The Rise of Asian Destination Resorts

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Tuesday, January 19th, 2016 | Written by Lucy Brown

With 2016 officially underway, many experts are looking ahead and making predictions about what to expect from the world of both brick-and-mortar and online gambling. Asia is one area of particular interest to analysts, as recent numbers out of the region’s gambling capital of Macau, the so-called Las Vegas of Asia, suggest that 2015 was not a great year for the industry.

What’s Behind the Downturn?

For the whole of 2015, Macau’s gambling revenues were down by 34 percent to $28.93 compared to the previous year’s tally of $44 billion. The reason for the downturn is directly related to the crackdown on white collar crime in China that took place throughout the year, with a number of prominent high rollers arrested on various corruption charges, and the Chinese government taking action to prosecute some offshore gambling moguls. As a result, the player pool of wealthy Chinese gamblers dramatically shrunk, leaving casinos that once catered only to VIPs without their regular stream of wealthy clientele.

Casino Companies Battered

As a result, Macau’s six casino operators, namely Galaxy Entertainment, Melco Crown, MGM China, Sands China, SJM Holdings and Wynn Macau, saw both their revenues and their company shares battered last year. Case in point, while the Hang Seng Index reported an average share price drop of 7.2% in 2015, that figure rose from between a 31% and 56% drop for Macau’s casinos, representing a $45 billion loss from their collective market value.

What’s Ahead for Gambling in Asia?

There is no sign of the Chinese government easing up on its efforts to go after money launderers, and those exploiting the financial markets to strike it rich. This means that in order to survive, casinos in the region will have to change their strategies to attract players.

Most experts believe that casinos will respond by transforming their once gaming-only facilities into true vacation destinations to attract tourists who want a real getaways rather than just a place to enjoy some high stakes gambling. This will mean adding more amenities to properties and including gambling options beyond basic slots and table games. Specifically, experts feel that casinos will need to increase sports betting activities to remain profitable, as there is a true demand for sports books throughout Asia. As Joe Pisano, CEO of Jade Entertainment and Gaming Technologies Inc explains:

“Legal sports book is an underrated product category in Asia. In 2016 I expect to see the growth of retail sports book in Asia both through land based casinos and standalone retail outlets.”

A Chance for New Markets

With the slump in gambling revenues out of Macau, experts predict that other countries may have an opportunity to begin attracting tourists with luxury destination casinos. Some experts believe that Laos and Cambodia could be appealing locations to major casino operators looking to establish a new destination casino in Asia. There are a number of other Southeast Asian that are expected to benefit from Macau’s slump, and as Mr Pisano explains:

“I expect in 2016 that we will see new properties emerge in provincial cities in the Philippines and Vietnam that will be true destination resorts offering both recreational and entertainment activities. These properties will be in the vicinity of international airports.”

India is another potential possibility for growth, as demand for gambling is high in the country but not well met with casinos. With Japan poised to host the Olympics in 2020, industry analysts are also betting on the construction of new casino resorts in the island nation to capitalize on the huge influx of tourists.

Key Players Already Taking Action

There are already signs that the experts’ predictions for the shift to resort-style casinos in Asia is underway. In October 2015, a new casino called Studio City opened in Cotai, Macau, offering new attractions like Ferris wheels, a Batman thrill ride and entertainment like magic shows. The casino cost $3.2 billion to build, and there isn’t a single VIP table on the gaming floor, showing that the resort is aiming to attract the everyday player.

The Chinese government is also aiming to boost tourism in Macau with the construction of the Hong Kong-Zhuhai-Macau Bridge, which is a 50 km link connecting three major cities, and costing US$10.6 billion. In the past, Hong Kong and Macau have attracted different types of tourist, although Hong Kong has benefited from acting as a conduit for those mainlanders looking to travel on to Macau. While Hong Kong is worried the bridge will cut off its preferential role as stop-over locale amongst this group, analysts believe that the whole region’s tourism industry is likely to benefit from having a first class rail link, with an increase in employment from the project also set to boost the local economies.