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Casino operators in Asia-Pacific urged to tread carefully

Wed, May 1, 2:07pm by Staff Writer

Casino operators in the Asia-Pacific are banking on Chinese gamblers finding themselves could be in for a turbulent few years amid a potential oversaturation of the premium making, according to a recent report by Fitch Ratings.

The South China Morning Post is reporting that the ratings agency has cited huge investments in gaming operations in the Asia-Pacific that cater to wealthy Chinese consumers, combined with the economic slowdown on the mainland, which they say has hurt Chinese demand for gaming activities.

“Billions of dollars were invested in the last decade to build casinos that cater to wealthy Chinese consumers,” Fitch said in the report released on Monday,.

“The premium segment has already plateaued in markets such as Singapore and Australia, but investment is continuing across the region, even as China’s economy goes through a structural slowdown.”

In the United States, a number of casino operators faced bankruptcy in the 2010s.

Media reports at the time cautioned of oversupply as individual states welcomed new entrants to enhance tax revenue from the gambling industry.

A similar story could be emerging in the Asia-Pacific, as casino operators are preparing to open or expand integrated resorts in Japan, Australia, Russia, Vietnam and even the Marianas Islands.

Slow growth in China underpins caution

Fitch forecasts China’s GDP growth rate at 6.1 per cent for 2019 and 2020, down from 6.6 per cent in 2018.

With US$35.7 billion in gaming revenue in 2018, Macau dwarfs other markets.

Singapore’s gaming revenue last year was around US$4.3 billion, while the Philippines amounted to US$3.5 billion and South Korea totaled US$2.23 billion.

Australia’s three casino operators brought in combined revenue of US$3.5 billion for the year.

Fitch forecasts “flat to low single digit growth” for Macau’s gaming revenue this year, against an 18 per cent rise in 2018, citing the impact of the economic slowdown in China upon the VIP market.

The competition for Chinese gamblers is due to heat up as Japan continues the process of opening up to the gambling industry.

In 2018, Japan announced approval for three integrated resorts that could result in US$5 billion to US$9 billion in annual revenue, depending on where the resorts are to be located.

Fitch noted that development time would be long and expensive, “placing pressure on the winning bidders’ credit metrics and liquidity.”

Melco, MGM and Las Vegas Sands have expressed interest in expansion in Japan.

Last year, Galaxy Entertainment Group started a training programme in collaboration with Japan’s Tokyo University to help develop sills related to resort operations and management.

Russia, South Korea and Japan are vying to attract gamblers from northern China.

In 2018, just two per cent of Beijing residents visited Macau, compared to 10 per cent of Guangdong residents.

On April 23, Hong Kong-listed Suncity Holdings announced it had increased its stake in Summit Ascent Holdings, which owns the only casino in Vladivostok, Russia, from three per cent to 28 per cent, ahead of a planned US$120 million expansion.

Suncity also has a 34 per cent stake in the Hoiana Integrated Resort being built in Hoi An, Vietnam.

The resort is to be built in seven phases over 13 years.

The first phase, due to be completed in 2019, will include a VIP oriented casino with 140 gaming tables and 1000 slot machines.

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