While emerging markets in Asia will not always be driven by multi-billion dollar capital investments, they still can position the industry for solid expansion and lay the groundwork for positive returns. James Walker reports from Macau.
[dropcap]A[/dropcap]s gaming operators across Macau continue to look for new strategies to help reverse the region’s protracted decline in GGR, it was perhaps no surprise that the conference programme at this year’s G2E Asia was replete with numerous sessions that focused specifically on the Chinese SAR. But what of the secondary and non-traditional markets in Asia? Have any emerging markets benefited from VIP players shying away from Macau?
These important questions were addressed during a lively panel session moderated by David Rittvo, executive vice president of The Innovation Group, during G2E Asia last month. And while it is clear that opportunities abound across Asia, it seems the path to success is rarely clear-cut.
Opening the session at the Cotai Expo, Rittvo asked an expert panel to outline which markets were currently emerging in Asia. “One of the highlights would be the population in northern India along the Nepali border,” said Tim Shepherd, executive director and president of business development for Silver Heritage, which is currently developing a luxury hotel-casino in Nepal. “The population here is greater than almost anywhere in Asia, excepting the Shanghai Delta, and [the region] is currently served by zero casinos.
Andrew Scott, CEO of World Gaming Group, a Macau-based equity firm, added: “The obvious one for me is Thailand. But the issue with Thailand is that the Thais love the king, and while the king is there it’s not going to happen. The country has a very unpopular crown prince. If he were to take the throne, who knows what could happen. That could put all the casinos down the western border of Cambodia and the eastern border of Myanmar out of business overnight.
Scott added: “Mainland China is not going to happen any time soon – but you could arguably put 10 Macau’s around China. Fifty per cent of visitors to Macau come from Guangdong Province. So if you were to put a casino, for example, on the Mongolia-China border, you would be close enough to capture a very large swathe of the northern Chinese market.”
When asked whether any emerging or secondary gambling markets in Asia have seen an upswing in trade in the wake of Macau’s downturn, Rui Pinto Proença, partner at corporate advisory firm MdME, said: “One year ago, when we were well into the Macau downturn, there was a consensus that all – or at least some – of the emerging markets in Asia would benefit from VIP players shying away from Macau. I believe there are certain properties that have done a very good job of taking advantage of that opportunity. They have positioned themselves very well in terms of marketing, accessibility and gaming offer, but I don’t really think we can look around and say that there is really one jurisdiction that became a true alternative to Macau.”
Proença added: “To enter an emerging market, by definition, means that you will be navigating some very grey regulatory frameworks most of the time. And that’s a very challenging thing to do. But someone has to break ground, and I’ve seen it go both ways. I’ve seen operators that have come into markets and committed substantial sums of investments, only to find that it just doesn’t work. But I’ve also seen potential investors working with government agencies in certain countries trying to set up the right framework.”
With this in mind, Rittvo asked whether it was important for emerging markets to strive for a high level of legislation in order to enhance investment, or whether there was a harmonic that could be struck so that the government hits the goals they want for inbound tourism and infrastructure spend without having as stringent a regulation that would preclude people from owning and operating casinos. “If you want to strive to be Las Vegas or Macau, that can be your goal, but we must remember that these markets didn’t start with the regulations that they have today,” Proença stated.
“There was a maturation process. At the same time, you have to differentiate yourself. If you’re going to follow the same structure it might not work, because there’s somebody else that’s much bigger and much better at doing that than you are.
“I’m not saying there is no room for growth, but I believe if there is a lesson to draw from Macau, it’s that you should diversify the source of your clientele. If you are riding this wave of taking advantage of the VIP market, in the near future you should consider investing those proceeds from the VIP into transforming or reinventing your business model.”