Runway Manila connects the airport to Resorts World Manila for pedestrians, in response to the... [+]
New resort developments in three different markets illustrate that the good times are back for Asia’s casino owners. Resorts World Manila in the Philippines, South Korea’s Paradise City outside Seoul and on the other side of the globe at Baha Mar on Cable Beach in the Bahamas, highlight the new ways forward for Asia’s gaming industry without hundreds of billions of high roller dollars flowing out of mainland China.
These new developments unfold against the backdrop of a broad-based recovery in Macau so compelling that Morgan Stanley sees now as a good time for investors to buy Macau casino stocks, during the second quarter that’s historically a trough time for share prices, while JP Morgan suggests the current wave of enthusiasm makes it a good time to take money off the table. Exciting times, indeed.
Baha Mar, the largest hospitality project in the Caribbean, soft opened last week. The US$3.5 billion integrated resort meant to reshape the Bahamas missed multiple scheduled openings two years ago under project founder Sarkis Izmirlian, then, as China flexed its economic muscles 90 miles off the U.S. coast, got bailed out and effectively taken over by China Export-Import Bank and delivered into the Beijing-friendly hands of Hong Kong’s Chow Tai Fook Enterprises.
(A Bahamas newspaper has uncovered a possible Bahama government corruption angle in the ouster of Izmirlian.)
Chow Tai Fook patriarch Cheng Yu-tung took a 10% stake in Stanley Ho’s Macau casino empire in the 1980s, and son Henry Cheng sits on the board of SJM Holdings, Ho’s Hong Kong listed gaming vehicle. Over the decades, the Chengs tried to expand their gaming portfolio, and finally succeeded in 2015. That March, they effectively replaced Malaysia’s Genting Group in a US$4 billion casino resort project in central Vietnam, majority partner with local investor group VinaCap and leading Macau junket promoter Suncity.
In July, CTFE was part of the winning bid for the massive Queen’s Wharf Brisbane project, a makeover of the central business district waterfront in Australia’s third largest city.
Baha Mar is CTFE’s first shot at running a casino resort of its own, though the group includes Rosewood Hotels, so it knows hospitality. As Chinese travelers become as important to the global hospitality business as Chinese gamblers have been to the global gaming business, expect to see Chinese companies operating hotels and integrated resorts beyond China-centric markets. Billionaire Lawrence Ho, with a license in Cyprus and hopeful near Barcelona is one example. Galaxy Entertainment’s stake in Monte Carlo’s casinos is an even more intriguing one.
Paradise City, South Korea’s first international class integrated resort, was conceived in the age of the Chinese high roller and developed for the broader Chinese travel market on the fringe of international gateway Incheon Airport outside Seoul.
Remember that under Korean law, only foreign passport holders can enter the casino, and now Chinese tour groups are shunning South Korea after its installation of the U.S. THAAD missile defense system responding to North Korea’s missile program. So US$1.1 billion Paradise City must look for customers beyond China, and it’s targeting Southeast Asia’s 650 million people, with a growing middle class but plenty of other increasingly eager and enticing casino options.
Caesars Entertainment and Mohegan Sun hold licenses to develop two additional IRs in Incheon, but whether they proceed will undoubtedly hinge on the reception to Paradise City. No IR has had a bigger weight on its shoulders since Venetian Macao tried to put the landfill between the islands of Coloane and Taipa on the global gaming map as the Cotai Strip. That bet worked out pretty well.
South Korea’s leading foreigner-only casino operator Paradise partnered for Paradise City with Japanese gaming machine maker and pachinko operator Sega Sammy, led by billionaire Hajime Satomi. For years, Satomi has expressed support for the seemingly impossible dream of casino legalization in Japan. But Japan’s Diet took the first step toward allowing casinos in December and, later this year is expected to pass legislation to legalize casinos in Japan, and the global gaming industry can barely wait.
Whether through luck or foresight, if Japan legalizes casinos according to plan, Sega Sammy will be the only Japanese company with casino development and operations experience.
Well, almost. Since late December pachinko and gaming machine mogul Kazuo Okada’s Universal Entertainment has been running Okada Manila in the Philippine capital. Once the vice chairman of Wynn Resorts after his funding enabled Steve Wynn to complete Wynn Las Vegas and Wynn Macau, Kazuo Okada was ousted from Wynn’s board and in 2012 had his stock holdings redeemed at a substantial discount, accused of endangering Wynn by developing a competing resort in the Philippines.
Okada Manila is the third of a projected four IRs in Entertainment City on Manila Bay and the new district’s largest with a total price tag of $2 billion that includes the world’s biggest dancing fountain, unveiled last month.
December also saw the opening of an elevated expressway that connects Entertainment City directly to the airport, reducing travel time from as much as two hours to 15 minutes. The market’s first IR Resorts World Manila, located next to the airport, lost a key selling point with the airport expressway. The joint venture of Genting Hong Kong and Philippine billionaire Andrew Tan’s Alliance Global Group responded last week with a 1.5 billion peso (US$30 million) elevated walkway that links RW Manila directly to the airport, capable of accommodating 200,000 visitors a day in air conditioned comfort as the overall resort doubles its lodging and gaming capacity.
For the past two years, the Philippines have been the fastest growing major casino market in Asia, and the upward trend has continued this year. As Asia continues to grow wealthier and its middle class expands, investment that supports expanding tourist numbers, enhancing the competitive position of a resort or as a destination, looks like a good bet.
Exciting times, indeed.
