India -- an untapped tourist goldmine?

China’s exploding outbound tourism market and how it will shape the future of the global leisure and luxury industries over the next decade has been well documented but, so far, less attention has been paid to giant neighbour India, which offers similar potential.

Its already 1.2 billion population is expected to expand by 51 percent up to 2050, while China in absolute terms is expected to begin to shrink from 2030 onwards, the United Nations World Population report forecasts. According to World Bank estimates its middle class is likely to swell to more than 1 billion by 2025, or about two thirds of its forecast population at that time.

The Boston Consulting Group says consumer spending in India is likely to more than triple from $991 million in 2010 to $3.6 trillion by 2020, a 14 percent annual growth rate, or 8 percent in real terms. While the Brookings Institution forecasts that by 2030, India will be the world’s biggest consumer, with its middle class spending more than $12.8 trillion per annum.

The global middle class is defined as households with daily expenditures between $10 and $100 per person in purchasing power parity terms.

Add to that a natural propensity to gamble and it’s easy to see why the India card is likely to play an increasingly important role in the investment decisions of foreign gambling operators.

Casino gambling in India is restricted mostly to Goa and Sikkim states, but betting on horse racing and the lottery is legal, as are card rooms for Poker and Rummy. Consultancy firm KPMG estimates that $60 billion was wagered in India in 2010 on lottery, online, cricket, and card games. Around $40 billion of that is thought to have been bet illegally.

Domestically, the industry continues to be plagued by political bickering and regulatory uncertainty and is thought unlikely to open further to gambling any time soon.

Delta Corp, the largest and most organized player, has received permission to start a new floating casino in Goa, but does not yet know where it can locate the ship as the government wants to move casinos further away from the Mandovi river.

The group opened its ambitious integrated casino-cum-resort in Daman last year, but the casino has yet to begin operations, even though the resort has acquired the five-star accreditation that was a necessary prerequisite for running a casino.

Jay Satya a lawyer and expert on gambling said it may take up to a decade for the climate within India to become favorable to legalized gambling.

However, the pent up demand is there. Many Indians say they began gambling during the parties surrounding the Diwali festival. Diwali is the Indian festival celebrating the goddess of wealth, Lakshmi, and it is considered auspicious to gamble that night.

“(I have been playing) all my adult life,” said Munish Bharadwaj, a filmmaker in his 40’s. “It started as a family thing during Diwali. Now, in addition to the regular Diwali fare with friends and family, I see myself at casinos whenever I get the opportunity.”

Bhardwaj said his preference was for card games, “mostly flush (three card poker) and regular (5 card) poker”.

So, where will this newly rich and ever-growing Indian middle class travel to satisfy their desire to gamble? The number of Indian outbound tourists in 2013 was 14,924,755, an increase of 11.4 percent over 2012. Figures for 2014 aren’t yet available.

According to the Tourism Ministry, the top five destinations were Saudi Arabia, Thailand, Singapore, Kuwait and the U.S. Tourists to Saudi Arabia were most likely making a pilgrimage to the Haj, whereas Kuwait numbers may be skewed by job seekers entering the country as tourists.

Macau, seeking to diversify its tourism base away from mainland China, has set out to woo the Indian visitor with some success in recent years. More than 150,000 Indians visited Macau in 2014, according to figures released in May this year by the Macau Government Tourism Office. That pales in comparison with the 21.2 million arrivals from China, but shows explosive growth from the 29,000 recorded in 2006.

However, some experts say the Macau offering is too focused on Chinese players whose game (Baccarat), service and entertainment requirements (spa, sauna, and KTV) are almost the opposite of Indian players (Roulette, poker, rummy, and other derivative card games, decent service, and a lively atmosphere within the casino).

Singapore, whose two casinos are among its prime tourist attractions, also receive hundreds of thousands of Indian visitors every year, with the number increasing almost three times between 2000 to 2013, according to figures released by Singapore Tourism Board.

Neighbouring Nepal, where gambling is legal, and whose government has recently significantly improved regulations in a bid to develop the industry, also gets the majority of its tourists from India, with 180,974 visiting in 2013, according to Ministry of Culture Tourism and Civil Aviation statistics. However, the data falls far short of the true numbers of Indians visiting Nepal as those crossing by land are not required to show a passport and aren’t counted. Many border crossings are also open 24 hours a day.

In an attempt to cash in on the expected boom in outbound tourism, Australian billionaire James Packer took a gamble on Sri Lanka, the tiny tropical island off the coast of southern India, which he said had the opportunity to be the new Macau.

However, his plans for a $400 million casino resort in the capital Colombo were dashed earlier this year, when the new government of President Maithripala Sirisena shut the door on gambling.

“There was a shift in the government’s policy. It decreed that all foreign operators had to leave,” said Albert Climent, a Delhi-based gaming consultant. The shift was reportedly due to moral opposition from the Buddhist clergy. “The moral debate is the hardest to overcome,” he  added.

On the flat, low-lying northern border of India, Nepal may be a major beneficiary. Previous casinos there were closed down for most of last year after failing to comply with new regulations that are ultimately aimed at improving standards and attracting more investment to the industry. However, despite the devastating April earthquake, the two casinos to have successfully applied for and received licenses under the new regulations are now open for business again.

The three Indian states bordering the mountain Kingdom include the capital New Delhi and have a population of more than 400 million. They are also well served by the country’s major highway systems, as the East-West Corridor and the northern section of the Golden Quadrilateral pass through all of these border states.

The country’s potential attracted Silver Heritage Group, whose plans call for as much as $100 million in investment in five-star facilities along Nepal’s borders with India. It now runs the Millionaire’s Club & Casino at the Hotel Shangri-La in Kathmandu and has plans for 200 tables and 1,000 slots at multiple resorts on the border with India opening in phases from 2017. Its investment rationale was driven by this well established Indian demand.

The Millionaire’s Club & Casino has a capacity for 22 live tables and 36 slot machines, with potential to develop additional gaming space within the property. 

Silver Heritage believes India is the largest remaining materially underserved gaming market in the world.

Unlike Macau, the two countries also share close cultural affinities, with food, drink and entertainment offerings catering to the Indian market.

An assistant professor at a well-known Indian university and his journalist wife told AGB that they favored Nepal because it is affordable, partly because the Indian rupee is stronger than the Nepali currency.