morgan Stanley note that “Other markets are adding capacity and marketing initiatives. VIP growth in those countries has started to outpace Macau in recent quarters.” Wolfgang Georg Arlt, director of the China Outbound Travel Research Institute, sees “more and more Chinese spreading out all over the planet, discovering destinations and travel forms more diverse than ever”. This includes “more smaller destinations, for leisure trips, for investment, and also for gambling”. folded, individuals and companies, since the end of 2012, victims of the liquidity crunch and competition from larger, better-capitalized rivals. Dore Holdings, one of the largest, threw in the towel this year. SunCity, the largest, is diversifying into non-gaming investments. Others are pursuing casino projects abroad. Others are working existing markets from Australia to the Philippines to Indochina to take advantage of more relaxed environments where tax rates are lower and better deals can be had on comps and commission rates. They are, of course, taking their players with them. Nor is it unreasonable to suppose that more than a few of their customers are tiring of Macau and would prefer to frequent it less often in favor of more exotic locales they may see as more gratifying to their wealth and status, and safer in terms of the possible ramifications back home. This would make sense in the larger context of a China that is becomingmore affluent andmore global in its outlook and aspirations. The analysts at CLSA said in an extensive report released earlier this year, “We incorporate shifting travel patterns into our Chinese outbound-tourist estimate and forecast stronger growth in further-out locations as travelers look for a more desirable travel experience.” Hong Kong financier Tony Fung’s A$8 billion plans for a mixed- use resort complex in north Queensland, Aquis at the Great Barrier Reef, are designed precisely with this in mind. He is confident it will be “an easy sell”. “You see, if you go to Macau your colleagues think you are a gambler. If you go to Singapore they think you are a gambler. But if you say you are going to Cairns and the Great Barrier Reef, then you are still a family man.” ‘SPREADING OUT’ Macau is the only place in China where casinos are legal. It’s not the only place in Asia. There is no reason why the supply-side logic driving the enthusiasm behind the new Cotai openings shouldn’t apply to similarly scaled investments elsewhere. i si e asi g i O t 2014