While Beijing’s anti-corruption drive has often been blamed as a primary factor behind the slump in Macau’s gaming revenue, the same regime is also responsible for proposing and supporting another initiative that may have widespread implications for the development of the Asian gaming industry -- the “One Belt and One Road” project.
During a state visit to Kazakhstan on September 7th 2013, Chinese President Xi Jinping, proposed that China and the Central Asian countries build an “Economic Belt” along the historic Silk Road, a trans-Eurasian project from the Pacific Ocean to the Baltic Sea.
One month later, in a speech to the Indonesian Parliament, Xi proposed a “21st-century Maritime Silk Road.” Now known as “One Belt and One Road,” the initiative has become one of China’s keystone state development strategies focusing on connectivity and cooperation.
The goal is to realize the massive trade potential and boost economic development among countries through Central Asia to the Middle East, as well as those along the maritime route through Southeast Asia, the Persian Gulf, and the Horn of Africa. At a more individual level, the initiative is also an integral part of Xi’s blueprint for China’s “great rejuvenation” in the new century.
One of the initiative’s priorities is to enhance cooperation in and expand the scale of tourism. As witnessed globally, the gaming industry has boosted tourism, by acting as a key marketing attraction, offering world class entertainment features, and enhancing the quality of hospitality services.
The availability of gaming facilities has not only fueled the rapid expansion of tourism, but has also greatly benefited the gaming industry itself via infrastructure improvements such as higher airlift capacity and better road access. Countries along the Belt and Road have their own resource advantages with unique natural, cultural, and ethnic elements. When these elements are offered together with gaming and leisure facilities, they will provide an exotic attraction catering to today’s Asian (and global) middle-class travelers, especially the rapidly growing outbound Chinese tourists.
What is more important is the fact that growth in either sector leads to more growth in other sectors via additional jobs, incremental foreign investment, higher tax revenue and increased trade volumes. As casinos and gaming are legalized in more countries along the routes, it bodes well for expansion of the tourism sector and more gaming establishments.
The initiative also prioritizes transport infrastructure construction and improvement projects, which we believe will benefit the gaming industry in the long term. Improvements such as massive ground transportation networks (including China’s signature high-speed railways), coordinated connectivity of customs clearance, and comprehensive civil aviation cooperation are going to resolve (or at least alleviate) many bottleneck issues for existing and prospective casino properties. On the guest’s end, this would mean less time on the road, translating to longer stays and higher frequency of visits.
Furthermore, China’s direct investments, from both private and government sectors, in areas such as agriculture, forestry, fishery, energy, information technology, machinery manufacturing, ocean engineering, and marine bio-pharmacy, are expected to establish a sizeable and consistent volume of business travelers through the economic corridors. These business activities are going to generate a substantial demand for conferences and exhibitions.
In light of the initiative, a cursory review of what the Asian gaming stakeholders have been doing in the past year or two reveals some pioneering progress along the Belt and the Road.
In Russia, other than the Tigre de Cristal Resort by Lawrence Ho’s Summit Ascent Holdings Ltd and the on-going construction of a casino resort by NagaCorp Ltd in the Primorye Integrated Entertainment Zone (IEZ) near Vladivostok in the Far East region, the approved establishment of gambling zones in Crimea and Sochi remains on the radar of numerous gaming companies.
The Innovation Group has completed several market assessment and feasibility studies for IR development projects in the region in recent years. In Almaty, Kazakhstan, where the Chinese government has funded construction of a new international airport, the Tengri Resort is being developed and will contain hotels, residences, casinos, other leisure amenities, and even educational and medical facilities. The resort development is expected to have the involvement of several Asian gaming stakeholders.
As the Belt reaches into Europe, Asia-based gaming companies are beginning to position themselves accordingly. In July 2015, Galaxy Entertainment Group Ltd acquired an equity position in the casino firm Société des Bains de Mer (SBM) that operates four casinos and several hotel properties in the Monaco principality, including Casino de Monte-Carlo. Hong Kong-listed Landing International Development Ltd has recently inked a deal to acquire a company controlling the upscale Les Ambassadeurs Club and Casino in London to expand and diversify its gaming operations. These opportunities should allow the Asian gaming companies to capitalize on the patronage and reach of over 1,000 casinos in the European Casino Association. Although many of them are very small by comparison to their counterparts in Asia, they are in locations and settings that are ideal for creating unique and exotic experiences which are critical to attract some of the 100 million tourists currently travelling from China.
Along the Road, we have observed even more vivid market dynamics. The Innovation Group’s list of recent development feasibility projects covers such countries as Korea, Philippines, Vietnam, Laos, Cambodia, and Sri Lanka, with a high level of variety both in project type and in scope. In early December 2015, a media outlet in Cyprus identified two Asian gaming companies, namely NagaCorp Ltd and Bloomberry Resorts Corp, as submitting a full proposal for a single available gaming license. In June 2014, a plan for an integrated resort invested by Chinese conglomerate Fosun International, along with partners from Greece and Abu Dhabi, was approved by the Greek government. While in light of Kerzner International’s extensive relationships with Chinese business partners, it probably would not be surprising to see more Asian gaming developers and promoters in South Africa.
Even for Macau, with a natural bridge between China and Portugal, the cross-region cooperation initiatives are expected to help the tourism sector flourish.
We believe the “One Belt, One Road” initiative will help the Asian gaming industry to further expand the supply of leisure and entertainment facilities in the region. The Innovation Group has been closely watching the markets and we believe these developments have the potential to re-establish the norms and reshape the gaming industry, both in the region and globally.
*David Rittvo, Executive Vice President, International
David Rittvo, Executive Vice President of International Division for The Innovation Group, is leading a team to expand the company’s presence on an international level, with focus on the Asian Region. Since joining the group in 2009, he has worked on feasibility studies, market assessments, financial pro forma projections and master planning for multiple clients in Vietnam, The Philippines, Sri Lanka, Macau, Australia, Japan, Korea and Taiwan.
*Michael Zhu, Vice President, International
Michael Zhu is in charge of a diverse set of project initiatives for The Innovation Group, including feasibility studies, market assessment, business analysis, and operational optimization. His main focus is on integrated resort development and operations in the Asia-Pacific and Europe markets.
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