Gambling in South-East Asia Poses Some Risks

In light of recent political developments in China, some potential investors are less confident in casino business.

Macau is the hotspot for gamblers that come from all around the world. However, the biggest players that can drop millions without ever batting an eye are the ones right next door. They are the high-rollers from China that come in on private jets and rent out the most lavish rooms in the most expensive hotels. However, the problem is that’s in recent times they have subsided with their gaming exploits, which in turn caused the financial downturn in Macau.

• Galaxy Entertainment plans new exciting projects
• Shows and entertainment will become more important
• Macau revenues has experience a downturn in recent times

This is the reason why some investors, that were previously highly enthusiastic to get a share of the massive gains in the gambling hub, are now being more reserved with their plans. Gambling news reports that for over a decade, Macau has ruled the gambling world as it brought in the biggest revenues out of all the gaming cities, while now it is facing difficulties for the first time in that period.

Chines high rollers scared off by developments in the mainland

The current General Secretary of the Communist Party and the President of China, Xi Jinping, has initiated an anti-corruption campaign last year and it has managed to heavily affect Macau as well. The super wealthy Chinese gamblers that would normally come to the gambling city have been frightened by the developments occurring across the mainland, and have therefore ceased to continue their usual trips to Macau.

In efforts to stop revenues from falling, new and ambitious projects are in the works. Currently, it is estimated that over USD 20 billion worth of casino resorts will be developed in the next two years, which should put the former Portuguese colony back on the map as the most reputable gaming city in the world. The first casino resort and entertainment complex will be introduced by Galaxy Entertainment Group, for which the price tag is around a staggering USD 3.2 billion.

Despite the news of these new investments, some financial experts believe that nothing will change for Macau this current year, considering the Chinese gambling laws imposed by the President. Morgan Stanley analysts report that gross gaming revenues in Macau are likely to fall 24 percent in 2015 to a “low” USD 33 billion. The special administrative region is not the only area of concern. Gambling industry insiders are worried that Macau’s current financial challenges could be potentially transferred to other areas in Asia, creating a domino effect.

At a recent industry conference held in Macau concerning the gaming world, some prominent individuals expressed their concern about the status quo. Thomas Arasi serves as the president of the Bloomberry Resorts, which maintain the popular Solaire casino resorts in Manila, Philippines. He stressed, “This challenge doesn’t help anyone. It’s a general downdraft.”

New gambling destinations could still come about in Asia

Some countries in the region have moved towards plans of establishing their own gambling hubs. Vietnam, South Korea and Japan are all vying their options of introducing casinos. The latter two nations are the most enthusiastic ones, as they will be hosting the Winter Olympics 2018 and the Summer Olympics 2020 respectively. Online internet casinos believe this will prove to be a shrewd investment for them, considering they stand to generate massive revenues from gambling operations.

Another part of the reason why the aforementioned countries are exploring gaming options, is that they were motivated by Singapore’s transparent casino industry, which isn’t rife with political and corruption tensions. However, despite the initial excitement about the prospect of opening up gaming centers in Japan and South Korea, investors are now felling somewhat different towards the whole idea, according to mobile casinos.

A gaming analyst at Morgan Stanley, Praveen Choudhary, stated that 12 months ago many suitors were lining up to place their money into gaming industries in Japan and South Korea, while now with the current climate, they are more reserved. “A year ago people were jumping up and down” regarding the prospect of new casinos opening up, Choudhary stated.

He also stated that Macau first needs to experience some difficult times, although he is unsure when that may be, before a recovery can come about not just for the former Portuguese colony, but also for general gambling industry in Asia. “In the long term, the Asian gaming industry should be seen in a positive light but we need to see Macau hit the bottom first and I have no idea when that may be.”