Inside Asian Gaming

inside asian gaming July 2016 24 Feature In Focus they are exceptions, not the rule, for the continent. “Europe is not a compelling opportunity,” Mr Bartlett says. “Europe does not have a high spending casino market. There is no pent up demand and Europe only has a population of 738.6 million, whereas Asia has a population of 4.1 billion.” “There’s no China next door, no built-in market,” adds Union Gaming’s Govertsen. He also cautions about labor costs and “entrenched” unions that have demonstrated “the ability and willingness to strike at any time.” Last year, gaming revenue for Europe’s approximately 560 land based casinos grew marginally to US$10.5 billion, GBGC states in its report, just over a quarter of Asia’s casino revenue of US$39 billion. France, at US$2.8 billion, is Europe’s largest market. But it is still just a tenth of the size of Macau, even after the global gaming capital’s US$15 billion crash last year. Europe’s market has been experiencing its own troubles since the 2008 GFC. GGR for the continent has fallen 40% from 2007, the most recent year its casino revenue topped Asia’s with US$17.5 billion to $13.9 billion. After that, Asia’s casino revenue more than tripled by 2011 and last year, at US$39 billion, was three-and-a-half times that of Europe, the GBGC report states. Mediterranean casinos have been especially hard hit by recession, with Spain’s casino revenue down more than 40% and Greek casinos down nearly two-thirds from their 2007 peaks. Europe has roughly one casino for every 1.4million people, theGBGC report says, while Asia has one for every 53 million people. The report points out that nearly every jurisdiction in Europe allows casinos, so the market is fragmented, with lots of small, convenience casinos scattered around the continent rather than larger casinos with more amenities or casinos in clusters, as on theMacau peninsula. France’s gaming revenue was about the same as South Korea’s, but South Korea’s revenue came from 17 casinos (half of it from the only casino open to local players), while France’s revenue was split among 198 casinos. “It is a more competitive market [than Asia],” Mr Bartlett, who founded GBGC in 1999, says. “The UK, for example, has 146 casinos serving a population of 63 million, plus 9,500 betting shops, racetracks and a booming internet business.” Genting Berhad recorded 24.2%of its Leisure andHospitality category revenue from the UK last year, but just 17.8% of its adjusted EBITDA. Margins for the category are 34.5% in Malaysia and 18.6% in the UK. DIRTY MONEY Despite Europe’s proliferation of betting opportunities, there’s still a cultural stigma against casinos. “Casinos are viewed like porn shops in Europe,” Mr Gallaway 60% of Cyprus arrivals, with Greeks, Germans, Swedes and Israelis pushing the total for the top six markets to 76%. The shortlisted companies wouldn’t provide details of their projects, citing the ongoing tendering process. Melco International writes, “Lacking integrated casino resort alternatives in the Europe and Middle East region, we perceive significant market potential in Cyprus and believe it can attract visitors from the region that consists of large and wealthy populations in many proximate countries.” Local newspapers report Melco/Hard Rock proposes an IR in Limassol, the hometown of Cypriot President Nicos Anastasiades, on the island’s southern coast. Bloomberry is looking at Paphos on the west coast, with NagaCorp focusing near the airport at Larnaca on the southeastern coast. Spectrum Asia CEO Paul Bromberg calls Cyprus “the best opportunity currently in Europe,” citing the lucrative Israeli and Middle East market. “They spend money but the rest of Europe really doesn’t.” WHERE’S SHELDON? Global Market Advisors Managing Partner Steve Gallaway is a Cyprus skeptic, describing it as a small market that’s hard to reach where they’re talking about large investment. “Maybe it’s about high end players from the Middle East and Israel,” he says. “I can’t think of a successful casino that’s been based on that.” He adds, “If Israeli junkets are so valuable, why isn’t Las Vegas Sands there? No one is closer to Israel [than LVS Chairman Sheldon Adelson]. There must be a reason.” “Cyprus is not a LVS type of operation,” Mr Bartlett replies. “LVS is building 3,000 guest room casinos outside of the US that have their own catchment of gamblers, plus the local population, ideally in a major country with a significant population or drive time to one.” “That none of the largest international players seemingly participated [in the Cyprus tender] suggests to us that they don’t see adequate cash flow generation based on investments measured in Macau’s Galaxy Entertainment Group bought a 5% stake in SBM, which owns Monte Carlo Casino