Concessions, online crackdowns and technology seen as 2019 themes

The new year is getting underway against a backdrop of political and economic uncertainty across the globe. The U.S. government shutdown due to a spat over funding for a border wall with Mexico and the trade dispute with China are causes for concern that ultimately will be felt in the global gaming industry. Already, shares in Macau operators have been heavily sold off and gross gaming revenue is declining in tandem with the slowdown in China’s economy. Two of Macau’s operators are going into the final year before their concessions expire with no clarity as to what the government plans in terms of the rebidding process. While several countries, including Thailand and India, face elections, which could have ramifications for the gaming industry. We ask our field of industry experts to gaze into their crystal balls for predictions as to what are likely to be key events and trends to watch out for this year. In alphabetical order.

Harmen Brenninkmeijer, managing partner Dynamic Partners

For 2019 my predictions are the following: Sportsbetting will  continue to expand, the money made in 2018 will not be matched but growth opportunities in a number of markets will be exceeded.

The US will grow despite the attack by the “Federali’s” to get involved and rule. An additional 5-10 States will allow for sportsbetting and the National Leagues will be part and parcel to not limiting the growth.

The growth in emerging markets will be  surprising and new products will enable easier and faster bets to be placed. Operators with few innovations will lose the game, slowly but surely.

The Crypto world will be of interest again. As economies suffer around the world the Crypto world will gain. Surely the value will rise, and the number of applications will be more practical. A number of them will be of surprising value.

No major IR openings are expected that are not already on the board. No major regulatory changes are expected in any countries, although Brazil could surprise everyone. The casinos will feel the pressure on their bottom line, demanding more innovative and better-priced product. It’s already hard to attract more and new patrons to the casinos and this will only become more difficult.

The i-Gaming sector will feel more pressure. Not just in the regulated areas due to the various controls, bans and tax increases but also in the unregulated areas. Pressure will be increased by some of the major contributors to the cashflow (read China). The Chinese will make it increasingly difficult to move money in and out, to access the sites and to service what’s needed by pressuring various governments to not accept illegal immigration in the sector.

Overall the business will be stable but not with the double digit growth it has been used to in most markets. It will only reach that in the ultimate emerging markets, such as most of the African and Latin countries.

Esports will continue to grow (up). It will see a better understanding of the market, the potential and how it can compliment gaming. More of a game integration will be seen as the game developers see how parts of esports can be integrated into traditional (slots) games. Overall the excitement will be supported by active growth in the traditional areas accepting more of a synergetic value creation for the products offered.

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David Green, CEO NewPage Consulting

Going forward, my three  “look fors” in 2019 are these: Some indication of the Macau SAR government’s intent with regard to the renewal or re-tender of gaming concessions. With the Chief Executive finishing his second, and final term in December 2019, he has choices to make. Does he do nothing, and leave the issue solely within the province of his successor, or does he exercise his discretionary power to extend the term of the one concession expiring in 2020 (SJM’s, with MGM’s “sub-concession” terminating on the same date, 31 March, 2020)? My expectation is that he will grant an extension of perhaps two years, which will mean that all concessions and sub-concessions will expire in 2022.

As recently as August 2018, Morgan Stanley was anticipating the combined market capitalization of the six operators in Macau to be around US$146 billion. There is a lot riding on what the government does, yet it is unclear that it has a roadmap to lay out for investors, operators and regulators to chart their courses.

I think the global focus on the financing of terrorism and on money laundering will result in a push back against proxy betting. Player anonymity is inconsistent with the internationally accepted objectives of CTF/AML conventions and domestic laws enacted by signatories to facilitate enforcement. Know Your Customer is a fundamental plank of risk-informed regulation of the gaming industry.

Already people are looking beyond Japan for the next big market opportunity; much remains to be done yet to get the industry underway in Japan, but it now seems certain that it will progress. India may be where effort will be concentrated. Sikkim has the benefit of a new airport, but is still a difficult place to access, and the terrain is challenging for large-scale construction. Goa has made the industry a political football, and it has struggled to gain either political traction or scale. Rajasthan, which is currently having an election, is one State that suggests itself as worth investigating, given its numerous tourist attractions and historical features.

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Frederic Gushin, managing director Spectrum Gaming

Macau will begin to consider the re-issuance of concession as 2022 approaches and the Chinese government will continue its crackdown on corruption in 2019.

The online gaming facilities in the Philippines and Cambodia will come under increased scrutiny by regulators and law enforcement and crypto-currencies will become more widespread and even more controversial in 2019.

Asia will continue to be the worldwide leader in casino gaming and unregulated online gaming.

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Sudhir Kale, founder GamePlan Consultants

I believe that more and more casino operators will begin to use artificial intelligence (AI) to make the most of the data they collect on customers. The application of AI in the gaming industry is currently in the nascent stage and this development could be a game changer for 2019.

Casinos in the Australasian region will continue to focus on cost-cutting at the expense of customer experience. The days of unprecedented growth they experienced from 2010-2014 are well and truly over, and operators are under serious pressure to shore up their EBITDA. Unfortunately, many operators will accomplish this by further impoverishing the guest experience, thus depriving themselves of loyal customers in the long-term.

The mass market will be the key revenue growth driver not only for Macau but for other markets in the region. Operators in Australia, New Zealand, Cambodia, Philippines, and Singapore will have to reassess their priorities in terms of which customers they should focus on.

Pressure on share prices of bellwether casino stocks such as Las Vegas Sands and Wynn will continue in 2019. Stock prices of these companies will continue to be negatively impacted by tensions between the U.S. and China, and by revenue growth below investor expectations.

Revenues in Philippines gaming market should continue to impress while those in Singapore will be a cause for concern. The long-term outlook for markets primarily dependent on Mainland China is far from appealing. Forward-looking senior gaming executives will do well to diversify their customer portfolio.

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Andrew Klebanow, senior partner Global Market Advisors

Sihanoukville is rapidly evolving into a super-regional gaming destination. On the regulatory front, the Law on the Management of Integrated Resorts is now being reviewed by the Council of Jurists of the Council of Ministers. The industry can expect final passage in 2019.

In Japan, expect to see the issuance of over 300 executive orders that will better define the market opportunity for future integrated resorts. Since casino gaming remains a contentious issue, many of these orders may not appear until after elections in April or even later, after elections for the upper house in July. Nevertheless, these orders are a critical step prior to the start of the Request for Proposal process in 2020.

While geo-politics may create economic headwinds, many markets in Asia continue to enjoy robust growth. Resorts World Genting will have completed its $1.5 billion expansion and renovation and will enjoy the fruits of those efforts. Likewise, Macau should continue to see continued growth. The opening of the Grand Lisboa Palace near the end of the year will further stimulate demand.

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Joji Kokuryo, founding member AGB Nippon and managing director Bay City Ventures

2019 will hopefully bring more clarity to Japan on the legislation front, but the main attraction will be technology. Not just new technology in games, but in platforms intertwining gaming ecosystems and systems such as for accounting and security. Blockchain will have weeded out the pretenders and the real projects worth chasing will be taking shape.

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Tim Shepherd, director Fortuna Investments

Vietnam is the hottest land based gaming destination in Asia right now and it will remain so into 2019. On the demand side, a mixture of proximity to China, safe environment and a wonderful destination for tourists means plenty of guests. On the supply side strong (and stable) gaming regulation, a large slice of the  population which can speak Mandarin, tied to an industrious "can - do" from architects and builders, mean fewer headaches, less capex and greater ROIC on a like for like basis with places like the Philippines.