Inside Asian Gaming

inside asian gaming October 2015 16 Macquarie Securities issued a report in September that forecasts China’s percentage impact on Asian gaming revenue growth near- to mid-term to slow to the low single digits at best. That’s more bad news for Macau and Singapore and quite possibly for the Philippines, South Korea and Australia. All are counting on wealthy gamblers from the PRC to sustain returns on billions of dollars in new and proposed investment in resort-scale casinos. The crux of Macquarie’s research is that Asian gaming is evolving away from a VIP-centric business model to a mass-market model driven less by gambling and more by tourism. A Las Vegas model, in other words. Which is interesting on several levels, not least because Vegas itself is experiencing a fairly dramatic shift in this regard. As this is playing out across Asia, analysts expect the mass market’s contribution to gaming revenues will continue to climb. Currently, it is approaching 50% from 36% or so just five years ago, according to Macquarie. In line with this, non-Chinese Asians’ share of the mix will become more prominent as well, growing by double- digits over the next couple of years, Macquarie believes. The boom in Chinese outbound travel will be another big positive. Although these new tourists represent a much broader demographic than the tycoons and provincial satraps from southern China who transformed Macau in the space of a decade into the largest casino market, in terms of revenue, in the world—they won’t be stuffing drop boxes at baccarat tables at anything near those levels. What all this implies in the face of an estimated 50% increase China’s VIPs have gone missing from Las Vegas ... Will the masses step up to replace them? Cover Story C hina’s high rollers, so noticeable by their absence from Macau the last year and a half, are taking their disappearing act on the road. In Singapore, whose two multibillion-dollar resort casinos were conceived in large part to cash in on free- spending VIPs from the world’s second-largest economy, demand from Chinese gamblers is “deteriorating,” as Morgan Stanley put it in a recent client note. This is nothing new. Tepid revenue growth has been the story in the Lion City for a couple of years. But it has earnings under increasing pressure. In the second quarter, gaming revenue went into decline. The bank believes the market could contract in 2015 by as much as 4%. A Rough Ride on the Silk Road