With the continuously decreasing gaming revenues over the past 22 months in Macau, casino gaming companies in the Asia-Pacific region have come to realise that they need to create destination resorts targeting a broader audience, analysts say.
For the Head of Equity Research, Global Travel and Leisure at GMA, Jonathan Galaviz, “there is no doubt that the Asia-Pacific casino gaming industry is at a major inflection point, where the casino gambling experience of the 1980’s and 90’s is transforming into destination gaming-inclusive resorts (DGIR’s)”. As a result, real estate developers and casino gaming operators are now developing “an all-inclusive experience for a broad audience.”
In Macau, the gambling downturn started in 2015, putting “a fire under the rear ends” of the chief executive officers of casino gaming companies operating in Asia. “It let them know that taking consumers for granted in Asia won’t pan out too much longer,” Galaviz mentions, adding: “So, starting in 2016, many of these companies are now refocusing their strategies to take the middle-class of China and greater Asia even more seriously than ever.”
For the gaming analyst based in Las Vegas, Macau is “at a major cross roads”. The government needs to decide where to position Macau, since “other countries in the region are not stopping”. He believes Macau “needs to push things up a notch” to be relevant now and in the coming years. Competition is just around the corner, and Macau will not escape “the dynamics of regional competition for tourism dollars”, and could risk losing its way if it doesn’t take the competitive threat seriously.
Macau, a destination resort
The president of Macomber International Inc, Dean Macomber, says that “even if there is disagreement whether a given Macau project is a destination-resort or not, the collection of all current gaming and non-gaming opportunities in Macau could qualify the city as a destination resort.”
For the US-based gaming analyst, Macau is currently, or at least will soon be, a destination resort.
“The new wave of casinos coming online seem more to be building upon a character already established rather than being created anew,” he highlights. “But the current demand and capacity does not yet create what my sense considers a destination resort, nor will it upon the immediate completion of the next wave of projects”.
The gaming expert still believes that Macau is “too gaming-centric” to be considered a truly diversified destination resort.
Considering the decrease in gaming revenues in the territory and subsequent shift in government policy, Mr Macomber suspects that “had the owners known of the current shift in government strategy to a more resort-casino balanced economy, their current new wave projects would have been different, both to respond to the re-prioritization of target market segments, but also to respond to the different economics of such projects.”
Still, he believes throughout Asia there is no other boom that can compare to the more localized Macau boom. “And, both the Macau boom and any Asian boom that is taking place is largely a PRC boom that is being consumed primarily by Macau and to a much lesser degree other Asian venues,” he adds.
No threat
The managing partner and lead analyst of Union Gaming Research Macau, Grant Govertsen, emphasises that “only two large-scale resorts are likely to open this year in Asia, both of which are in Macau: Wynn Palace and The Parisian.” And Wynn Palace in particular promises to be “the most impressive and luxurious large-scale resort to have ever been developed”.
Mr Govertsen doesn’t believe this year will be significant in the context of resort development, as he sees “a continued evolution” of resort development.
In the subsequent years of 2017 and 2018, not only in the territory but also in the rest of Asia, he believes there will be “greater amounts of development coming online. This includes Cambodia, the Philippines, Saipan, South Korea, and Vladivostok, all of which will likely see projects come online in 2017 and 2018.”
With the continued proliferation of gaming in the Asia-Pacific region, Mr Govertsen still believes Macau will retain its number one position and will continue to generate revenue.
“We believe there are a couple reasons for this: no other gaming jurisdiction has natural access to mainland China, nor is any other jurisdiction part of China. Macau is impossible to replicate,” he explains.
Nonetheless, he admits Macau will be “negatively impacted”, to some extent, by these competitive jurisdictions, but mostly in the VIP segment. “Clearly some amount of VIP play is already leaving Macau for places like Saipan,” he observes.
As far as the mass market segment is concerned however, he believes “it is very difficult for these far-flung jurisdictions to compete with Macau,” and this is “the most profitable segment”.
