Macau feels the heat as Asia embraces gambling legalization

The gambling landscape of Asia and the Middle East is experiencing a remarkable transformation as some of the region’s most prominent tourist destinations venture into the realm of casino development. This departure from their traditionally conservative stance puts pressure on established hubs like Macau, compelling them to adapt to the changing dynamics.

The evolving landscape of Asian gambling

Major players in the industry, such as MGM Resorts International and Wynn Resorts Ltd, have unveiled plans for billion-dollar integrated resorts in Japan, a country that recently legalised casinos. Similarly, the United Arab Emirates (UAE) is engaged in discussions regarding the possibility of allowing gambling, attracting interest from prominent casino operators. In Thailand, policymakers are considering the establishment of a large-scale gaming complex, aiming to rival the renowned Marina Bay Sands in Singapore, pending government approval.

This wave of new developments presents a significant challenge for Macau, which has long held the title of the world’s largest gambling hub, enjoying exclusive access to regional demand and generating gaming revenue six times higher than that of the Las Vegas Strip. However, Macau’s era of explosive growth has waned in recent years due to stricter regulations targeting high rollers and increased scrutiny of casino activities as a measure to control capital outflow. Consequently, Macau now finds itself needing to shift its focus towards mass entertainment options in order to attract tourists, while other destinations draw closer to offering popular casino games like baccarat and blackjack.

The primary target audience for these emerging destinations is the vast number of Chinese travellers, who represent the majority of Macau’s visitors. Prior to the pandemic, mainland Chinese tourists accounted for a significant portion of the inbound tourist arrivals in both Thailand and Japan, comprising approximately one-third of their foreign visitors in 2019. The UAE is also setting its sights on China as a crucial source of tourism.

Jeremy Walker, a seasoned gaming industry consultant and former senior casino executive, emphasised the changing landscape, stating, “The loyalty that Macau once enjoyed as the premier destination in the region won’t necessarily persist in the future. The gaming customer residing in Shanghai will soon have the option to board a plane and visit Macau, Singapore, Osaka, or Bangkok. They will choose the destination that promises the most exceptional experience.”

Thailand, Japan, and UAE pave the way for casino resorts

Thailand’s lower house of parliament took a significant step in January by passing a proposal aimed at establishing multiple gaming resorts. The largest of these resorts would require a minimum investment of around US$8 billion (RM37 billion). Following suit, Japan granted final approval three months later for a US$10 billion project in Osaka, set to be co-developed by MGM and Orix Corp, thereby paving the way for the operation of its first gambling facilities by 2030. Bloomberg reported last month that the UAE has also engaged in preliminary discussions regarding the legalisation of gambling.

These advancements come as countries strive to revitalise their economies, which have been severely impacted by the Covid-19 pandemic, with a keen eye on the success of casino resorts in Macau and Singapore, an Asian financial hub. Thailand aims to generate at least US$11 billion in additional tax revenue from these establishments, while Japan is projected to have an annual gaming market worth around US$20 billion. For comparison, Macau reported gambling revenue of US$36 billion in 2019.

According to Udorn Olsson, a former member of a Thai parliamentary committee examining the legalisation of casinos, these establishments have proven to be highly lucrative, and the country wishes to tap into this potential: “Casinos have become very successful, and we’d like to have this money.”

While the addition of glamorous casinos would undoubtedly enhance the appeal of these tourism powerhouses, Macau faces mounting pressure to enhance its own attractions in order to attract a larger number of visitors. The crackdown on high rollers by China has significantly impacted Macau’s gaming revenue, with this group contributing only 23% of the city’s gaming revenue in 2019, compared to the previous figure of 50%.

In response, Macau’s six licensed casino operators have committed to investing at least US$13 billion over the next decade to develop non-gaming industries. However, doubts persist regarding the returns on these investments, given Macau’s limited space, tourism infrastructure, and expertise required to host such events. A casino executive, who preferred to remain anonymous while discussing their company’s internal assessment, highlighted these concerns.

Challenges and opportunities on the horizon

Macau can breathe a temporary sigh of relief as it still holds a time advantage over other potential casino destinations. Despite Thailand’s widespread support for the casino proposal, the country finds itself in a post-election stalemate. According to former parliamentarian Olsson, it may take an additional year after the formation of a new government to make progress.

Japan’s inaugural casino resort is still a distant dream, with MGM estimating that its opening is at least seven years away. Other operators have also shown dwindling interest in the remaining gaming licences due to a complex bidding system that could extend for years. Meanwhile, the UAE faces one of its biggest hurdles in legalising gambling due to religious constraints, as Islam, the foundation of its legislation, prohibits such practices.

Macau’s tourism industry is gradually recovering as China resumes international flights, with April witnessing a return to 66% of pre-Covid levels. Morgan Stanley estimates that gaming revenue from mass market tourists will surpass 115% of 2019 levels next year, leading to a complete recovery of operators’ combined profits by 2024.

In an effort to expand their reach, Macau’s operators have established overseas sales networks spanning Asia, Europe, and the US. Furthermore, they have been enticing international high rollers with exclusive private jet offerings. Rita Tam, the general manager of TAG Aviation’s Macau branch, revealed these developments to the Macao Daily News.

Operators have also made ambitious promises regarding non-gaming activities and amenities. Galaxy Entertainment Group Ltd plans to create a sprawling 61,000-square-metre “high-tech amusement park,” while Melco Resorts & Entertainment Ltd aims to host a 90-session residency show series featuring superstar performers until 2025. Sands China Ltd has proposed a new 18,000-square-metre convention centre, and SJM Holdings Ltd is considering inviting international soccer teams to play locally.

As gaming consultant Walker aptly summarises, “We’re now entering this new era of competition.” Macau faces the formidable challenge of delivering on its vision for non-gaming attractions and must strive to excel in this regard.

Get ready for the SiGMA Asia Summit this July

Join SiGMA Group for the PAGCOR-endorsed SiGMA Asia Summit in Manila for an immersive foray into the Asian and Philippine gaming markets. Also stay tuned for the upcoming SiGMA Magazine issue focused on the Asian markets, featuring exclusive interviews and brilliant insights from KOLs such as Alejandro Tengco, Chairman of PAGCOR.