The ASEAN region is a growing bloc of countries with attractive destinations and resorts, as well as enthusiastic players. Muhammad Cohen reports.
If you’ve ever seen a PowerPoint about the Asian financial meltdown of 1997, then you know that the Chinese character for “crisis” is a combination of characters meaning danger and chance.
Asia’s gambling industry is no longer in crisis. However, Southeast Asia offers the best opportunity for gaming in this region and poses the biggest threat to Macau, which has been a casino destination since the early 1990s.
Southeast Asia is unquestionably the driving force behind Asian gaming for a long time to come. This region has a strong hand with its growing economies, top-notch gaming resorts and attractive destinations to attract tourists after the Covid event. It also boasts enthusiastic local players who are willing to play, even though they may live in separate jurisdictions.
Daniel Cheng, an industry veteran, says that it’s all about the economy: “The ASEAN block will surpass Japan in this decade, and become less powerful than the US, China, and the European Union.”
Association of Southeast Asian Nations (Burnei, Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam) has a population of 660 millions and a collective GDP of US$3.3tn. This is the 5th largest economy in the world. It’s just behind India, and 50 percent greater than Canada or Brazil.
According to the ASEAN annual report released in July, ASEAN economies are expected to grow 4.7% in 2019 and 5.0% in 2024.
Growing markets
In an email sent to iGB, Cheng wrote: “Indonesia has the 4th largest population in the world and a GDP almost three times larger than Singapore.” The Indonesians are a powerful force for outbound tourism in and of themselves. Indonesia, for example, is close to China when it comes to both tourism and visitor arrivals in Singapore.
Don’t forget Thailand, with its 70+ million people and an economy bigger than Singapore. This kingdom was recently liberated from the junta regime to bring in a wave of new soft power. Be prepared for Vietnam’s’rehabilitation’, with its warming relations with America and growing wealth of almost 100,000,000 people.
Malaysia is Southeast Asia’s richest full-sized nation, with its first integrated resort, the newly renovated Resorts World Genting. Singapore is one of the world’s richest countries per capita and has two integrated resorts that are among the most profitable on the planet. Market gaming revenues have already exceeded pre-Covid levels.
The Philippines is the most dynamic market in Asia, and it will soon surpass Singapore’s gross gaming revenues. GCG Gaming Advisory Services estimated that Philippine GGR in 2023 could be US$5,9bn. Two-thirds of this amount would come from Manila’s Entertainment City IRs.
Travellers International Hotel Group (formerly Resorts World Manila) has upgraded the flagship resort, Newport World Resorts, to a significantly improved version.
The casino resort boom
The Philippine Archipelago is expanding. Bloomberry will add Solaire North to Quezon City, followed by a resort in Cavite to the south. This is to surround Metro Manila. NuStar, the second-largest metropolis in the country, has opened a gaming and lodging facility in Cebu City last year. Two more hotels are in development, as well as luxury retail, MICE and MICE facilities.
Six new casinos or improved ones have been opened in Clark, an overnight getaway two hours north of Manila, with its international airport. Hann Resorts, which operates the Widus Casino in Clark and is a multi-billion dollar expansion company with plans for luxury hotels, golf course and homes. Rival D’Heights plans to expand both its residences and hotel.
The Philippines is a top market for POGOs
The Philippines is the only ASEAN country that allows casino gambling without any entry restrictions. Local players, as well as a small niche of Koreans and Japanese tourists, who are the closest tropical gaming destinations, fuel the growth in the gaming industry. The archipelago also has another advantage.
David Leppo, president and CEO of FootballBet.com says that the Philippines is currently Asia’s only online market that has been regulated. The retail market bounces back, and the Internet market has grown stronger in the past four years thanks to Covid.
All over Southeast Asia, new resorts are popping up. Corona, which opened on the beachfront of Phu Quoc Island just before a pandemic named after its name occurred, is Vietnam’s one and only casino resort where foreign passports are not required. Hoiana will launch its US$1bn phase in central Vietnam’s famous coastline by June 2020. Ho Tram, in the southern part of Vietnam, opened its second planned hotel tower last year.
Thailand Betting
In recent years, the legalisation of casinos in Thailand has gained momentum. Hard Rock Hotels and Cafes, which have hotels in Thailand, are actively engaging government officials. Las Vegas Sands is also interested in the Kingdom.
No one else, including international casino operators and local hotel groups, has said no to Thailand. Leppo says that tens of thousands Thais cross the border to Cambodia and Laos every day in order to gamble.
The regional incumbents don’t stand still. Malaysia’s Resorts World Genting – the granddaddy gaming resort in Southeast Asia – completed an upgrade of its SkyWorld park worth US$2bn, which included a new menu of entertainment, lodging and retail options.
Singapore’s two 800-lb gorillas of gaming, Genting Resorts World Sentosa and Marina Bay Sands are currently in the early phases of US$3.5bn extensions. The government has agreed to allow the casino duopoly to expand. These include a new waterfront district and a modern arena. MBS has completed a US$1bn separate upgrade to its rooms across its three towers, ahead of the addition of a new tower featuring a rooftop pool.
According to JP Morgan Asia Pacific’s head of Asian Gaming/Leisure Research DS Kim, Singapore’s mass and VIP gaming revenues each surpassed 2019 levels during this year’s 2nd quarter. Leppo says that mainland China players are more likely to be able to obtain a Singapore visa than Macau.
Macau Diversifying
Macau is focusing more on Southeast Asia to increase its tourist base outside of Greater China. The Big Six [casino operators] – Sands MGM Galaxy Wynn Melco SJM – are working with the Macau Government Tourism Office (MGTO) and IPIM (Macau Trade and Investment Institute), to help support government initiatives to increase foreign tourism to Macau.
Mendoza, a Macau marketing consultant, says that sporting events such as the SJM Macau Open Golf Tournament and MGM Macau Tennis Masters in December “will attract international attention and spark curiosity, thereby attracting audiences to Macau.”
The real work will begin when the number of overseas visitors exceeds their historical 8%. Mendoza says that since the products and services developed were for the Chinese mainland market, it would take a holistic approach to market planning, development, and implementation in order to meet the needs of Southeast Asia tourists.
Some people do not believe that these efforts will be successful. An executive who has worked in Macau for many years and requested anonymity, says that Southeast Asia is a marginal factor. I don’t believe you can make Macau an international destination simply because the government says so.
Daniel Cheng explains that Macau is currently a target market for a completely different group of people than ASEAN. The new Macau regulatory regime after 2022 will depend heavily on mainland-controlled outbound travel. “The enclave does not have the hardware or software necessary to be competitive with ASEAN countries on a level playing field.”
Unfair fight
Southeast Asia is yet to show that it has the ability to challenge Macau. Andy Choy, a long-time Macau gaming executive says that while regional competition may divert some visitors away from Macau’s gaming industry, it is unlikely to represent any significant portion of Macau’s gaming business.
Even if Macau’s recovery is stalled, the projected revenue from gaming of US$22 billion will be double what it would have been in Southeast Asia, which has seen a boom. Macau’s primary neighbour, mainland China, has a population five times greater than Southeast Asia and a nominal gross domestic product (GDP) that is twice ASEAN GDP per capita.
Choy: “Macau is very attractive because of the number of attractions and properties. It’s a lot more appealing than a standalone property elsewhere.”
Anonymous executive mocks the notion that Thailand is a game-changer: “If mainland gambling enthusiasts wanted to travel to Thailand, then they would already have gone to Singapore.”
Unintended Consequences
Macau’s advantages are undeniable and perhaps insurmountable over Southeast Asia, with its mainland China market, when it comes to proximity, familiarity, language, food or other factors. Chinese authorities also threaten individuals and places with severe penalties for gambling abroad, while crackingdown on illicit money transfers and gaming promotional activities.
It’s no surprise that the mainland has not yet reached pre-Covid tourism levels in Asia. These new realities and policies also affect Macau, whether they are done so intentionally or not.
Macau’s gaming volume has not risen to pre-Covid levels like it did in Singapore, Philippines, or Las Vegas. This is despite mainland Chinese being able to travel to Macau without quarantine, although there have been intermittent disruptions because of Covid outbreaks. GGR was 58.5% higher than the previous year’s figure as we approached the Golden Week around China’s National Day on 1 October.
Macau has effectively lost its VIP market, which represented 46% of the 2019 GGR (about US$16.9bn). The liquidity that junkets provided previously to allow VIP players to gamble at their usual levels is no longer available for many of them. Casino credit is risky for the casino because there are no legal ways to collect debts from gambling in mainland China.
The mass outweighs the VIP
Morgan Stanley Asia Pacific analyst Praveen Chaudhary believes Golden Week’s VIP revenues will be 30% less than their 2019 levels, with the mass revenue approaching 100%. JP Morgan predicts Macau’s GGR will increase to 62% in 2019, and then stabilize around 80% by 2025. Investment bank’s forecast for 2025 EBITDA industry slightly surpasses pre-Covid, due to expanded mass play with higher margins and massive investments in reshaping Macau as tourist destination.
Macau will have to invest billions in order to meet regulators, while running at full speed to get back to the level it once was. Southeast Asia’s largest markets are now performing better than they did before the Covid scandal, while recovery is accelerating elsewhere.
Leppo states: “The Southeast Asia market, even without travellers from mainland China and its ethnic Chinese populations is growing and strong.”
Look out for in-depth reports on Southeast Asia’s key destinations from iGB over the next few months.
Muhammad Cohen, a former US diplomat who is currently iGB Asia’s editor-at-large, has been covering the Asian casino industry since 2006. He most recently covered it for Forbes. In 1997, he wrote Hong Kong On Air – a novel about television news, romance, betrayal and high finance.
