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[email protected] Keeping the Faith A precise US dollar 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 in East Asia and Australia since Macau first sold the world on the belief, as Sheldon Adelson has expressed it (and I paraphrase), that “The only way to stop the Chinese from gambling is to lock the doors.” It’s a belief that weathered the global financial crisis, the Bo Xilai scandal and a wholesale 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 on Manila. James Packer is building an altar to it 60-stories high on Darling Harbour in Sydney. But then, everywhere you look now, from South Korea to Saipan to the beaches of the South China Sea coast in Vietnam, it’s taken as an article of faith: Build it and they will come— they , of course, being the newly rich of a Chinese economic monster that’s been fattening up on the lunch of its neighbors’ export-driven business models for the last 20 years—they’re coming to give it back at the baccarat tables and shopping malls and theme parks and condos … mostly, or so it’s hoped, at those baccarat tables. Well, certainly some will. Some are. It is impossible to discount the impact of the current boom in China outbound travel. More than 100 million Chinese went abroad in 2013. Their numbers have been growing at double-digit annual rates for the last decade. They now account for more than 10% of all international travel, according to the United Nations World Tourism Organisation. CLSA Asia Pacific Markets forecasts their numbers to hit 200 million by 2020. Massive amounts of money are chasing them even from within China, where investors are scooping up overseas assets to the tune of more than US$100 billion a year, according to the China Outbound Tourism Research Institute. But how much are they gambling? And gamble they must, and heavily, to justify even the fraction of what actually gets built of the more than US$50 billion in casino-related investment proposed for the Asia-Pacific region over the next five or so years. On Cotai there’s around $19 billion on the table that says they will, and the first big bet, $5 billion or so, goes down next year in an environment which no one could have foreseen at the start of this year, and which suggests, at least currently, that there is a bottom after all to what we believed was a bottomless well. 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 a market where VIP play generates around 80% of gambling volume. Trade receivables, a key indicator of credit extended to gamblers, is rising faster than revenues at both Marina Bay Sands and Resorts World Sentosa as they work to stem a year-long decline in high-end play in the absence of a Macau-style junket network to handle recruitment and banking. Elsewhere, results have been mixed. At the $500 million 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 early next year. The first of the new Manila super-resorts, Solaire Resort & Casino, appears to have found its legs under new management after a troubled 2013 debut. But the first real test of the Philippines’ credibility as an international VIP destination comes this month with the soft opening of its $1.3 billion neighbor, City of Dreams Manila, under the direction of Macau’s Melco Crown Entertainment. In Queensland, there is viability in the US$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 Echo Entertainment and its Chinese partners. South Korea is compelling as well, especially with Japan out of the running. The country is enjoying a surge in travel from that vast part of China north of the Yangtze that Macau 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 from Seoul. It’s slated to open in 2017. An investment consortium led by Caesars Entertainment plans to enter the fray the following year with an $800 million resort nearby. Chinese travelers also love South Korea’s island of Jeju, which is home to eight casinos already and where Resorts World Sentosa owner Genting Singapore and its Chinese partners look to do well with plans for a resort pegged at a relatively modest $300 million.