Genting builds on U.S. growth

Since entering the US market in 2011 with the launch of Resorts World New York City, Genting Group has made a number of major investments in the country, indicative of an operator intent on becoming a major player in the market.

These investments have included the $236 million purchase of real-estate in Miami in 2011, a near $250 million investment as part of an agreement to run a proposed $1 billion tribal development in Taunton, Massachusetts, and, most eye-catchingly, plans for the estimated $4 billion Resorts World Las Vegas, which will be the first major new development on the Strip for almost a decade when it opens in 2019.

These projects add up to a serious statement of intent in the U.S. from Genting Malaysia Berhad, the subsidiary which runs the Group’s U.S. casino business, even if a number of question marks remain over the particulars of its various interests.

Population hubs

“Genting’s strategy appears to be focused on U.S. states with large populations, or tourist resorts as in the case of Miami, which is a mixture of both. The U.S. economy is recovering well, and this will support a market that has less legal gambling spend per capita than most countries, even though its GDP per capita is one of the highest,” Warwick Bartlett, CEO of Global Betting & Gaming Consultants, told AGB.

The group first entered the U.S. in 2011, with Resorts World New York City, the city’s first legal casino. Michael Levoff, SVP of public affairs, Genting Americas, told AGB the development has been a “resounding success” for both New York State and Genting. Resorts World New York has seen its GGR grow at an above-market annual average of 4 percent since launch, exceeding $800 million in 2014.

Levoff said there is scope for further growth, too, with New York having an estimated $4 billion unsatisfied gaming market and more than $1.8 billion being wagered out of state each year. “Over time, we will work to further market to and capture those customers by continuing to invest in the product and customer experience at Resorts World New York City,” he said.

Growth ceiling?

Alex Bumazhny, a senior director at Fitch Ratings, told AGB that Resorts World New York City’s revenues have grown strongly as it has penetrated deeply into the local Long Island market. However, he cautions that further penetration upside could be limited and that going forward, the casino’s revenue will be more likely driven by local economic conditions as opposed to attracting new customers.

Genting has explored a second license in New York, missing out on a proposed Orange County development in 2014. However, earlier this year it was granted a license to operate a further 1,000 video lottery devices on site and is planning for a Phase Two expansion. “This expansion is designed to position the facility to grow the existing market and diversify revenue streams with the addition of more non-gaming amenities,” said Levoff.

Nearby in Massachusetts, development on the proposed Mashpee Wampanoag tribe’s First Light Resort and Casino in Taunton continues to hit legal issues. The project is somewhat of an anomaly for Genting in the U.S., insomuch that it has partnered with a tribe rather than developed individually, and the experience is unlikely to alter Genting’s historic preference to operate alone.

Legal hurdles

In Florida, Resorts World Miami also stalls amidst a flurry of lawsuits. Levoff at Genting said Miami “continues to be an exciting opportunity for future development”, but the firm will not project an opening date.

Bartlett at GBGC said Miami would be the perfect location for a Resorts World Casino, but that questions remain over the license and tax rate.

“The Florida State Lottery will be concerned that they may lose some revenue, and that is quite serious because the lottery helps fund state education. But the state needs the tax revenue that a casino would bring, let alone the jobs,” Bartlett said.

The biggest prize, however, could yet be Vegas. Genting projects a 2019 opening for Resorts World Las Vegas, and said full construction mobilization is likely to take place in Q1, 2017. Smaller site preparation projects are already underway.

“The multi-billion dollar project will be the first ground-up, new integrated resort in Las Vegas in over a decade and will feature innovative concepts that are designed to lead a resurgence in interest in Las Vegas from both domestic and international customers,” Levoff at Genting said.

It is understood that the development will be tailored with Genting’s Asian database in mind, and it will likely be boosted by the announcement in August that Hainan Airlines will begin operating a non-stop flight from Beijing to Las Vegas.

Bumazhny at Fitch Ratings said he was somewhat skeptical about large scale greenfield projects on the Strip in terms of return on investment prospects, but did note that Genting is “uniquely positioned due to its deep global database that is has built up across Asia and the New York area.”

Bartlett said that promising recent numbers out of Vegas suggested that by the time the $4 billion development opens, Genting could experience a tailwind.

Big spender

While Resorts World Las Vegas could be Genting’s only project to complete in the next three years, Bumazhny said it had been aggressive with capex in the U.S., adding that Genting’s history of maintaining long-term investment horizons with an emphasis on establishing footholds in gateway markets may explain the approach.

“One advantage Genting has is long-term commitment to its projects and its deep balance sheet, which allows it to weather long ramp-up periods and make early adjustments if necessary,” he added.

Whether this means there will be further U.S. expansion, however, is unclear. Fitch Ratings expects Genting to incur annual capex of MYR 7 billion - 8 billion ($1.72 billion - $1.96 billion) from 2016 to 2018, of which 40 percent will likely be incurred by Genting Malaysia Berhad, primarily on Resorts World Genting. That could equate to an annual U.S. capital expenditure in the region of $750 million.

This would appear to suggest a strong commitment to the U.S. While Levoff would not be drawn on future U.S. developments, he did describe the country as a “vast market with tremendous revenue potential”, adding that Genting “is well prepared and suited as it continues to pursue U.S. expansion.”

Having already left a significant footprint in the U.S. over the past five years, and with a Vegas debut yet to come, Genting looks well placed to continue its rapid growth stateside.