The Outlook for Asian Gaming

Attention has been given to the rise of Asia’s booming gaming market in recent years, with some analysts even projecting it to surpass all other regional gaming markets before the decade’s end.  The success of Macau and Singapore has inspired other parts of Asia to either enhance their existing gaming industry to a world-class standard or to establish their own destination gaming markets.

The Philippines and Vietnam, both countries with existing gaming facilities, have passed legislation to support a destination resort casino market.  South Korea may follow their lead.  In other parts of Asia without Las Vegas-style games, such as Japan and Taiwan, things have been heating up with legislators and other constituents seriously considering gaming’s benefits.

Asia’s gaming fever mirrors that of the United States.  In recent years, several states in the U.S. implemented gaming legislation or expanded existing games.  Some U.S. gaming markets could even be described as saturated.  In the Mid-Atlantic region for example, gaming facilities in Delaware, Pennsylvania, New Jersey, New York, West Virginia and Maryland are in heavy competition for the same regional patrons and tourists.  Delaware and Pennsylvania added table games to their facilities, at least partially pressured by a congesting regional market.

The key difference between the pervasion of gaming throughout Asia and the United States is demand.  According to Credit-Suisse’s Global Wealth Report 2011 there are about 949.7 million people living throughout North, Central, and South America.  Throughout the entire Asia-Pacific region (includes China and India) there about 4.25 billion people.  The population of the Americas is not even a quarter of the population of the Asia-Pacific region.  Trying to imagine how much gaming product it would take to saturate the Asia-Pacific region is staggering.

A huge driver behind the success of Macau and Singapore’s gaming markets has been Chinese tourism.  Chinese policy changes opened up its outbound tourism market and greatly increased the proportion of Chinese visitors to all visitors in several regional markets.  Singapore for example, drew about 5.6% of its total visitors in 2000 from China.  In 2010, Chinese visitors to Singapore represented about 10.3% of all visitors to the country.

Asian gaming markets have another thing going their way—Asia is becoming wealthier.  Based on projections made by Credit-Suisse and detailed in their World Wealth Report 2011, wealth in the Asia-Pacific region (including China and India) is increasing at a greater rate than the world’s two wealthiest regions (Northern America and Europe) and the world’s average.  As the average wealth of individuals increases throughout the Asia-Pacific region, more and more people will have the means to indulge in leisure activities and travel—increasing regional demand for destination resort casinos.

With such trends in wealth, tourism, and population it is little wonder that destination gaming has been such a success in Asia in recent times.  It is also no surprise that many other Asian countries want in on the action, and that they are not trying to follow the ‘Las Vegas Model,’ but either the ‘Singapore’ or ‘Macau Model.’

Contributed by:

Nicholas Farrae

Analyst, Economics and Gaming

nicholasfarrae@tmg-consulting.net  or (504) 569-9239 x 31

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.

G2E Conference Summary: Key Takeaways

At this year’s Global Gaming Exhibition and Conference, TMG staff attended over twenty conference sessions, covering issues such as gaming on the Internet, U.S. and Asian gaming expansions, operations models for revenue maximization, player tracking and marketing programs, and the state of financing for gaming projects.  This blog post includes a few key takeaways from such discussions.

Capital Investment in Gaming

Throughout the conference sessions and our discussions with gaming executives, it became apparent that capital is currently available for existing gaming operators.  However, during this recovery period, debt leverage needs to be lower for commercial lenders to be comfortable.  Across the board, the scale of capital investments is expected to remain lower than in pre-recession times.

Social Media

Simplifying the myriad of communications and streamlining the social media experience for conference attendees was the G2E Mobile“App”.  Developed with Konami, the mobile device application put the entire conference in your hand.  Conference organizers were able to send direct messages to attendees, as well as to live-stream all conference mentions in the Twitter universe.  The integration of the conference with social media such as Twitter was reflective of the gaming industry as a whole, as smartphones now allow casinos a way to send real time offers to their patrons.  In his Conference Keynote, James Murren, CEO of MGM Resorts International urged the gaming industry to monetize social media now.

New Forecasting Models to Improve Operations

One of the more interesting sessions at this year’s G2E was led by Chris Anderson of the Cornell School of Hotel Administration.  He and the other panelists pointed out that revenue management begins with a simple demand model that only focuses on inventory (RNA) and demand for the day, but does not consider length of stay.  However, length of stay is a very important variable in a casino revenue management model because the implications of a guest staying at a casino hotel are not one-dimensional.  More complicated revenue management models consider length of stay, constrained and unconstrained demand, and market mortality (guests not captured).  The revenue management model best suited for casinos is one that allows for maximum gross operating profit on a per room available basis.  Achieving this type of modeling is possible, yet it requires investment in IT and databasing, and can only be achieved in incremental steps from more simple revenue management models.

Gaming on the Internet

Existing land-based casino operators see iGaming as an opportunity to create a new experience that immerses patrons into an experience that could not be had before.  Further, it initiates people who are unfamiliar with casino gaming, potentially leading to new customers at bricks and mortar casinos.  According to MGM Resorts International’s James Murren, the “next big thing” in the gaming industry will be the collision of casino gaming and video gaming experiences.

Gaming on the Internet is set to be commoditized, and governments will have to think competitively when setting tax rates.  If operators are taxed too highly in one jurisdiction, they will have the ability to move to one with more favorable rates.  In the end, the cost of taxes will be passed on to the customer.

For more, please see the previous G2E Conference Summary blog post: iGaming Congress. 

Contributed by:

Nicholas Farrae

Analyst, Economics & Gaming

Disclaimer
The views, interpretations, or strategies expressed are those of the authors, and do not necessarily reflect the position of TMG Consulting. This site is meant for educational purposes only and does not constitute professional advice. TMG Consulting makes no representation as to accuracy, completeness, or suitability of any information on this site and will not be liable for damages arising from its display or use.