Asian casinos blossoming a new El Dorado

By SONIA KOLESNIKOV-JESSOP, UPI Business Correspondent  |  June 22, 2004 at 11:51 AM
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SINGAPORE, June 22 (UPI) -- The casino industry in Asia is set for a strong expansion of the next couple of years, with not only Macau proving a irresistible magnet for operators, but two potential newcomers, Singapore and Thailand, considering setting shop.

"Asia is the fastest growing region in the world for the casino industry," says Steven Lim, Executive director of the Malaysian-based RGB, a leader in Asia in distribution of gaming equipment, pointing that the trend is set to continue.

Leading the pack is the former Portuguese colony of Macau, which has become a new competing turf for Las-Vegas moguls since the government liberalized the market in 2002 by breaking the then 39-year monopoly of Sociedade de Jogos de Macau (SJM) and awarding two new 20-year gaming licenses: one to the Galaxy Casino Group of Hong Kong which has given a sub-concession to the Las Vegas Sands, and one to Wynn Resorts, owned by Steve Wynn.

While the Las Vegas Sands, owner of the Venetian casino, opened last month the $240 million Sands Macau, the $60 million Galaxy casino is set to open this week and so is the ground-breaking Wynn Resorts' $705 million mega project.

On the top of this hive of activity, MGM Mirage, the third largest American casino company has just announced plans to build and manage a casino in Macau, in a joint deal with Pansy Ho Chiu-king, the daughter of Stanley Ho whose company was controlling gaming in Macau up to now. The resort, which will use the "MGM Grand" name, could open by late 2006.

Far from recoiling at the competition, SJM director Ambrose So sees the new casinos has complementing its own portfolio.

He argues that China's recent relaxation of individuals to travel to Macau and Hong Kong is having a "baking powder effect on Macau's gaming pie."

"Last year, the number of Mainland visitors outgrew that of Hong Kong. This is a strong indication of the potential of the Chinese market," So said.

So revealed Tuesday that on the month the Sands Macau opened, SJM's revenues grew 24 percent over April and 107 percent year-on-year (due to the low base of SARS).

SJM's total gaming revenues totaled $3.7 billion in 2003 for 11 casinos, compared with total revenues of $4.8 billion for Las Vegas casinos. For this year, it is forecasting revenues of $4.2 billion for SJM.

To face the increasing competition, the company is in the process of updating some of its casinos and recently introduced two themed casinos: Pharaoh's Palace and Crystal Palace (with 36,000 crystal columns). It is also planning the extension of his most famous and largest casino, the Lisboa, with construction to start later this year for completion in 2006.

This will be around the same time that Wynn's mega-resort, with 600 rooms, seven restaurants and 100,000 square feet of gambling space, gets completed.

Meanwhile, the 120-acre, $10 billion "Cotai Strip" of 20 casino-resorts which will be built by the Las Vegas Sands should be completed by 2009, with the anchor hotel a reproduction of the Venetian.

"This is not the first time we have faced competition. We encountered the same in the 80s with Australia opening up, but which still had constant growth and we're not afraid of this competition," So told United Press International on the side of the Asian Casinos Expo 2004.

"With China opening up tourism the gaming pie is going to grow," he said, pointing that last year mainland China accounted for 40 percent of SJM's casino players, with another 40 percent from Hong Kong.

According to a recent report by Deutsche Bank, revenue in the Macau casino market may grow 25 percent a year over the next five years. The average casino win per table per day in Macau is $22,000, compared with $2,600 in New Jersey's Atlantic City, and $2,200 in Las Vegas.

So acknowledge that while typically slot machine will represent 70 percent of earnings in Las Vegas, in Macau 90 percent of revenues comes from table. "This is related to the Chinese mentality. Players here believed that they have a better control of lady-luck if they play at a table," he said.

RGB's Lim pointed that Baccarat remains the game of choice in the region, taking 70 percent of the market.

So noted the new entrants to the Macau casino market who will be pushing slot machines their strong point. "That's why we see complementarity's between our competitors and us," he said, adding that many of the new Mainland players like to start on the slot machine.

But beyond Macau, international operators are also getting exited by two new potential markets: Singapore and Thailand.

In March, the House of Representatives in Thailand voted overwhelming in favor of legalizing casinos despite heated debates. Though this is only the first step in a long road, it is an important one, Lim says.

Meanwhile, the Singapore government, which had long been opposed to letting a casino on the island, is now mulling a possible u-turn to set up a casino on Sentosa Island. It recently invited comments from the public and a decision should be taken by the end of the year.

So said his company would be interested in both countries, but all things equal would prefer Thailand, because of the size of the market and location.

A two-year old study showed Thais were spending about $7.5 billion each year on gambling, much of it underground or outside the country, meanwhile official statistics in Singapore showed at least $4.1 billion of legal gambling last year.

But Frank McFadden, CEO of Casinos Austria International, also told UPI Singapore was a very attractive investment for operators though they should expect a high degree of government involvement if the project goes ahead. "The government might want to be a majority owner in the project, but that's not a problem" he noted.

He pointed to the high GDP per capita ratio, as well as the population density as major plus points, but he also said that if the government restrict access to locals (as has been talked about) this would make an investment in a casino here less palatable.

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