In a sea change for the traditionally conservative region, some of the biggest tourism spots in Asia and the Middle East are moving toward building or allowing their first casinos, raising competitive pressure on existing hubs like Macau.
MGM Resorts International and Wynn Resorts Ltd. have announced plans for billion-dollar resorts in Japan — which has legalized casinos — and the United Arab Emirates, where talks about allowing gambling are gaining momentum. In Thailand, politicians are mulling a large gaming complex to rival Singapore’s famous Marina Bay Sands, pending government approval of such facilities.
The establishment of new centers would pose a major challenge for Macau, the world’s largest gambling hub, which once had regional demand all to itself — to the tune of gaming revenue six times that of the Las Vegas Strip. The Chinese territory’s era of explosive growth has come to an end in recent years as Beijing cracks down on high rollers and tightens scrutiny of casinos’ activities in a bid to curb capital flight. Now it faces the daunting task of pivoting to mass entertainment options to lure tourists just as other destinations get closer to offering baccarat and blackjack.
The countries are targeting Chinese travelers, who comprise the bulk of Macau’s visitors. Mainland Chinese were the largest group of tourists to both Thailand and Japan before the pandemic, accounting for about one-third of their foreign arrivals in 2019. The UAE is also increasingly eyeing the world’s second-largest economy as a key source of tourism.
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“The loyalty that perhaps Macau had in the past, because it was the best show in the region — the best option — won’t necessarily be the case going forward,” said Jeremy Walker, a gaming industry consultant and former senior casino executive. “That gaming customer living in Shanghai will in the future have a choice to jump on a plane and go to Macau, Singapore, Osaka or Bangkok. They’re going to go where they feel they’ll get the best experience.”
Big Gamble
The lower house of Thailand’s parliament in January passed a proposal to establish several gaming resorts, with the largest one requiring a minimum investment of about $8 billion. Three months later, Japan gave a final go-ahead for a $10 billion project in Osaka to be co-developed by MGM and Orix Corp., paving the way for its first gambling facilities to begin operating by 2030. There have been early discussions in the UAE on legalizing gambling, Bloomberg reported last month.
Progress has come as countries seek to boost their economies hammered by Covid, attracted by the success of casino resorts in Macau and in Asian finance hub Singapore. Thailand is seeking at least $11 billion in additional taxes from such facilities and Japan is estimated to have a potential gaming market of $20 billion a year — compared to the $36 billion in gambling revenue reported by Macau in 2019.
Casinos “have become very successful and we’d like to have this money,” said Udorn Olsson, a former member of a Thai parliamentary committee looking into their legalization.
While glamorous casinos would add further appeal to tourism superpowers, Macau is under increasing pressure to up its game to attract more visitors.
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High rollers who generated half the city’s gaming revenue in 2019 — amounting to $16.7 billion — now only contribute 23% after China’s crackdown.
Macau’s six licensed casino operators have pledged at least $13 billion over the coming decade to build non-gaming industries. But there’s doubt whether their investment will generate returns given Macau’s lack of space, tourism infrastructure and expertise to facilitate some of those events, said one casino executive, who asked not to be identified discussing their company’s internal assessment.
Era of Competition
Time is still on Macau’s side, as it’ll likely be years before the first dice are rolled elsewhere. While Thailand’s casino proposal has won cross-party support, the country is in a post-election stalemate, and it could take a year after a new government is formed to progress, said ex-parliamentarian Olsson.
The opening of Japan’s first casino resort is at least seven years away, according to MGM, and interest among other operators for the country’s remaining gaming licenses is waning due to a complicated bidding system that could drag on for years. Religion remains one of the biggest challenges for the UAE to legalize gambling, as the practice is prohibited under Islam, its main basis for legislation.
Macau’s tourism is starting to ramp up again in the months after China reopened, returning to 66% of the pre-Covid level in April as the mainland resumes international flights. Gaming revenue from mass market tourists is expected to reach 115% of 2019 levels next year, driving operators’ combined profit to fully recover in 2024, Morgan Stanley estimates. TWEAKS TO GRAF OK?
Macau’s operators have been expanding their overseas sales networks across Asia, Europe and the US. Several companies have also been luring international high rollers with private jets, Rita Tam, general manager of charter flights operator TAG Aviation’s Macau branch, told the Macao Daily News.
Operators have also promised a wide range of non-gaming activities and facilities, from a 61,000-square-meter “high-tech amusement park” planned by Galaxy Entertainment Group Ltd. to a 90-session residency show series featuring super stars at Melco Resorts & Entertainment Ltd.’s resort through 2025. Sands China Ltd. has proposed a new 18,000-square-meter convention center, while SJM Holdings Ltd. wants to invite international soccer teams to play locally.
“We’re now entering this new era of competition,” said gaming consultant Walker. “Macau has a big challenge on its hands to deliver on its vision for non-gaming attractions, and will need to do better.”