When Las Vegas Sands last month landed a license to build the first casino in Singapore, it underscored just how expansive and lucrative the Asian gaming market has become.
The $3.2 billion project is expected to be the world’s most expensive casino complex and will include a hotel, shops and conference center.
Projected to open in 2009, the casino will have a significant economic influence by boosting tourism and providing jobs, as well as stimulating Singapore’s transition to a service economy.
Although gambling is still taboo in many parts of the Far East, governments throughout the region are re-assessing the case for casinos.
For instance, Japan, Taiwan and Thailand have been considering legalizing casino gambling, while South Korea, the Philippines and Vietnam are planning to expand their existing facilities.
The boom in Asian gaming has been triggered by the explosive growth in casino revenue and visitor volume in Macau, the coastal Special Administrative Region (SAR) of China.
Since the granting of casino licenses to outside investors in 2004, billions have been invested in building new casinos and renovating existing ones in a bid to attract greater numbers of tourists, especially from China, to Macau.
Why China? It is estimated that more than 100 million Chinese reside within a three-hour drive of Macau, and more than one billion within a three hour’s flying time.
Total gaming revenue in Macau increased to $5.75 billion last year, and could very well eclipse the total gaming revenue generated in Las Vegas this year.
U.S. casino interests — such as Las Vegas Sands, MGM Mirage and Wynn Resorts — have sweetened the pot for tourists, and is shifting Macau from catering primarily to hard-core gamblers to the mass consumer.
Before 2004, Stanley Ho controlled casino gambling in Macau with somewhat seedy casino operations that were nothing more than run-down gambling halls. Investment from U.S. casino firms is expected to change that.
Most of the gambling in Macau has been characterized by high-limit players, both for slot machines and table games. However, a significant portion of its gross gaming revenue — in excess of 95 percent in 2005 — is generated via the tables, compared to less than 50 percent in Las Vegas.
This is despite Macau having far fewer table games than slot machines, about 1,400 versus 3,400. This compares to about 3,200 and 55,000, respectively, on the Las Vegas Strip.
The bottom line is Macau, possessing only 44 percent of the tables and 6 percent of the slots contained on the Las Vegas Strip, has generated a nearly equal level of overall gaming revenue.
Keep in mind that Macau’s explosive growth in gambling revenue has come despite the lack of a significant selection of non-gaming amenities such as restaurants, retail and entertainment options, and convention and meeting space. Those amenities are a major impetus behind the significant amount of capital now being invested on the Cotai Strip section of Macau.
Most of the gambling is currently concentrated in the downtown section of Macau. Over the next couple of years new facilities opening here will include Wynn Macau, Galaxy Star World, Crown Macau and MGM Grand Paradise. These casinos will focus on both the VIP and mass markets, with upscale amenities and hotel rooms. Slots are expected to increase by about 50 percent and table games by 80 percent by the end of next year.
The real test for the Macau market will come next year, when the Cotai Strip opens for business. The development of a kind of "Las Vegas Strip of Asia" will introduce, in a major way, a significant non-gaming component to the market, as well as hundreds of mass market table games and thousands of slots and hotel rooms.
While that strategy has worked in Las Vegas, it remains to be seen how it will play in Macau. Up to now, Macau has been more of an Atlantic City type of destination — short-term (day trip) visitors who spend virtually all of their time gambling.
Most experts believe the strategy will work in Macau. Standard and Poors, for instance, believes the continued expansion of the Chinese economy and frequency of travel by Chinese citizens will be key factors in Macau’s development.
In addition, U.S. interests are betting on Macau’s continued success. Gaming manufacturer Aristocrat Technologies last week announced it has formally opened an office in Macau.
"The company has invested greatly in games development for the region," said Warren Jowett, Aristocrat’s executive general manager for the region. "Our investment in the creation of products specific to the diverse needs of the Asian customer and player base represents a significant amount of the company’s overall research and development budget."
In addition, the owners of Global Gaming Expo (G2E) announced last week it had acquired the Asian Gaming Expo, a gaming equipment trade exhibition.
G2E immediately renamed the expo G2E Asia and announced its first exhibition will be held next year, June 12-13, at the Macau Tower.
"With Singapore’s decision last year to legalize casinos and Macau’s gaming operations flourishing, Asian gaming markets are playing a larger role in the global gaming landscape," said Frank J. Fahrenkopf, president and CEO of the American Gaming Association, which co-sponsors G2E. "As the leading resource for the worldwide gaming industry, G2E is creating G2E Asia to highlight the remarkable growth in the Asian gaming markets and bring the unbeatable quality and value of the G2E experience to an even larger audience."