Tuesday, August 16, 2022

Gaining critical mass

Asia’s gambling industry is heading into 2018 on a firmer footing than it has for several years, with most major markets having chalked up strong growth in 2017, though China and its policies will continue to be the main driver when it comes to performance.

Macau, the region’s gambling capital, saw gross gambling revenue jump 19.1 percent in 2017, rising for the first time in three years. The growth was unexpectedly led by the VIP market, which many analysts had given up for dead following Beijing’s anti-corruption drive.

According to figures from the Gaming Inspection and Coordination Bureau (DICJ), VIP revenue in the final three months of the year, rose 21.9 percent, moderating from the 35 percent clip 17Q3, but still outstripping the 17.1 percent growth rate recorded by the mass market.

Analysts are expecting another year of growth, with Morgan Stanley upping its estimates to 16 percent for overall GGR, while Bernstein sees an increase of 10 percent.

The Philippines also recorded a strong year, despite coping with the fallout from a major attack on the Resorts World Manila casino in June, which killed 37 people. The IRs in Entertainment City chalked up 27 percent growth and that is likely to extend to a 32 percent increase this year, according to Morgan Stanley estimates.

Likewise, Singapore’s IRs showed a steady recovery, helped by the VIP business, while casinos in Cambodia and Vietnam also powered ahead. Although overall market figures are not available, NagaCorp, Cambodia’s biggest operator, posted a 40 percent gain in interim GGR.

While VIPs were the main story in 2017, the focus is expected to switch back to the mass market this year. China will continue to be the dominating factor due to the sheer strength of numbers. It is the world’s largest outbound travel market, with figures projected to top 200 million by 2020, according to CLSA estimates. Gaming venues will be key beneficiaries, the firm said.

Operators in the Philippines, which does allow locals to play in casinos, can boast decent support from the domestic market, at least as far as visitation and non-gaming are concerned. However, elsewhere, most still need to court that mainland visitor. To be sure, Asia’s middle class is expanding, with Thailand and India in particular, showing promise as source markets, but the numbers are still eclipsed by China.

So what are the latest trends and what are the risk? According to analysts, in the most recent quarter, the mass market sector in Macau performed better than expected.

Although some surveys have indicated that the more savvy China tourist may be looking further afield than Macau, Morgan Stanley contends that the visitation base has spread to second-tier cities… and that bodes well for the outlook. It says it expects these cities to become bigger and wealthier, with their residents more willing to spend.

In the first 11 months of last year visitation to Macau from second-tier cities was up 13 percent, while visitation from Tier 1 cities, such as Shanghai and Beijing, was up only 3 percent, it said. And according to a survey, residents of these cities indicated a strong propensity to want to travel this year. As a result, Morgan Stanley has upped its 2022 estimate for Macau GGR to $60 billion from $53 billion previously.

This renewed focus on mass will be a positive for the Macau market, especially as VIP is forecast to slow again this year. According to Bernstein, the sector will face renewed headwinds from cooling measures on Chinese real estate, credit tightening in China and a continued focus on capital outflows.

In the short term, other regional destinations are unlikely to get such as lift from China’s new travellers, who judging by prior patterns will likely opt for familiar destinations such as Macau for their first foray abroad. However, lessons from the past have also shown that these travellers are prepared to spread their wings relatively quickly. If they do the pie is big enough to go around Asia’s IRs.

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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