Forget about Las Vegas or Biloxi or even Shippensburg, Pennsylvania. The big action in gaming today is in Asia. And we mean big. As in bring your wallet, your line of credit and legal rights to your first-born kind of big.
There was a time when a few hundred million dollars would buy you a nice mega-resort. Then going over $1 billion became the norm. No more. Consider these: MGM Resorts is developing a casino in Osaka, Japan, that will cost over $8 billion; Las Vegas Sands is matching that number, not with a new resort, but with an expansion of its existing Marina Bay Sands in Singapore; and Wynn is a piker with its Al Marjan in the United Arab Emirates at a mere $3.9 billion.
And the big spending isn’t limited to those notable locations. Even somewhat out of the way (or at least not highly touted) locales like Sri Lanka boast a $1.2 billion City of Dreams to be built by a Melco Resorts and John Keells Holdings joint venture.
Those numbers are staggering, but so are the opportunities. Consider:
- The current Marina Bay Sands did over $2 billion in EBITDA last year on just over $4.2 billion in revenues, a 48.5 percent return. An $8 billion investment yielding similar returns would almost double the company’s size. Heck, even a 20 percent return amounts to $1.6 billion.
- MGM will have a Japanese casino monopoly for the foreseeable future and be located in the Osaka metropolitan area of 20 million people just a couple hours from the 38 million residents of Tokyo metro.
- Al Marjan is a sun-drenched island surrounded by the wealthy Middle Eastern petrostates and just a few hours by air from populous, wealthy Europe.
- Sri Lanka will have the closest integrated resort to India’s nearly 1.5 billion people.
Now, we have Thailand moving towards legalizing casinos and the big integrated resort companies are salivating at the chance to invest billions upon billions there.
But not all streets are paved in gold.
Asia has a huge population and its economies are growing fast, but they aren’t all grown up yet, and many projects look for success towards China, whose government has been making it exceedingly difficult for foreign casinos to market to its citizens.
Not all projects will succeed, at least not for the original owners. Case in point, Mohegan Inspired near Seoul, Korea. The $1.7 billion property has been taken over by Bain Capital (at least for now, as Mohegan might still try to negotiate a deal with Bain). As of this writing, Bain promises to make Inspired a long-term success and maybe it will. But limiting customers to foreigners and locating a property in a cold-winter country when the likes of Macau, Singapore and the Philippines are warm year-round might not be the recipe for mega-resort success.
Even countries with year-round warmth and white-sand beaches like Vietnam haven’t succeeded in the integrated resort game thanks to restrictive regulations.
As for the long-term, the world may seem tranquil and stable now, but few places have America’s long-term political stability, a fact that should be given at least some consideration in weighing foreign investments.
So, Thailand’s government seems determined to legalize integrated resorts. But the majority of the population opposes casinos. Chinese President Xi Jinping has given his usual quietly direct warning about relying on casinos for economic development, which sounds like “don’t count on China for customers.” And the most recently discussed regulations look like they would strongly discourage, if not prohibit, locals from casinos.
In other words, Thailand might be more like Vietnam than Singapore for casino developers and operators.
Nor are established markets sure to experience the kinds of growth that they’ve enjoyed in the past. Declining revenues at Okada Manila could hint at limitations in the Philippines as more and more competing projects are proposed.
And Macau, as successful as it has been, has hit at least a speed bump recently and its gaming industry is not the darling of the national Chinese Communist government. The market is still well below its gaming revenue peaks of a decade ago while casino companies operate under stricter government requirements.
In sum, Asia presents alluring possibilities, but it is a varied continent by economic well-being and government policies. Selectivity is the investor’s best path forward.
