AGBriefings December 2020 Edition

JURISDICTION UPDATES December 2020 Edition

MALAYSIA

VIPs support revenue pg.16

CHINA

Off to the races? pg.14

AUSTRALIA

Sitting in judgement on Crown pg.40

CAMBODIA

Caution over Naga expansion pg.44

In focus pg.20

The year that changed the game

2

Asia Gaming Briefings | December 2020

MESSAGE 3

The year that changed everything

N

ow an Asia Gaming Brief tradition, the

been one of Asia’s integrated resort success stories,

December edition of our Focus section gathers

credit ratings agency Moody’s sounded a note of caution

views from industry figures on the key events

arguing that the company’s capital $4 billion spending

of the past year and asks them to gaze into a

plans will reduce the its liquidity buffer at a time when

crystal ball to divine what the year ahead may hold.

Covid-19 has made the pace of recovery uncertain for the

Over the years, many of the answers have been

gaming industry.

remarkably prescient in their forecasts for the near-term

Down under, the fallout from the inquiry into Crown

direction of Asia’s gaming industry. However, we can

Resorts’ suitability to hold a license in Sydney may

safely say that no one came anywhere close to guessing

have ramifications for the entire industry in Australia,

what 2020 may have had in store!

including tighter regulation.

In these pages you’ll also find the most relevant updates

Asia Gaming Brief signs off this last edition of the print

across the Asia jurisdictions. Starting off with Macau,

magazine of the year with its sights firmly locked on

the Chief Executive has reaffirmed that “promoting

the industry’s recovery. The pandemic has changed

an adequate economic diversification” remains a key

everything and so have we. AGB has pivoted its editorial

objective and a key way forward will be developing a

coverage to adapt to the new content consumer behavior

financial industry. The concept of Macau as a financial

and expanded to new interactive formats - from video

center, theoretically, offers the best chance for success.

interviews, to podcasts and infographics. Let us know

Across the gate, Chinese Ministry of Agriculture and

how you’d like your Asia gaming industry insights to

Rural Affairs, together with the General Administration

be delivered to you by sharing your feedback with us at

of Sports revealed a five-year blueprint that would aim

editorial@agbrief.com.

Rosalind Wade

Luis Pereira

to expand and promote the country’s already mammoth horse-racing industry – which already boasts the second-

Enjoy your reading and Happy holidays!

highest number of riders in the world, right after the U.S. Up on the mountain, and behind the sea of red in Genting

On behalf of Asia Gaming Brief

Malaysia’s 20Q3 results, analysts found reason for

Rosalind Wade & Luis Pereira

cheer in the performance of its domestic operations,

CO-FOUNDERS

which generated a positive EBITDA of RM541 million ($133 million) in the quarter. Meanwhile Singapore’s

Connect with us:

two integrated resorts have surprised analysts with the strength of their most recent results, despite higher entry

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fees for locals and a lack of international travel.

Asia Gaming Brief

Asia Gaming Brief

Circling to Cambodia, where Nagacorp has undoubtedly

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DECEMBER 2020 EDITION SERIES II • ISSUE XIX

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Asia Gaming Briefings | December 2020

4

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Asia Gaming Briefings | December 2020

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All ® notices signify marks registered in the United States. ™ and © 2020 Scientific Games Corp. and its Subsidiaries.

All rights reserved. Scientific Games is committed to responsible gambling. Responsible gambling features are proactively developed Asia Gaming Briefings | December 2020 to ensure the safety and security of players while using Scientific Games products.

5

CONTENTS 6

GREATER CHINA

AUSTRALASIA

SOUTH EAST ASIA

MACAU

10

MALAYSIA

16

CHINA

14

SINGAPORE

18

SOUTH ASIA

40

INDOCHINA

42

INDIA

SPECIAL FOCUS

AUSTRALIA

20

Asia Gaming Briefings | December 2020

CAMBODIA

INDUSTRY OPINION

44

48

LAST WORD

54 54

7

Asia Gaming Briefings | December 2020

8

CONGRATULATIONS ON THE

ANNIVERSARY OF THE ESTABLISHMENT OF THE MACAU SPECIAL ADMINISTRATIVE REGION

Asia Gaming Briefings | December 2020

9

Asia Gaming Briefings | December 2020

10

MACAU

(Image source: Government Information Bureau (GCS))

GREATER CHINA

10

Macau mulls a future in finance Macau Chief Executive Ho Iat Seng reaffirmed in his policy address this week that “promoting an adequate economic diversification� remained a key objective and a key way forward will be developing a financial industry.

Asia Gaming Briefings | December 2020

GREATER CHINA

(Image source: Government Information Bureau (GCS))

11

T

he need to diversify the Macau economy away from its over-dependence upon the gaming industry is a perennial topic, more often producing fine words than concrete achievements.

Slowly, however, as various other schemes rise and fall away, it appears that the concept of Macau as a financial center, theoretically, offers the best chance for success.

This possibility is clearly on the chief executive’s mind, as he discussed it at some length in comments that he made both on Monday in his policy address and on Tuesday to some legislators of the Legislative Assembly.

On Monday, Ho stated, “We will proceed with the study and elaboration of a complete legal regime related to the financial system; promote the construction of financial, tangible and intangible, infrastructures; accelerate the construction of the bond market; prioritize the development of wealth management activities, and promote the construction of the cross-border settlement center in yuan, thus diversifying the development of the financial sector.”

On Tuesday, he added, “We still need to think a lot on how to achieve it, including developing physical spaces for negotiating bonds. We have to continue working so that our bonds market can have sustainable development… We are working so that our conditions match international standards.”

This concept has long had Beijing’s backing with, for example, Premier Li Keqiang saying that “China will support Macau to become a financial services platform” in October 2016 at

the 5th Forum Macau Ministerial Conference. in this direction. There will definitely need to For some time the basis for these schemes be something more to push Macau forward to become successful has been the notion that as a financial center, Macau could become in spite of all of the a financial platform money flowing through operating between China China will its gaming industry. and Portuguese-speaking H o w e v e r, e v e n countries, including as support Macau if finance is indeed an RMB clearing center to become a regarded as the most and a launching pad for financial services promising growth sector Chinese relations to such outside of the gaming countries. platform. and leisure industries to A common criticism accomplish a substantial of these notions, however, degree of economic is that the actual volume diversification, it shares of trade and financial transactions between China and the the same weakness as all such schemes—it Portuguese-speaking world may not be of would require a major shift in Macanese sufficient heft to justify extraordinary efforts attitudes and practice.

“

”

Non-resident workers decline The number of non-resident workers employed by Macau’s hotel, F&B, gaming, and entertainment sectors dropped by 13.5 percent between January and October of this year to about 61,000, according to data published by the Labour Affairs Bureau (DSAL). Non-residents in the local hotel and restaurant trade were down 14.7 percent from January, while labour in recreational, cultural, gaming and other services, including construction workers employed in the industry, was down 9 percent.

Asia Gaming Briefings | December 2020

GREATER CHINA 12

As Ben Lee, managing partner of IGamiX Management & Consulting, told Asia Gaming Brief, “To get real diversification, we need to basically open up Macau, open up its economy, and, more particularly, open up its labor force to external talent in order for us to be able to germinate, incubate, and grow the non-gaming component that would be so important to a real diversification of the country.”

He added that the actual tendency within both the Macanese government and among a substantial part of the population is to demand policies of job protection for locals and to insulate themselves from the labor competition of outsiders.

Any sort of diversification—the creation of an energetic financial sector among them—must necessarily require new skills and at least some workers flowing in from abroad who are willing and able to impart these needed skills. This could easily clash with local political demands and thus result in high-flying plans crashing back to earth.

To put it another way, there may be a critical gap between what the Macau government says that it wants—economic diversification—and what Macanese society is willing to sacrifice in order to gain the competitive edge needed to bring any such vision to fruition.

Asia Gaming Briefings | December 2020

GREATER CHINA 13

DEUTSCHE BANK TRIMS GGR FORECASTS 4Q20E $3.16 bn to $2.76 bn

-70% year to year 2020E $8.00 bn to $7.59 bn

-79% year to year 2021E $28.80 bn to $26.60 bn

+251% year to year 2022E $31.72 bn to $29.31 bn

+10% year to year 2023E $34.36 bn

+17% year to year

Nov. GGR disappoints Macau’s monthly gross gambling revenue disappointed to the downside again in November, prompting another round of estimate cuts and further pushing out the prospects for a full recovery. The lights are on in its impressive casinos and according to indicators of luxury spending and travel on the Mainland, the desire and ability to travel are still intact. What isn’t is the ease of visa processing and there is no current visibility on when that might change. The November results were down 70.5 percent at MOP6.74 billion ($844 million). That’s lower than the MOP7.27 billion of the month before, although that’s not a big surprise given the Golden Week holidays in October.

Asia Gaming Briefings | December 2020

GREATER CHINA 14

CHINA

China’s racing industry faces high hurdles In late September, the Chinese Ministry of Agriculture and Rural Affairs, together with the General Administration of Sports (GAD) revealed a five-year blueprint that would aim to expand and promote the country’s already mammoth horse-racing industry – which already boasts the second-highest number of riders in the world, right after the U.S.

M

uch of this five-year plan is focused on positioning its horse racing industry in line with international standards.

It mandates the welfare of animals, stricter racing integrity controls, and the formulation of nationwide standards in the development of the sport.

One of the key measures is also the integration of its sports lottery system into horse racing – which would be a massive opportunity for anyone that can get a slice of the action.

And it is no secret that the Hong Kong Jockey Club has been positioning itself at the center of these efforts, having initially floated the idea of legalized wagering on horse races years ago.

The HKJC has been operating a world-class horse training facility in Conghua (Northern Guangdong) since August 2018. The HK$3.7 billion facility and its race events have served as an eye-opener for Chinese officials to understand what horse racing across the country could be, with enough investment.

“The HKJC has positioned itself well as a reliable group that can run the sport by building the Conghua Racecourse near Guangzhou,” comments journalist Michael Cox from Asian Racing Hub and Apple Daily.

“Perhaps the next step for the HKJC would be applying to have betting on races from Hong Kong on the races at Conghua as a way to not only boost turnover but prove it can run racing fixtures without incident and with a high degree of integrity.”

But Hong Kong Jockey Club chief executive Winfried Engelbrecht-Bresges in an interview last month said that we should not be getting our hopes up about horse racing with betting any time soon.

“At the moment we are a cooperation

Asia Gaming Briefings | December 2020

partner of the China Sports Lottery… But one should not expect there will be horse racing with betting [in China] in the next two or three years. It is a general direction and everyone has to work to the plan,” said Engelbrecht-Bresges to the South China Morning Post in October.

Engelbrecht-Bresges had previously stressed that the Jockey Club’s endeavors at Conghua are about the sport of horse racing, not gambling.

“It is not for us to change the [gambling] law, that is something which is even above what the Jockey Club can do because it is really fundamental policy,” he said to local media in 2019.

Besides, the development of racing to the point in which betting can occur is still far off, added Cox. “Away from the HKJC exhibitions at Conghua, racing in mainland China is not anywhere near the standard required for any type of betting to occur,” said the journalist.

“Officials need to be trained to ensure racing fixtures are run with a high degree of integrity, rules formalized across different tracks for consistency, drug testing brought up to international standards and if China wants to be part of the world scene and compete against global visitors, horses registered with the studbook – which is like an international register for competing horses.”

There’s also the matter of animal welfare and quarantine issues with exotic diseases that could make horse transport challenging, he added.

This has not been the first time the media has got into a frenzy about the “imminent” legalization of horse race betting.

In 2018, racing media picked up on the central government’s official nod to develop horse racing and sports lottery in the southernmost

island of Hainan, which it said would help promote tourism in the province.

Some media outlets saw this as a sign that the central government was beginning to put the pieces in place that would eventually allow for legalized gambling on the races.

This fervor eventually died down – and it was confirmed in April 2020 that betting would not be part of the equation in Hainan.

Cox is skeptical of the timeframes as described in the five-year plan.

“Despite the recent release of the five-year plan, developing racing on the mainland to a point where it would resemble anything like the world-class racing in Hong Kong will be difficult to achieve in that timeframe,” said Cox. “The good news for the HKJC is that it has played the long game well and positioned itself perfectly as far as politics are concerned.

The HKJC is in partnership with a sports lottery already, so the infrastructure exists, which helps.”

“In the end though, who knows? Things can change quickly in China – even when you think you have a deal done – as we saw recently when the Ant Group IPO – largest IPO in history – was suspended by regulators just days before it was due to be listed on the Hong Kong Exchange.”

GREATER CHINA 15

CHINA TOURISM RECOVERY

China luxury spend bodes well for Macau: MS

Year-over-year change from 2019 to 2020 (%)

Surprising strength in Chinese luxury spending, an ongoing clampdown on online gambling and limited travel options all bode well for Macau and shares in its operators, Morgan Stanley said. China luxury sales rose 18 percent in October and 13 percent in September, suggesting strong pent up demand, it said.

Hotel room nights

Cruise passengers

Subway passengers

Domestic flight passengers

International flight passengers

Railway passengers

20

0

Five-year economic plan looks inwards for growth

-20

-40

-60

-80

-100 Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

(Source: McKinsey)

After years of increasingly acrimonious trade tensions with the U.S., China’s latest five-year plan looks inward, focusing on boosting domestic demand and on fostering self-reliance in technology. The outline of the plan, which lays out a blueprint for economic growth, also focuses on the need for more quality growth, rather than development at all cost, recognizing an increasing maturity in the Mainland economy. Beijing estimates that gross domestic product will exceed 100 trillion yuan ($14.9 trillion) this year, bouncing back to be one of the few global economies still in expansion mode after the shock of the Covid-19 crisis.

Asia Gaming Briefings | December 2020

SOUTH EAST ASIA

16

MALAYSIA

Local VIPs support Resorts World Genting Behind the sea of red in Genting Malaysia’s Q3 results, analysts found reason for cheer in the performance of its domestic operations, which generated a positive EBITDA of RM541 million ($133 million) in the quarter.

SOUTH EAST ASIA

T

17

A Securities analyst Tam Kan Meng said company executives on a conference call attributed the strength at home to support from local VIPs, who have been unable to travel overseas to gamble due to border closures.

Total visitation to the hilltop resort returned to 66 percent of pre-Covid measures, with gaming revenue back to 74 percent. VIP players made up 64 percent of the total in the period.

Leisure and hospitality revenue is down 34.2 percent year-on-year to RM1.2 billion, but that performance is “satisfactory,” says Tam as the group has regained more than 60 percent of its prior levels, even with reduced capacity.

Still, TA Securities is cutting its forecasts for Genting Malaysia next year and says it expects the operating environment in the first half to be similar to Q3.

It has cut its earnings projections for 2021 by 30.4 percent to RM499 million and for 2022 by 1.8 percent to RM1.4 billion.

Analysts at CGS-CIMB were more upbeat than TA Securities, noting that they expect a recovery to be imminent and subsequently raised their forecasts.

For 2021, they raised their core earnings

per share forecast by 3 percent and for 2022 by 6 percent, saying they are factoring in lower operating expenditure.

“We see FY21F net profit recovering to RM563 million, then doubling in FY22F, as visitors fully return (partly bolstered by Genting SkyWorld’s mid-2021 opening),” they noted.

see FY21F “net We profit recovering to RM563 million, ” Management have confirmed that they expect the outdoor theme park to open in the middle of next year. The much anticipated attraction was one of the central planks of the revamp of the resort. It has been delayed in part by a dispute with former partner 20th Century Fox. Nomura analysts also said they were pleasantly surprised with the performance in Malaysia.

“What really struck us [positively] was the

GENTING’S LEISURE & HOSPITALITY REVENUE Individual Quarter (3Q) -34%

Malaysia

(units in RM’Mil)

2020

revenue/margins generated by the Malaysian resort, with revenue at 66 percent and EBITDA at 79 percent of year-ago levels, and EBITDA margins of 36 percent in Malaysia,” they said.

However, TA Securities reports management as saying that margin level is unlikely to be sustained in 2021 due to additional costs from running the theme park.

Genting Malaysia itself is maintaining a cautious outlook, warning that ongoing measures taken to control the pandemic will continue to have an impact on its business.

The government announced on Nov. 4 that several more states have been added to its Conditional Movement Control Order list and that the order had been extended to December 6 in the Kuala Lumpur area.

Prior to the pandemic, the Genting Highlands resort had about 50,000 visitors a day. That number is currently at about 15,000 a day due to the latest clampdown.

In the U.K., the group’s casinos were forced to close their doors again on November 4th, while its New York properties – Resorts World New York City and Resorts World Catskills were closed throughout much of Q3, reopening only on Sept. 9th.

2019

Nine Months Ended 30 September -54%

1,181.3

2,488.6

1,796.2

United Kingdom and Egypt - United States of America and Bahamas

131.4

-68%

5,461.8

-57%

535.8

414.7

69.9

-80% 355.8

1,254.1

359

-67% 1,100.9 (Source: Genting Malaysia)

Malaysia loses millions annually to illegal gambling

Guidelines published for gambling-related ads

The Malaysian government is losing up to MYR3 billion (US$725 million) a year in revenue as illegal gambling syndicates take an ever growing amount of business away from legal number forecast operators. The activities of these illegal 4D operations have grown bigger and more sophisticated over the last decade, eating up market share by the day, the Straits Times cited an industry source as saying. “These illegal 4D syndicates do not only offer bigger cash prizes compared with the legitimate NFOs but extended credit and allowed online buying via WhatsApp on draw days,” said the source.

The Communications and Multimedia Content Forum of Malaysia has issued industry guidelines to provide clarity on certain advertisements, including a provision that advertisements directly encouraging any form of gambling are not acceptable. The Malaysian Communications and Multimedia Content Code doesn’t establish legally enforceable responsibilities.

Instead, the guidance describes the CMCF’s current thinking on a topic and would be used as industry best practices that promote self-regulation, unless specific regulatory or statutory requirements are cited.

Asia Gaming Briefings | December 2020

SOUTH EAST ASIA 18

SINGAPORE

Locals drive growth, but for how long?

Singapore’s two integrated resorts surprised analysts with the strength of their most recent results, despite higher entry fees for locals and a lack of international travel.

R

“That said, we are still positively surprised esults at both Marina Bay Sands and Genting Singapore beat expectations, by the extent of the recovery in gaming revenue both turning in a profit in the quarter. (only down 41 percent y-y) as that it is solely Marina Bay Sands recorded adjusted coming from local residents and is subject to property EBITDA of $70 million, while Genting capacity restrictions,” he said, referring to Genting.

“Based on the trends reported by competitor posted a net profit of S$54 million.

It’s an impressive performance for a market Marina Bay Sands (MBS), we estimate that VIP which relies heavily on international travel roll is still down ~80 percent y-y, whereas mass and where the entry fee for the local market table drop / slot handle are down 40 percent /20 percent y-y (VIP is more tourist driven).” was raised by 50 percent last year.

Much of the local demand is in the premium Genting didn’t go into much detail as to the reasons for its strong performance, but analysts slots business. Las Vegas Sands’ management said they think the primary driver was pent- explained that the market is not so much up local demand following the reopening of local, as made up of expatriate residents. This clientele has favoured the casinos on July 1st. premium slot business over Morningstar analyst tables, unlike the local Jennifer Song said that market in Macau. government subsidies and Much of the “Premium slots seem cost cutting efforts are local demand to be stronger, a trend also likely to have helped seen in Marina Bay Sands to improve margins, with is in the which actually did report Genting’s EBITDA margin premium slots detailed gaming statistics,” coming in at 53 percent business.

Nomura’s Mohata said. “This in Q3, compared with 48 is because even though percent a year ago. social distancing needs to “From management of be followed, the casinos some major Macau casino operators, we can see that at the beginning stage have some degree of flexibility in spacing out of casino or border openings, the high quality the slots over a larger area and use most of and frequent patrons will likely come back first, them, given demand for VIP and mass tables and we think Singapore casinos are likely the is lower. So within the allocated space for the same. So we think the strong recovery may casinos, there is some room to rejig the layout.”

Despite the outperformance in the most also be led by the premium local customers.”

Nomura was also surprised by the resilience recent quarter, analysts and management of the Singapore market, which in the past few alike said that for a full recovery, tourists need years has taken a back seat in terms of interest to return. The level of local demand also is unlikely to be sustainable longer term. to some of its faster growing neighbours.

For 2019, the local market made up about 25 “At least some of the beat was due to reasons such as a pent-up demand after re- to 30 percent of demand for Genting Singapore, opening in July, hotel revenues for travellers while gaming revenue has already returned to serving Stay-Home Notice (quarantine) and 59 percent of pre-pandemic levels, Song said.

“While we doubt whether the pent up Singapore’s Job Support Scheme,” analyst local demand will be sustained or not, we Tushar Mohata said.

“

”

Asia Gaming Briefings | December 2020

SOUTH EAST ASIA 19

VISITOR ARRIVALS

Monthly Visitors Arrivals (VA) Trend

YoY %

1.8M

10% 0%

1.6M

-10%

1.4M

-20%

1.2M

-30%

1M

-40%

800K

-50% -60%

600K

-70%

400K

-80% 200K 0

-90%

Oct.

Nov

Dec

Jan

Feb

Mar

2019

Apr

May

Jun

Jul

Aug

Sep

Oct

-100%

2020 (Source: Singapore Tourism Board)

Singapore PM sees several years to normality

Genting Dream Cruise sets sail for nowhere from Singapore

Singapore’s Prime Minister Lee Hsien Loong said he thinks it will take several years before life returns to normal after Covid-19. “In the short term, I do not see us getting away from the precautions and the risks which are present right now overnight. It is not possible,” he told a virtual APEC event. “Winter is coming in the Northern Hemisphere, their cases are currently continuing to grow. Even if you start having a vaccine by beginning of next year, by the time it gets rolled out to a significant proportion of the population and has an impact in slowing down the spread of the disease, it will be probably 2022.”

Genting Dream Cruises officially resumed sailing in early November, with a trip to nowhere out of Singapore. The group’s mega ship World Dream made its inaugural trip from the port, operating at 50 percent capacity with about 1,400 people. The safety precautions that were needed ahead of and during the cruise are stringent. Genting Cruise Lines said it has completely re-examined and enhanced all of its health, hygiene and operating protocols including thorough sanitization and disinfection and enhanced hygiene practices for guest cabins and crew member quarters, public areas and recreational facilities.

think breakthroughs in the Covid-19 vaccine development and expanding travel bubbles with Asian countries should help lift volumes going forward.

The Singapore and Hong Kong governments had agreed a travel bubble. International flights had been scheduled to resume on Nov. 22, though that arrangement has now been delayed due to another spike in Hong Kong cases.

To further stimulate domestic demand, Resorts World Sentosa has been rolling out staycation packages and events such as the Aqua Gastronomy Experience. Visitors get to taste sustainably sourced seafood in an underwater setting in its aquarium.

Looking ahead, both operators have said they remain committed to their S$4.5 billion expansion plans in Singapore, which analysts say is necessary to keep drawing in the visitors

in the face of increasing competition from other regional jurisdictions.

Las Vegas Sands Chairman Sheldon Adelson, however, told investors that the plans are likely to be delayed due to the pandemic.

“In addition to the expansion, we will continue to reinvest in Marina Bay Sands to enhance the customer experience and the tourism appeal of the resort,” he said.

LVS has abandoned its ambition to build a resort in Japan, though Genting says it’s still on the agenda. It’s “keenly” exploring an opportunity in Yokohama.

“We will evaluate the conditions of the Request-for-Proposal (RFP) and the investment environment when the formal bidding process begins and will respond with a proposal if these conditions meet the group’s investment criteria,” it said.

Asia Gaming Briefings | December 2020

FOCUS 20

2020 in review: Don’t look back in anger Now an Asia Gaming Brief tradition, the December edition of our Focus section gathers views from industry figures on the key events of the past year and asks them to gaze into a crystal ball to divine what the year ahead may hold.

O

ver the years, many of the answers have been remarkably prescient in their forecasts for the near-term direction of Asia’s gaming industry. However, we can safely say that no one came anywhere close to guessing what 2020 may have had in store!!

As we limp towards the end of the year, our commentators talk about what surprised them most in how companies have handled the pandemic. Most say they missed the live events and social gatherings, highlighting that although digital is an invaluable tool, it won’t replace social interactions, which is surely good news for an entertainment-based industry.

They are expecting a recovery in 2021, but nothing as fast as had been initially hoped when the pandemic first hit. Governments around the region are expected to be highly cautious in opening up their

Asia Gaming Briefings | December 2020

borders until widespread availability of vaccines cuts infection rates to a minimum.

In terms of individual themes, that aren’t Covid-19 related, commentators pick out Macau and Australia.

They explore the upcoming concession renewal process and whether the government would, or should, take the decision to delay, given the crisis and the lack of preparatory framework for how the tenders will be carried out.

There is also considerable focus on Crown Resorts and the regulatory hornets nest it may have stirred up in Australia. The company will hear what sanctions it may face early in the New Year, as a result of shocking revelations of mis-management during a suitability hearing in Sydney.

Some argue that given the fact best practices should now be global, the regulators’ deliberations may have further-reaching ramifications.

21

Asia Gaming Briefings | December 2020

FOCUS 22

Positive shoots and lessons learned As Macau celebrated the 20th anniversary since the handover to China last December, there was no indication of how the gambling hub’s fortunes were about to change so radically.

T

his year, there appears to be little cause for celebration, with the global pandemic having halved the size of the local economy and caused a plunge of about 80 percent in annual gross gambling revenue.

Macau heads into 2021 with more uncertainty than it has faced in recent years. Recovery from the crisis has been slower than anyone forecast and remains vulnerable to new outbreaks of Covid-19 until a vaccine program is well underway.

Asia Gaming Briefings | December 2020

While late in the year, the prospect of Macau adopting China’s digital yuan has further shaken the market, casting significant doubt over the survival of the junket industry and with it the VIP gaming sector.

Although the short-term future continues to be doubtful, analysts agree the longer-term outlook remains intact and the pandemic has highlighted positive elements and provided a context for change.

The Macau government has been widely praised for its handling of the crisis. The first case in the territory

FOCUS 23

Significant question marks remain over the VIP sector, with the prospect of a digital yuan being introduced raising concern about the survival of the junket operators.

The Gaming Inspection and Coordination Bureau has denied that it has been in talks with operators about the possible impact of the introduction of the currency.

However, Beijing is fully embracing the concept and has been conducting ever larger trials of the digital currency through a series of pilot programs.

The currency would give the central bank far greater visibility of how money circulates throughout the country.

J.P. Morgan said it doesn’t think there is much cause for concern in the short term, given the DICJ denial, but agreed that it could potentially be the end of the shrinking junket sector.

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The Macau government has been widely praised for its handling of the crisis.

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was discovered on January 22 and on February 4 CEO Ho Iat Seng took the unprecedented decision to shut the 41 casinos for two weeks.

Border controls were put into place and a system to ensure citizens were supplied with adequate face masks. A study from the Macao Polling Research Association, made in July, showed that 94.7 per cent of the respondents are satisfied with the overall performance of the Macau government in dealing with the prevention of the epidemic.

Macau has had a total of 46 cases of the disease and no deaths.

“Frankly speaking, the Macau Government has performed admirably well throughout the pandemic with proactive and decisive leadership and generated community support focusing on public health and safety as well as economic and social stability,” Jay Chun, head of the Macau Gaming Equipment Manufacturers Association said.

Government measures were put in place to help small and medium-sized businesses

and struggling families. The operators were encouraged to keep the lights on and their staff employed.

Despite having little to no income and not much wiggle room when it comes to cutting costs, the six operators managed to improve efficiencies, with the first reporting that they had turned EBITDA positive in October.

Galaxy Entertainment said its daily operating expenditure has come down from $3.4 million prior to the crisis to $2.3 million in Q3, allowing breakeven at a much lower level of revenue.

Most of the others reported a similar picture.

At the beginning of the year, there had been an expectation for a v-shaped recovery, led by the VIP sector. That hope has long faded and now projections are that it will take until at least 2022 for the market to regain its 2019 levels and longer still for the VIP market to recover.

Premium mass and later mass is expected to lead growth and analysts say further out this improved sector mix will have a positive impact on operators’ margins.

“Since gamblers would be able to use e-renminbi from his/her e-wallet to purchase chips, casinos wouldn’t have much, if any, reason to pay hefty commissions to junkets – currently approximately 44 percent of VIP gross gaming revenue.”

The pandemic has again thrown a spotlight on the dangers of relying on a single industry and a single tourism market for Macau’s economy and this time in a light that’s so dramatic it would be hard to ignore.

The government is expected to push further to diversify Macau’s economy. It’s also expected to seek concrete pledges from operators about non-gaming diversification as part of the concession renewal process.

Details of the retendering aren’t expected to be disclosed until late next year and the government has also said it doesn’t intend to delay the process, despite the short period of time for operators to prepare their submissions. The concessions expire in June 2022.

Asia Gaming Briefings | December 2020

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A year like no other for Asian gaming At the conclusion of every year there are important industry events that need to be recapped, but there can be little doubt that even ten years, twenty years hence, 2020 will mark a dividing point in history between the pre-Covid and post-Covid eras. This will be true even if the malady itself, as most people now anticipate, is eliminated in the coming years by a variety of vaccines.

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s everyone reading this article no doubt recalls, distant stories about a coronavirus spreading from Wuhan, China, grew more insistent throughout January and February, and by the spring it was no less than a global pandemic impacting every jurisdiction in the world, including the Asian and Pacific nations that we put our main focus on.

By the summer, it was also becoming clear that Covid-19’s heaviest impact was not falling upon China or even East Asia, where the crisis began, but on others such as the United States, where healthcare systems withholding coverage to large sections of their population, as well as other local customs and attitudes, made any sort of unified community response to the pandemic difficult if not impossible to implement.

Indeed, the Asia-Pacific included such countries as New Zealand and Taiwan, and even Macau, for that matter, where the direct toll of the coronavirus fell very lightly.

But no one could escape the massive indirect impacts such as the crippling of international transportation networks, the near elimination of cross-border tourism, and the heavy hand of policies related to social distancing and enhanced sanitary practices.

Although the recovery was uneven, by the second half of the year some casinos and other resorts were able to resume operations and even manage small profit margins on the basis of domestic tourism and pent up demand from patrons who had become weary of long periods of time stuck in their homes, isolated from their customary social activities.

One of the unexpected lessons of 2020 was that casinos and integrated resorts are not nearly as invulnerable and recession-proof as many may have formerly believed. The coronavirus pandemic possessed just the right formula to drive patrons away from the casino floors, the shopping malls, and all of the other forms of entertainment upon which the industry relies for its revenues. Even the most robust and well-managed casinos suffered serious setbacks in the spring.

Asia Gaming Briefings | December 2020

But if in any cloud there is a silver lining, then it was surely the shot in the arm experienced by a variety of forms of online gaming. People stuck in their homes became captive audiences searching for entertainment that they could find on their computers or mobile devices. Many of these people turned to online gambling as their pastime of choice, and some firms proved well positioned to step into the vacuum.

A corollary to this development was that governments

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and gaming industry regulators were also encouraged to think more carefully about online gaming. Their responses have been various. In India, the explosion of local people using their mobile devices for betting resulted in several major state governments passing blanket bans on online wagering, while other jurisdictions too grappled with the question of whether to crack down on internet gambling, much of it directed from overseas bases, or to legalize it in some form and to collect public revenues from it.

One of the most striking of these transformations occurred in the Philippines, where PAGCOR is now beginning to license some of its land-based resorts to operate online divisions.

The debate over whether to ban, crack down on, blacklist, regulate, or promote online gaming has really only begun in 2020, and the answers will likely play out over a number of years, following different trajectories in different jurisdictions. It is easy to predict even now, however, that

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People stuck in their homes became captive audiences searching for entertainment that they could find on their computers or mobile devices.

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the Covid-19 pandemic and the events of this peculiar year will become important reference points in this debate for the foreseeable future.

A final observation that should be made about this year in the history of the Asian gaming industry is that it highlighted the

resilience and adaptation of many of the industry players.

Managers of gaming floors quickly rearranged their layouts to upgrade sanitation and to implement changing government guidelines on social distancing and other crowd limitations. Suppliers went back to their whiteboards to brainstorm new products that could allow contactless gaming or other protections for staff and patrons. Human resource managers made painful decisions about their revised staffing needs and they rapidly enforced new training protocols for those who remained. Executives who were more accustomed to talking face-to-face had to find new ways of communicating effectively while offering presentations on Zoom or other online meeting platforms.

In short, this was a year that challenged and forced changes in established business practices in the midst of disorienting days, weeks, and months. For those whose businesses survive the storm, new skills and new outlooks are sure to follow.

Asia Gaming Briefings | December 2020

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Confidence in local government Jay Chun

Chairman and CEO, Paradise Entertainment, founder of the Macau Gaming Equipment Manufacturers Association

The Macau Government is working hard on the new casino license process. including reviewing all aspects of the existing gaming laws and regulations, as the landscape of the gaming industry has greatly changed since the grant of the previous concession back in 2002.

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r. Chun is confident that the Macau Government, led by the Chief Executive Mr. Ho Lat-seng will continue to implement the policy in pursuit of the stability of the city, which in turn would be vital to ongoing prosperity of Macau.

Macau is facing rising competition from jurisdictions such as Vietnam, Cambodia, the Philippines as well as Japan, which are generally considered to be newer gaming jurisdictions than Macau having a relatively diverse customer base.

Considering this, going forward, I expect that the Government would evaluate a gaming license scheme that aims to include attracting a new set of customers from a wider place of business and exploiting potential beyond gaming which works best for all the stakeholders involved.

Mr. Chun has full confidence that the Macau Government is equipped with the ability and the vision to consider the new license bidding process that is best for Macau, best of its stakeholders, and fits well into the Greater Bay Area Development Plan in the long term.

As far as Paradise is concerned, since there are very few details out there for a full plan on what exactly the government is planning to do, the group shall carefully consider and evaluate this opportunity when the Government has announced the details. Having said that, since our mission is to become a world-leading gaming equipment supplier and our core focus in the past and in the future would continue to place emphasis on gaming technology, our primary focus would stay in the realm of gaming technology.

For years, the Macau Government has been making

Asia Gaming Briefings | December 2020

great efforts to label Macau as a World Center for Tourism and Leisure. Yet, the pandemic has uncovered her major weaknesses particularly as a city that is over-reliant on tourism, not just gaming. To effectively diversify Macau’s economy, Mr. Chun supports that Macau should gradually develop other economic sectors beyond tourism. Despite our mission to diversify, we should not ignore nor forsake our gaming market, as it still makes a significant contribution to our economic prosperity and will continue to play a major role in our future economic development. For Macau to diversify its economy, Mr. Chun supports that continual innovation in the marketplace is definitely required. In this regard, he thinks innovative technologies, including but not limited to AI and 5G could also improve the efficiencies of gaming businesses.

In recent years, the mass market segment has proved itself to have overtaken the VIP segment in terms of contribution to GGR and has become an important basis for the gaming industry’s sustainability.

This past history highlights that technology and innovation are indispensable to the life of the gaming market. Mr. Chun says that there is room for development of Electronic Table Games, particularly for LMG machines to capture this trend and welcomes to see policies from the government which can provide more incentives for the gaming manufacturers to invest on research and development on innovative gaming machines and products.

In the long run, this serves to attract more talent from high-tech backgrounds to come to Macau and to build it as the hub of gaming technology in the Greater Bay Area.

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Longer-term focus comes to fore This is the year that forced us to embrace uncertainty and a different understanding about how time perception has an influence on our behavior.

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n one side we learnt to be efficient in a virtual communication environment. We applied the basic business principles but with an enhanced sense of urgency and continuously readjusted assumptions and execution decisions to be taken. Resilience became one of the main leadership needed skills.

On the other side came the realization that the business needs to focus on long-term sustainability. The dangers of just looking into your last quarter results.…it was a contrast between the constant daily urgencies and crisis and the clear realization that only a business with solid, durable

Angel Sueiro

and deep rooted fundamentals will survive.

2021 will show the first big steps to defeat the pandemic and in parallel signs of economic recovery (through big government stimulus). Anyway the risk of an economic slowdown is always there. Also, we should consider a slow change in demographics behavior due the increasing income gap between different social sectors.

Technology will become even more important to identify these changes and the ability of the operators to adjust the product quickly (and accurately enough) will be even more important under this fast moving environment.

Chief operating officer, PH Resorts

Zero-touch economy created The pandemic has swept the world like no one could have imagined in the year of 2020.

This global crisis has put many businesses to an abrupt halt in Q1 and forced companies to develop new business models for survival.

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orking from home has created not only new ways of business interaction but also new demands for digital and virtual technologies. Although companies around the world first experienced a sudden slump when the lockdown was first in practice, it is surprising to see how fast people are adapting to the new situation and shifting from face-to-face interaction to online communication.

This has created a new form of zero-touch economy, in which the integration of virtual technology and digital innovation will play an even more crucial part in defining a company’s sustainability and success. BBIN believes the digital zero-distance innovation will keep booming faster than ever and continues to offset the impact of the pandemic.

Asia, being the first region to battle with the COVID19 challenge, is now moving to a relatively stable stage of living with the new normal even though travel restrictions and social distancing protocols are still in practice. For the year of 2021, we expect that Asia’s gaming industry will continue to see the recovery of the domestic market, while the missing piece of the international market is still highly dependent on whether the borders will be opened in 2021. Moreover, as sports events are gradually back to the field, BBIN looks forward to seeing the sports fans rejoining these events and hopes that the sports betting market will bounce back soon. Finally, as the Philippines regulator Pagcor recently greenlighted casinos to offer online betting, it is worth observing if the attitude towards

online bets is gradually changing under the financial pressure caused by the pandemic. Let’s keep a close eye and see if it is just a transitional policy or the first step of opening up the iGaming market.

The experience of living in lockdown with the socialdistancing protocols has changed how people communicate, interact, do business, literally every aspect of our lives.

With the vaccine coming on the way, we are getting a step closer to recovery.

During this difficult time that we all need to face the challenge together, it also creates a moment for us to bond closer with our family, the community, and rethink about the balance between economic growth and sustainable development. We have seen many recent events in the industry, including new awards and other CSR programs trying to bring more awareness of sustainability and highlight more on community engagement. Likewise, BBIN has been working to achieve the goal of a balanced and sustainable future through TGB Charity’s nonprofit campaigns. The sudden blow from the pandemic also prompted BBIN to delve deeper into the relevant issues and engage more in these charitable activities. We believe changes bring growth, and all these endeavors will make the whole world different from what we had before the COVID19 pandemic. At this critical juncture, BBIN keeps the agility and adaptability of responding to the ever-changing situation and hopes to hit the road of steady and sustainable growth in the year 2021.

Asia Gaming Briefings | December 2020

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The year that tarnished Crown David Green

Principal, NewPage Consulting

In terms of the most surprising event of 2020, I think Crown’s poor showing before the Bergin Inquiry qualifies.

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rown has enjoyed a monopoly in both be committed by successful tenderers.

Victoria and Western Australia, which Secondly, the next few months , encompassing the owes more to politics and history than transition of the US administration from President it does to competence and good practice Trump to President-elect Biden will be critical governance. I expect Crown may face an extended in determining the immediate future of Sino-US suspension of its NSW casino licence, during which relations. Unless the temperature is dialled down, time it will be required to undertake major reform which presently seems unlikely, there must be a real of its management and Board, risk that US operators with and to distance itself further interests in Macau concessions from James Packer. Whether will be at risk of being collateral there will be any flow on to damage. No overtly hostile Victoria and WA is currently action would be required to Analysts are uncertain; the regulatory and effectively expropriate those projecting a slow political inertia which has to companies’ gaming assets in date shielded Crown from Macau; the concessions could recovery of GGR the consequences of its own simply expire and not be post COVID-19, with actions, and inactions, may granted anew as a result of the some suggesting it limit the damage the company forthcoming tender process. suffers in both jurisdictions.

Finally, I expect there will may be 2023 before Regarding 2021, the issues be real impetus for Macau’s normalcy returns. for me are the following. First, casinos to move to cashless whether Macau will seek to regaming. This will be encouraged tender its gaming concessions as a practical response to in 2022? In my view, it should COVID-19, which has exposed not. Analysts are projecting a risk associated with handling slow recovery of GGR post COVID-19, with some currency. It has additional benefits, particularly in suggesting it may be 2023 before normalcy returns. regard to mitigation of AML risk, and the more Payback periods for new investments in both gaming effective denial of access to gaming products for and non-gaming assets are likely to be extended to persons who are barred from the casinos, or who such an extent that it may be difficult to attract the wish to limit their gaming spend to a pre-determined quantum of capital that the government expects to amount in any given period.

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Asia Gaming Briefings | December 2020

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Philippines positivity points to brighter future

David Lawrence

When we look back at 2020, regardless of business or geographical location, this has been a year of unprecedented disruption, whether personal or work related, to everyone’s way of life.

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n hindsight the most surprising aspects of this pandemic is the speed at which everything changed and the duration of these changes. While this situation has allowed many of us to spend more time with our families from a business perspective many very difficult decisions have had to be made to stabilize operations.

Especially for the hospitality industry the restrictions on movement both locally and internationally had and continue to have a significant impact. While many restrictions remain in place and are only expected to ease slowly, we have seen a gradual increase in business volume and are aware that there is pent up demand in many areas that should benefit us moving forward. The pandemic has also made us explore other options within our operations

General manager, casino, Thunderbird

that we would not normally have considered, time will tell which options we choose to pursue.

The Philippine people are renowned internationally for their resilience and positive outlook on life regardless of the circumstance, indeed in addition to the pandemic we also had to endure several typhoons during the year.

This outlook will carry us forward as we see restrictions eased, aided at some point by vaccines. Prior to Covid-19 Philippine gaming was enjoying a boom with revenues up and investment in both existing and new gaming and IR projects being seen. While this boom may have been paused, we firmly believe that Philippine gaming prospects remain very good in the longer term and will be raising a socially distanced glass to 2021 and beyond at the end of December.

New norms and little luxuries

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ost notable / surprising events of 2020: What else but Covid-19:) The pandemic that brought the world to a standstill, making people evaluate their priorities in life. It is a time when wearing a mask is a “norm” and being able to fly without going through a quarantine is a “luxury”. Attending virtual gaming events and webinars seemed really “weird”

and “interesting” at the same time.

There will be a lot of interesting new norms on the horizon and a time to make up for lost time of 2020 due to the pandemic. A year where you need to deliver as you will most probably be well-rested by the time we usher in Year 2021. Year 2021 will be a year where we will learn to cherish small little things that seemed insignificant prior to this ravaging Covid-19 pandemic.

Danny Too

General manager, Cherry Interactive

Asia Gaming Briefings | December 2020

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Impatience for normality Dennis Andreaci

Managing director, Andreaci Consulting

Very surprisingly, some very well managed small and mid-sized casinos have been able to focus on their local premium guests along with very reduced staffing and other costs (because most of the tables are closed and not needed). This small group of players has helped the casinos function as a business reasonably well.

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hat I’ve seen recently is that the public does have a lot of pent-up demand for doing things like traveling and I suspect that will be for casinos as well.

If you asked me this six months ago, I would have said I think people will be slow to re-adopt crowded activities. It looks like many people are growing impatient

and are more willing to get back to what they like to do.

So the key thing to look at is how fast the public is ready to return to their leisure activities.

I suspect we will see stages of surging. From almost no guests to a very quick jump in core players coming back quickly. Then the next stage might come some months later as we see a surge in general tourism.

There is nothing that can hold back the real premium and regular players once they are allowed back in easily.

We see some of this already in Asia when and where restrictions are eased.

I think that a well-managed casino should have a lot of marketing programs ready to fire up at any time so they could get a jump on the competition as they see the players considering coming back. I would like to be in front of that and take future market share from my competitors.

Hopes high for Year of the Ox Desmond Lam

Professor in Integrated Resort and Tourism Management and the Director of Accreditations at the Faculty of Business Administration, University of Macau.

It is interesting how fortune changes and predictions fail in the Year of the Rat. The year started with caution as COVID-19 outbreak began to wreak havoc in China.

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y January 25, the first day of the Chinese New Year, the devastating power of the bats over the Rat had become clear. For Macau’s casinos, a 15-day shutdown was just the beginning of a long nightmare. Visitor numbers to Macau and casino gaming revenue plummeted as weeks passed. When good news came in August and September in the form of the resumption of the Individual Visitors Scheme, many rejoiced. But hopes were dashed when October’s gaming revenue and visitor numbers were much lower than expected.

With December approaching, however, all figures seem to reflect an improving business trend.

As we approach the end of the Year of the Rat, there is greater optimism. Mainland Chinese cities are already in full recovery mode, despite pockets of coronavirus cases. There are positive takes from the past year. For one, Macau’s new government performed exceptionally well under pressure and putting measures in place swiftly while injecting

Asia Gaming Briefings | December 2020

confidence in the marketplace. Our residents, local businesses and concessionaires had also shown great resilience in the past year, working together to overcome their differences during such difficult times. Recovery is currently in sight, and that’s partly because everyone played their role. This will sell well to our prospective visitors in the coming months. I am thus hopeful as we approach the Year of the Ox and as vaccines become widely available.

With the pending renewal of Macau’s casino gaming concessionaires in 2022, many fundamental changes may occur by late 2021 and early 2022 as operators hail to the preferred “directions” of the government. Apart from the Macau government, local tourism and gaming executives are currently still contemplating how best to move forward. Many have hoped that the Year of the Ox will see a return of visitor arrival numbers and gross gaming revenue to pre-Rat level. Is it possible? Yes, I believe we will but at a fraction.

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Asia Gaming Briefings | December 2020

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Dominick Stenson

Casino manager, Queenco

Jamie Nettleton

Partner Addisons

Adapting to Covid-19 challenges

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he most notable event for me is the actual survival of many organizations given the unprecedented operating conditions of 2020, that’s of course when the doors were not closed completely.

Although many unfortunately did not survive, others, not just the mega corporations, adapted quickly and made the adjustments and strategic changes in order to stay afloat. Hats off to them! And here’s hoping the others can bounce back in 2021.

Regulatory shakeups likely in pipeline It is not just COVID-19 and its effects for which 2020 will be remembered by the Australian gambling sector.

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he event likely to have the most long-lasting impact is the NSW Casino Inquiry. Although a report is not due to be handed down by Commissioner Bergin until February 2021, evidence given during the hearings, as well as matters that have arisen in the course of submissions, have highlighted matters which any gambling licensee, whether based in Australia or overseas, should heed in conducting their business. Whether it be appropriate levels of corporate governance (including main board supervision), the necessity to have appropriate measures in place to detect and report money-laundering, or other matters, the NSW Casino Inquiry has considered a very broad range of issues (and in a very public manner).

It is also clear from the NSW Casino Inquiry that the gambling sector cannot operate in a vacuum. Reference has been made to the roles of ASIC (Australia’s corporate regulator), and AUSTRAC (Australia’s anti-money laundering/counter terrorism financing regulator), as well as the various gambling regulators, all of which have oversight on the business operations of Crown Resorts.

As one of the areas being reviewed in the course of the NSW Casino Inquiry is the manner in which casinos should be regulated, taking into account global best practice, the recommendations are awaited with interest, as well as the actions that will be implemented subsequently by the NSW regulator. It will also be of

Asia Gaming Briefings | December 2020

interest to determine what actions are taken by other regulators as a result.

Back to COVID The pandemic had a material impact on Australian gambling operators, both land based and online. Both suffered the consequences of COVID immediately with gambling venues forced to close while the online betting operators needed to find different types of betting contingencies (such as esports) with traditional sporting events only taking place to a limited degree. By the end of 2020, the businesses of most Australian gambling operators have bounced back, save where social distancing remains in place, for example, in casinos. However, one trend which has emerged during the COVID period is digitalisation, with increasing efforts being made to the utilisation of technology to conduct gambling in a contact-free manner. I expect that 2021 will result in further steps towards cashless gambling, particularly in venues and in the operation of gaming machines.

2021 will also see increased consumer protection measures in place, ranging from the introduction of a national self-exclusion register for online betting to new verification/identification measures for players of gaming machines.

Expect more change in 2021!

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Japan IR process needs to take decisive step forward

Fred Gushin

The Macau gaming industry will face a slow but steady increase in both visitation and gross gaming revenues as it transitions to more of a destination market, catering to visitors to Macau primarily consisting of the mass and premium mass markets segments.

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overnment-imposed restrictions on travel for Chinese nationals will create repercussions throughout Asian gaming, including severely restricting the ability of junket operators outside Macau to function.

Managing director, Spectrum Gaming Group

The New South Wales Gaming & Liquor Authority Crown Inquiry has raised serious and pervasive concerns relating to anti-money-laundering, casino due diligence, junket controls, corporate governance and overall casino compliance related to the Crown casinos in Melbourne and Perth, which will result an enhanced emphasis on casino compliance and AML issues throughout Australia and Asia and more robust governmental regulation of VIP play.

Efforts to authorize integrated resorts in Japan will continue, even as Japan is dealing with a change of government and a global pandemic. The government is expected to take affirmative efforts to advance the complex process surrounding the issuance of IR licenses; if it does not, it will risk further delays and the loss of interest in Japan by many of the major gaming companies.

Asia Gaming Briefings | December 2020

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“Emergency” content still in demand Michael Maertz

Managing director APAC, Sportradar

It has been a really unique and indeed surprising year to say the least. When live sport ground to a halt earlier in the year, we lost 95 percent of our live sport feeds in a matter of days. That would have signaled logically some tough and challenging times for all in the sector.

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t Sportradar, we were able to put out be sustained and constant, no matter what. The focus emergency content and products that kept at Sportradar will be to ensure the content that we have our customers afloat and were well received developed is kept going as much as possible as the demand by punters in the market. That was the is clearly there. Virtuals and Esports will be areas of greater surprise at how punters emergence than ever before accepted the content, from in that respect. Of course, E-Leagues, Table Tennis with 2021 being the year of to Virtuals and Simulated the re-scheduled European Virtuals and Esports Reality. This was a move Football Championship, there away from the traditional will be an upsurge in interest will be areas of greater sports as they shut down especially in Asia as more and emergence than ever during the height of the more live sport, with all its pandemic, and as we see excitement, returns. before in that respect. more and more leagues As more and more live re-open, there is still a sports return, the key here steady demand for much is to ensure that we have of the content we put out products that are innovative there originally as “emergency” content. in delivering what operators and punters want. Demand 2021 is hoped to be the year of bouncing back from will resume if consumption has changed, and I think 2020 for most. I expect to see an increased focus on we have as a company met those challenges, and will developing content for operators and punters that can continue to do so.

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Asia Gaming Briefings | December 2020

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Looking for travel bubbles

Matt Ballesty

2020 was a year none of us will forget.

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ew Zealand and Australia continue to outperform the world with management of the pandemic, and while it’s likely a travel bubble between the two countries will be the first major change in border restrictions, we expect it will come with a number of restrictions.

The rollout of vaccines is a positive sign for the industry but it will be some time before we return to a normal environment, and in the meantime our priority at SkyCity is to remain open while keeping our team and our customers safe.

We have a lot to look forward to in the year ahead, we have invested in our core businesses, recently opened our stunning new Adelaide casino and our VIP rooms in Auckland look fantastic.

We can’t wait to welcome more customers to SkyCity in 2021!

Executive general manager, gaming, SkyCity Entertainment

Hard work to be rewarded in 2021 With 2021 fast approaching, it’s important to reflect on how challenging this year has been.

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ith all the trade shows cancelled and extensive travel bans enforced, it’s been almost impossible to show our customers the new product lines we’ve built this year. That said, interest from progressive casinos who see the benefits we offer has been gratefully immense. This has kept us uniquely busy, shipping trial units to a number of sites, or hosting Zoom meetings to remotely introduce our new product line.

COVID-19 has not only changed the way we all do business, but new restrictions have also led to some interesting product developments. Our X-Touch and X-Portal modules have been designed with hygiene and social distancing in mind. For instance, X-Touch replaces physical chips at the tables if required, and allows casinos to increase occupancy for each game with touchscreen tablet play. X-Portal can also be used to stream games to other online platforms. We aim to release a suite of licensed game products, with new exciting additions to the game of Baccarat, that will be beneficial for our X-Table customers in adding incremental value.

Peter Johns

With 2021 marking the Chinese New Year of the Ox, I am reminded of how hardworking and methodical the Ox is known to be, and I believe that 2021 will be a year when hard work will be duly rewarded. We sincerely hope that this is true on a number of levels and wish all our customers and friends a better year ahead.

Chief commercial officer, IDX Games

Asia Gaming Briefings | December 2020

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Vietnam growth to gain momentum Tim Shepherd

Director, Fortuna Investments

Looking into 2021 for hidden gems / growth stories in land based - outside major VIP IR projects there are two types of market best poised to recover and succeed.

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irstly those with domestic demand, either through local and foreign resident play and secondly those able to secure a travel bubble arrangement between source markets and destinations featuring gaming.

Three markets stand out who fit these criteria: the Vietnam club market remains strong and is growing.

When the pandemic got going, many expats (largely Asian), involved in the manufacturing sector in Vietnam decided to stay and continued to fuel the gaming clubs in the larger cities. The clubs were closed only for a few

weeks as Vietnam successfully dealt with virus contagion.

Furthermore as international manufacturers look to reduce their reliance on China as a sole supplier, Vietnam has become a focus for yet more investors from across the globe but in particular from South Korea and Japan.

Throughout 2020 they have been able to bring their experts into the country on special business visas, to support new and growing investments, despite a prohibition generally for all other non resident/non citizens. Continued growth of revenue in this sector, albeit mass and premium not VIP, can be expected into 2021 and this may well flow over to casinos such as Corona and when it opens Hoiana.

Nepal increasing activity long term play (increasing presence of Chinese/Indians).

Although the virus is not under control in India, a vaccine in 2021 should see the continued emergence of Indian neighbour Nepal and an increasing number of casinos on the long border between the two countries.

India’s continued love/hate relationship with gaming seems destined to continue, but Nepal continues to develop supply.

Kathmandu “casinos were buoyant before the virus and will quickly be again soon after.

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Superpowers India and China have long sought Nepal’s natural resources for vast hydropower projects and are in a commercial war to win over the Government, leading to a huge influx of businessmen, lobbyists and entrepreneurs.

Kathmandu casinos were buoyant before the virus and will quickly be again soon after. Nepal is not a destination under China’s gaze as a gaming destination and this may help revenue growth in Kathmandu.

Bubble markets: Although these are still largely under discussion around the region, specific talks have involved South Korea and CNMI as well as Vietnam and China, which will open free passage between both countries to virus-free visitors starved of entertainment.

Look for these bubbles to drive gaming revenue and re-investment by operators.

Asia Gaming Briefings | December 2020

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Asia Gaming Briefings | December 2020

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Startling stock reality gap Sudhir Kale

Founder, Gameplan Consultants

The most surprising phenomenon in 2020 for me was the elevated stock prices for casino companies. Overall, the stock market looks increasingly divorced from economic reality and nowhere is this phenomenon more pronounced than in the case of casino stocks.

A

fter being badly hammered in March-April online gaming industry in countries such as Australia has 2020, casino stocks have shown an amazing shown remarkable growth of 140 percent in 2020. The comeback, despite the industry being beset by bulk of punters who got introduced to online gambling during the pandemic will continue severe structural problems to gamble online in 2021. This such as crippling Chinese restrictions development will cut into the on the outflow of the renminbi, casino gambling wallets of many increased government vigilance of customers, further delaying recovery Chinese citizens gambling abroad, Customer in the casino sector. and blacklisting of casino properties loyalty has taken a As I have written elsewhere, abroad. The top casino companies huge hit during the customer loyalty has taken a huge generate bulk of their revenues from hit during the pandemic. Casino China-facing properties. Added pandemic. companies will have to work twice government restrictions on Chinese as hard toward customer retention. players will continue to negatively Ingenious loyalty programs will impact casino operators’ performance have to be designed which go in 2021 and beyond.

Besides Chinese interference, we see a depressed global beyond the traditional “earn and burn” model. Overall, economic environment and a slower-than-expected recovery the global casino industry will face a less than munificent in the travel sector. Amid such negative developments, the climate not only in 2021 but maybe 2022 and beyond.

“

”

Asia Gaming Briefings | December 2020

FOCUS 39

China neighbors seen as first port of 2021 call

Prof.

Wolfgang Arlt

At the end of this annus horribilis, after so much hardship and so much obedience demonstrated by societies in lockdown around the world, we are all entitled to a nice Christmas present and the prospect of a better tomorrow.

F

ortunately, it seems that we will actually receive such a present in the form of several functioning and affordable vaccines becoming available to end the global terror regime of a tiny virus called Sars-CoV-2. Celebrations (in small groups, keeping distance, no kisses for persons not belonging to your household under the mistletoe!) appear appropriate even for those who do not rejoice about the story of a baby born in Palestine many years ago.

China will end the year as the number one outbound tourism source market, even if this title in 2020 is more akin to “Tallest Dwarf on Earth”. Comparing the period of April to December 2020 with the same period in 2019, less than four million border crossings from Mainland China will have happened, compared to 127 million last year. More than half of the trips

Founder, China Outbound Tourism Research Institute

had Macau as their destination, meaning that Macau received more Chinese visitors than the rest of the world together during that period. Who would have thought five years ago – and indeed even one year ago – that this could ever happen?

China will in 2021 again be the top international tourism source market and gaming will still be an important pastime for many of the Chinese travellers.

Neighbouring countries and regions will be the first destinations receiving higher numbers of tourists from China again. However, it will take another year before the number of border crossings surpasses the level of 2019. For gaming turnover that might even take a few years longer thanks to a combination of growing patriotism and digitalisation causing a decrease of business and MICE travel.

Asia Gaming Briefings | December 2020

40

AUSTRALASIA

40

AUSTRALIA

Crown at risk of “severe regulatory action” A “heightened risk of severe regulatory action” has prompted Fitch Ratings to put Crown Resorts on credit watch negative for a potential ratings downgrade.

Asia Gaming Briefings | December 2020

I

t was the second ratings agency to weigh in on the negative fallout on the operator from a series of highly damaging revelations during the course of an inquiry into its suitability to hold a license in Sydney.

Moody’s cut Crown’s issuer rating from Baa2 to Baa3 on Nov. 20th and said the company remains on review for a downgrade.

The main concern was the last minute concession from Crown that money may indeed have been laundered through its Melbourne and Perth casinos.

That revelation prompted the Independent Gaming and Liquor Authority in New South Wales to delay key permitting steps needed to be able to open its new property in Sydney.

It also triggered a request from the Victorian Commission for Gambling and Liquor Regulation to see the information submitted to the New South Wales probe.

Fitch explains that its negative ratings opinion comes from a view that “these actions highlight an increased risk of severe regulatory action being taken by ILGA, including a loss of licence, and have heightened the potential for further regulatory action by the Victorian and Western Australian regulators that would have a significant impact on the company’s business or financial profile, which would lead to Fitch downgrading Crown’s ratings.”

At present, Fitch says it believes that Crown would be able to absorb a hefty fine of about A$800 million, enabling its financial profile to remain consistent with its rating.

The company has already taken some remedial measures to set straight some of

AUSTRALASIA 41

the corporate governance lapses revealed during the hearing. This includes a pledge to no longer work with junket operators.

However, that may not be enough. Counsel assisting the inquiry recommended that Crown and its biggest shareholder, James Packer, be found “unsuitable” to hold a license.

The risks “ facing Crown,

and to a lesser degree Star, warrant serious consideration of a merger of the two companies.

”

This has left analysts and Australian media speculating what might happen should Packer be forced to offload his 36 percent stake.

Some have argued that rival Star Entertainment might be the obvious choice for partner.

“The risks facing Crown, and to a lesser degree Star, warrant serious consideration of a merger of the two companies,” Sacha Krien from Evans and Partners was cited as saying in a piece in the Sydney Morning Herald.

The newspaper also cites Macquarie

analysts as saying such a merger would create an estimated $150 million in synergy benefits and the attendant estimated lift in earnings per share of between 5 per cent and 9 percent.

In the article at least, they don’t address how antitrust regulators might view the combination of Australia’s two biggest operators.

Overall, the fallout from the inquiry into Crown Resorts’ suitability to hold a license in Sydney may have ramifications for the entire industry in Australia, including tighter regulation, Fitch Ratings said in its 2021 outlook.

Much of the focus is likely to be on the VIP market, which only accounts for about 20 percent of the operators’ business. However, prior to the pandemic and trade-tension induced slowdown, it had been the sector that casino companies had been wooing.

The Barangaroo casino was modelled as a VIP-only property, with tables only.

Anti-gambling lobbyists are already trying to turn up the heat on the sector, this time with a bill that will make them responsible to compensate victims of players who used funds obtained illegally.

Lobbyist Andrew Wilkie introduced a bill that uses the same definition of “stolen property” as the Criminal Code and puts the onus on the operator to report any cases where it suspects the use of illicit funds to AUSTRAC, the government’s financial crime agency.

“This bill will ensure that gambling entities are more accountable and will also prevent them from profiting from illegal behaviour,” Wilkie told parliament.

Star Gold Coast’s Hennessey reflects on 35th anniversary

Jumbo signs softwares and services accord with Lotterywest Internet online lottery business provider TMS Global Services, a wholly-owned subsidiary of Jumbo Interactive has signed an agreement with Lotterywest, the Western Australia state government-owned and operated lottery, to provide its online software platform and services for up to the next ten years. “I am pleased that the Lotterywest Agreement has now been signed on time and on terms as anticipated,” said Mike Veverka, CEO of Jumbo. “This is a major achievement for Jumbo securing our first government client setting up a solid Long -term partnership and providing strategic opportunities for Jumbo”, he said.

The Star Gold Coast is celebrating its 35th anniversary since opening, with Gaming Operations Manager Steve Hennessey reflecting on the changes in the industry and highlighting how advances in technology have facilitated casino management. “Technology has made a huge difference in the way we operate, from simple things like shuffling the cards. When we first started, we had to shuffle them ourselves and now we have machines that can do it for us,” Hennessey said. “When we first opened our doors, both guests and gaming management were able to smoke whilst working on the gaming floor, something you wouldn’t hear about today!”

Asia Gaming Briefings | December 2020

42

SOUTH ASIA

42

INDIA

eSports racing ahead India’s online gaming revenue is expected to jump by 45 percent this year as players turned to their mobiles during Covid-19 lockdowns, with esports one of the fast growing stars of the segment.

Asia Gaming Briefings | December 2020

SOUTH ASIA

A

43

ccording to a KPMG report, the was distributed in India by China’s Tencent.

“The ban of the game didn’t just impact total online gaming user base surpassed 400 million in July. players of the game, it also impacted the fastCasual gaming is still the largest growing esports and influencer ecosystems as sector of the market with revenues estimated numerous Indian Youtubers and esports pros at INR36 billion to 39 billion this year ($486 had built massive followings through playing PUBG Mobile,” Darang said. million – $526 million).

He cited data from Sensor Tower showing However, real money gaming is gaining significant traction, with the segment likely to the ban of the game led to iOS and Google Play be worth INR25-30 billion this year, with more game revenues in India declining 9 percent than 90 percent of those playing on mobile. between August 2020 and September 2020, Although a small segment of the market compared to a 5 percent growth rate during at present, esports is seen as having significant the same period last year.

PUBG has already said it’s coming back potential and is attracting overseas interest. “esports, as a category, is poised for after having told the Chinese company it is massive growth in India,” All India Gaming no longer authorized to distribute the game.

It’s planning to set up a Federation head Roland new Indian subsidiary Landers said in the report. and together with parent “This is evident from The success company Krafton plans the multiple platforms to invest $100 million st ar ting to emerge of PUBG has to help develop India’s alongside growing interest made the gaming eSports and gaming f rom international industries. players in an evolving ecosystem realize That will come with ecosystem driven by that India is ripe for jobs, with the Indian unit growth in the number expected to take on about of professional gamers monetization, 100 people, as well as a in India.” pledge to collaborate A quick look at India’s with other local Indian demographics help to demonstrate the market potential. About half businesses to develop gaming services. It will of its 1.3 billion people are under the age of also come with a new Indian version of the 25 and are keen gamers. Indians downloaded game and an accord with Microsoft Azure to 5.6 billion gaming apps in 2019, a record for store data securely in India.

Another hurdle when it comes to gambling anywhere in the world. While internet and smartphone penetration is also growing fast, on esports in India is the country’s regulatory framework. In theory, skill-based games are helping boost growth.

PUBG is by far and away the most popular legal and esports comes under the category of esports game in India. Launched in 2018, it skill-based gaming. However, along with a spike managed to attract more than 13 million daily in user numbers has come increased regulatory active users in the second half of 2019, just a scrutiny, with several states recently announcing year after launch. Perhaps more importantly, bans on all gaming skill-based or not.

“It is a concern, but so the far skill-gaming KPMG says PUBG has helped shift attitudes in India, managing to get Indians to pay for games. category has persevered,” Darang said, pointing “The success of PUBG has made the to a legal challenge to India’s leading fantasy gaming ecosystem realize that India is ripe sports companies, Dream11.

That challenge ultimately went as high as for monetization,” it wrote.

The company set up infrastructure including the Supreme Court of India, which found in talent programs, a ladder system for tournaments the company’s favour.

“This indeed boosted the morale of the and huge amounts of prize money.

“Post launch of PUBG Mobile, mobile industry as a whole,” he said.

After seeing the success of PUBG in game downloads have increased by 8 to 10 times,” Niko Partners Director for Southeast India, there has been a rise in interest from international teams and players.

Asia Research, Darang Candra, said.

Team Vitality, a professional esports team However, it’s not without its challenges.

In October, the Indian government banned from France, as well as organisations such as PUBG and other apps with ties to China Fnatic, TSM, Noblegg, and Nova Esports have due to public security concerns. The game all set up shop in India.

“

ONLINE GAMING PROJECTED PERFORMANCE * Growth over the previous year Industry size (in INR billion) FY20 FY21

89.9

+9.5%*

98.5

FY22

+44.8%*

142.7

Number of gamers (in million) FY20 FY21 FY22

365 436

+19.5%*

510

+17%*

(Source: KPMG)

”

RMG market to hit $3.8b by 2024 India’s online skill-based real-money gaming (RMG) market is expected to grow to become US$3.8 billion by 2024 on the back of growing digital infrastructure – breakneck speed of growing smartphone penetration, low cost of data and vast digital payment infrastructure allowing individuals access to instant real-time inter-bank transactions.

Finance Minister supports legal sports betting India’s Finance Minister Anurag Thakur said the country should legalize sports betting to weed out corrupt practices such as match fixing. Speaking at an ICICI Securities event he said: “My suggestion will be to legalise betting and gambling activities, which are underground. They continue to exist in our society,” he said.

Thakur’s stance seems to run counter to a growing number of individual states in India, which have recently announced plans to ban all forms of betting, including skill-based games, which are permitted under a Supreme Court ruling.

Asia Gaming Briefings | December 2020

44

INDOCHINA

44

CAMBODIA

Moody’s cautious on Naga’s expansion plans Nagacorp, the operator of Cambodia’s NagaWorld, has undoubtedly been one of Asia’s integrated resort success stories, though credit ratings agency Moody’s is now sounding a note of caution about its expansion plans.

Asia Gaming Briefings | December 2020

INDOCHINA

M

45

oody’s said the company’s announcement this week that it plans to build a $350 million property close to the country’s fabled Angkor Wat temple complex is “credit negative.”

It argues that the company’s capital spending plans, which will amount to some $4 billion over the next five years will reduce the its liquidity buffer at a time when Covid-19 has “weakened the economic environment and made the pace of recovery uncertain for the gaming industry.”

That the outlook is uncertain is undoubtedly true, though Nagacorp appears to be faring better than most. The company noted in its third quarter results that its mass market business had already recovered to 97 percent of pre-Covid-19 levels, while the more volatile VIP segment was at 71 percent.

A strong base of expatriate players in the capital Phnom Penh helped to support earnings. While Nagacorp has a significant advantage through an exclusivity agreement for a radius of 200 km around the country’s largest city.

Digging deeper into the Moody’s report, the firm says that although it’s raising a red flag, Nagacorp is in a fairly enviable position.

The company has said it’s in preliminary

talks to arrange financing for the expansion and Moody’s says its leverage is low enough to support additional debt.

It expects Nagacorp’s leverage to drop to 1.0x in 2021-2022 from 2.5X this year and below its 2.5X downgrade guidance.

It’s assuming that there will be an improvement in operating conditions given the upswing reported in Q3 and that a senior note will be repaid in May. It may even be possible for Nagacorp to fund its capital expenditure through existing cash flow without resorting to debt. However, that might be to the detriment of the company’s dividend payout policy. At 60 percent of

AVERAGE DAILY NET GAMING REVENUES AUG-SEP Pre-Closure 1Q 2020

Post-Closure Period

Public Floor Tables EGM

Gambling law to boost tourism, industry standards Cambodia has promulgated its long-awaited gambling law aiming to create jobs, boost the economy, and bolster tourism, as well as establish safeguards against money laundering and corruption. Finance Ministry spokesman Ros Phirun said the law also aims to screen and select potential investors by requiring higher criteria for obtaining a business license, such as higher minimum capital and a proper business plan. Online gambling is banned and the tax rate has been set at 4 percent for VIP and 7 percent for mass.

88%

337

94% 761 699

Total

Post-Closure Recovery

744 653

316

VIP

(in US$’000)

earnings, the dividend if paid may pressure liquidity, Moody’s argues.

As well as the newly announced Angkor project in Siem Reap, which won’t contain gaming, Nagacorp is progressing with a $3.5 billion Phase 3 expansion of its resort in Phnom Penh. It’s also building an IR in the Primorye gaming zone in Russia. Again for Moody’s this is both a negative and a positive.

“These projects highlight Nagacorp’s increasing appetite to expand its operations and entails execution risk, although this will improve earnings and cash flow diversification in the future and reduce the company’s singlesite operation risk.”

92% 1,842 1,668

91% (Source: Nagacorp)

Visitor numbers drop 72% in first eight months The number of foreign visitors to Cambodia fell 72 percent during the first eight months of the year to 1.22 million, according to Ministry of Tourism figures. China, Thailand and Vietnam were the largest sources of foreign travelers to Cambodia during the January-August period this year, the report said. It added that some 292,303 Chinese, 182,501 Thais and 180,095 Vietnamese came to the kingdom during the first eight months of this year, down 83 percent, 22 percent and 68 percent, respectively compared to the same period last year.

Asia Gaming Briefings | December 2020

46

Asia Gaming Briefings | December 2020

47

Asia Gaming Briefings | December 2020

INDUSTRY OPINION 48

Sudhir H. Kalé*

Taking stock of the global casino industry What does the immediate future hold for the global gaming industry?

I

see five important developments that will shape industry fortunes: (1) Continuing or growing restrictions on customers from Mainland China; (2) Overall depressed global economic outlook that will significantly curb travel and entertainment; (3) Continued restrictions on patron numbers and venue management in most jurisdictions; (4) Added capacity and competition in some jurisdictions; and (5) Deteriorating customer loyalty.

Chinese Government Restrictions China’s stringent policing of currency outflow for gambling purposes and its proposed crackdown on Mainland Chinese traveling abroad for gambling could not have come at a more inopportune time. The Ministry of Culture and Tourism in China stated in late August that “casinos in overseas cities attract Chinese tourists to go abroad for gambling activities, disrupting the order of China’s outbound tourism market, and endangering the

Asia Gaming Briefings | December 2020

personal and property safety of Chinese citizens.” China also wants to put a stop to the underground banking system that many of its citizens use for access to foreign currency for gambling.

It is no secret that most Asian and Asia-facing casinos rely heavily on Chinese clientele to make their business viable. The contribution of Chinese consumers to the global gaming industry is huge, both in customer numbers and in revenues. By choking the access to money flowing out of China and making it more difficult for Chinese punters to gamble overseas, the casino industry in most parts of the world could become perennially handicapped.

Depressed Economic Outlook According to the International Monetary Fund (IMF), global economic growth is projected at minus 4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact

INDUSTRY OPINION 49

future. These restrictions limit the number of patrons in gambling areas, the social distance that needs to be adhered to by gamblers, and constraints on operating non-gaming facilities such as restaurants, bars, and nightclubs. Casino resorts will have to spend considerable amount of money on disinfecting the public areas, testing staff and customers for infection, and modifying their gaming facilities to minimize the chance of infection. Senior executives will continue to spend a lot of their time ensuring that their “COVID-19 plan” is up-to-date and rigorously implemented. While some capacity restrictions may be eased as the pandemic wanes, many other constraints such as masks and sanitization protocols are here to stay for quite some time.

These restrictions impact casinos’ top line as well as bottom line. Forced reduced patronage limits the revenues casinos can make while requirements such as facility sanitization, modification of gaming equipment, and patron health-check add to operating costs. Gone are the days when patrons in Macau could congregate around a baccarat table, three layers deep, and beg croupiers to accept their bets during a run on player or banker!

the pandemic, and of those, 93 percent said they will continue with online or mobile gambling once stay-at-home orders have lifted. Only 51% of those surveyed indicated that they will return to casinos upon reopening. Even more concerning is the finding that just 35% of those planning a return to casinos would go back to their usual casinos. These findings imply that consumers will spend a lower amount of their gambling dollar in land-based casinos and less than 18% will return to their pre-pandemic casinos of choice.

Worldwide, there exist around 7.5 million slot machines and 85,000 gaming tables.

Billions of dollars are spent each year on loyalty programs, most designed along the ‘earn-andburn’ proposition. A huge dent in patron loyalty as suggested by the Synergy Blue research will induce casino companies to cut back on their player reinvestment percentages. When revenues are scarce, marketing activities are often the first to go under the guillotine. Unfortunately, such cost-cutting measures often end up in making an already bad situation even worse. Research evidence from other industries suggests that businesses who continue their consumer franchise-building activities during times of economic distress emerge stronger and more profitable on the other side.

on activity in the first half of 2020 than was anticipated, and the recovery is projected to be at a much slower rate than previously forecast.

The IMF has estimated the global economy to grow at 5.4 percent in 2021. Overall, this would result in 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020.

Integrated resort casinos (IRCs) offer products that fall at the extreme end of consumer discretionary goods. “Consumer discretionary” is a term for classifying goods and services that are considered non-essential by consumers, desirable only if their available income is deemed sufficient to purchase them.

Hotel facilities, entertainment, fine dining, and gambling together account for almost all the revenue of resort casinos, and spending on each of these products is totally discretionary.

With the dismal economic outlook for the years 2020 and 2021, few can be optimistic about consumer spending in IRCs.

Added Capacity and Competition Markets such as Macau, Sydney, and the Philippines are set to add additional gaming tables and slots despite poor demand, travel restrictions, and the current low capacity utilization. While new and renovated properties may draw initial high customer numbers due to the curiosity factor, the overall net impact will be further impoverished performance for the existing properties.

In 2019, Union Gaming reported that around US$65 will be invested in new casino properties in Asia between now and 2025.

Thanks to COVID-19, while brakes will be applied to planned investments wherever possible, some properties are at advanced stages of construction and have little choice in the matter. The net impact of additional capacity during times of the pandemic and a severe economic downturn will be accentuated financial hardship for established properties.

A Time for Reckoning

Pandemic-related Restrictions

Deteriorating Player Loyalty

Regardless of whether a vaccine for COVID-19 is found and made expeditiously available globally, restrictions on travel, entertainment, and gathering in public places are bound to remain in place in the foreseeable

In late April 2020, Synergy Blue carried out a survey of 1,000 regular gamblers in the United States. Of those surveyed, nearly twothirds (64%) said they gambled online or played mobile games (pay to play/free to play) during

*Sudhir H. Kalé, Ph.D., is the founder and CEO of GamePlan Consultants, a boutique consultancy that advises casino companies on matters of corporate culture and marketing. He has published around 150 articles on the marketing and management of casinos. You can write to Sudhir at skale@gameplanconsultants.com.

By all accounts, the gaming industry is having to contend with headwinds it has never experienced before. Most operators have painted rosy pictures about their prospects for the immediate future. Virtually all properties have engaged in severe cost-cutting measures, regardless of location or jurisdiction. Operators are having to walk a tight rope while implementing strategies that incorporate the concerns of customers, shareholders, and governments.

Traversing the immediate short-term will not be easy. Trade-offs and unpalatable choices will be inevitable. As for the long-run, one thing is for sure. Casino companies that will overcome the crisis and thrive will be those that do not take their customers for granted during these difficult times.

Asia Gaming Briefings | December 2020

CALENDAR OF EVENTS 50

FEBRUARY UKRAINIAN GAMING WEEK 24-25 February 2021 IEC Pavilion, Kiev https://ugw.com.ua/en

MARCH IMGL SPRING CONFERENCE 10-12 March 2021 Athens, Greece https://www.imgl.org/conferences/spring/overview/2020 SPICE INDIA 23-25 March 2021 Goa Marriott Hotel, India https://www.sportsbettingevents.com/spice-india

MAY G2E ASIA 25-27 May 2021 Venetian Macau https://www.g2easia.com/ SIGMA MANILA 27-28 May 2021 SMX Convention Centre, Manila https://www.sigma.com.mt/en/events/asia

JUNE ICE LONDON 29 June - 1 July 2021 Excel Centre, London https://www.icelondon.uk.com/

APRIL SIGMA EUROPE 13-15 April 2021 MFCC, Malta https://register.sigma.com.mt/malta/

Become a member EXCLUSIVE ACCESS TO AGB INTELLIGENCE BE THE FIRST TO RECEIVE OUR DAILY BRIEFS PRIORITY REGISTRATION FOR OUR EVENTS

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JULY PHILIPPINES ASIA GAMING EXPO 29-31 July 2021 World Trade Center and SMX Convention Center, Manila https://www.phil-asiangamingexpo.com/

AUGUST AUSTRALASIAN GAMING EXPO 10-12 August 2021 ICC, Sydney https://austgamingexpo.com/

51

Asia Gaming Briefings | December 2020

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UP NEXT E U R O P E ( M A LTA )

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M a y 2 7- 2 8 , 2 0 2 1

AMERICAS (SAO PAULO)

A F R I C A ( C A P E T OW N )

Sept 13-14, 2020

March 22-23, 2022

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Gaming Briefings | December 2020

LAST WORD 54

Sharon Singleton

Managing Editor, AGB

Will Live Shots be a game changer?

As we close our final magazine of the year, I’d rather not focus on the doom and gloom wrought by Covid-19 and will instead look at how the pandemic has been a key catalyst for change in the gaming industry.

T

he speed and flexibility shown by many at least. The Philippines allows its locals to gamble in companies in changing their business model casinos with no restrictions and the mass market goes and operating structures has been remarkable a long way to covering the bills, so why prevent them and will hopefully position them well for from also making bets online.

The second major impediment is a requirement a more profitable future...one that will allow the rethat funds be deposited and withdrawn physically at employment of those who lost their jobs.

The online industry has without doubt been a the casinos. In some ways, this appears to defeat the key beneficiary of the lockdowns and has left many purpose of online gambling and reduces potential revenue governments and land-based companies wondering generation if every time a player has a bad day he, or she, has to go back to the casino to top up their funds. how they can get a slice of that rapidly growing pie.

On the other hand, it may be a welcome circuit Here once again, the Philippines has taken the lead in Asia in its decision to allow land-based casinos to breaker to help alleviate problem gambling concerns and cuts down on the upfront accept online bets and to license costs for the casinos in putting gaming platforms offering online payment systems in place. games to local Filipinos.

The third interesting point The Philippine Amusement It’s nice to to note will be how successful and Gaming Corp (PAGCOR) have, but won’t the Philippines will be in geohas already given out its first fencing its territory. As Gilbert licenses, which it says will be replace the losses pointed out on a recent Asia available to all land-based casinos from the closure Gaming Brief Webinar, it’s an in the country. The first systems interesting opportunity for the may go live by the end of this of borders and online arms of the land-based year, PAGCOR Chair Andrea social distancing suppliers, but only if they have Domingo says.

As yet, it’s too early to say restrictions currently a guarantee that bets aren’t coming in from unlicensed whether this will be a gamechanger in place. jurisdictions. These are certainly in Asia, but it’s an experiment issues to be explored. that’s going to be followed Then there’s China. This closely by other jurisdictions year Beijing has again upped in the region.

At present, there are several key issues that will prevent the ante against jurisdictions targeting its nationals for the onshore casino licenses, which Domingo refers to gambling, introducing criminal penalties and saying it as Live Shots, from being major growth opportunities. has drawn up a blacklist of countries that it views as Firstly, the ability to bet online will be reserved for the key offenders.

The Philippines is thought to be top of that list, but registered VIP players only and only those resident in the Philippines. According to igaming consultant Mark so far Manila has refused to be swayed, instead taking a Gilbert, that’s likely to mean only about 10 to 15 percent more pragmatic approach. Domingo said a big part of of the local casinos’ business. So, it’s nice to have, but the impetus in taking the decision to introduce onshore won’t replace the losses from the closure of borders licenses was the rampant illegal gambling market. It would rather regulate and raise revenue than spend and social distancing restrictions currently in place.

However, it’s not inconceivable to think that if this time and resources trying to crack down. It remains tentative toe in the water works without significant hiccups to be seen whether any other governments around the that it might be expanded to cover all registered players region are brave enough to follow.

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Asia Gaming Briefings | December 2020

WE SURVEYED 500 PUBS

AUSTRALASIAN GAMING SURVEY

55

Covid-19 Response

Q. WHAT IS THE MOST IMPORTANT LEARNING YOU HAVE GAINED AS A RESULT OF THE CRISIS?

Q. WHAT ACTIONS HAVE YOU TAKEN REGARDING EGMs?

& CLUBS

Used Signage

56%

Increased Distance

56%

Deactivated EGMs Moved Machines

ACROSS

Reduced the Number

ANZ ...

Surrended Machines

AND HERE ARE THE RESULTS.

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46%

Set up Screens

Q. WHAT PAYMENT RELATED CHALLENGES HAVE YOU FACED?

31% 22% 8% 1%

Q. WHEN DO YOU EXPECT REVENUES TO RETURN TO NORMAL?

Paying Suppliers

68%

Paying Utility Blls

56%

Paying Saff

47%

Paying Rent

44%

Paying Contractors

Revenue is Normal (11%) In less than 6 months (6%) In 6 months to 12 months (17%)

35% 0

25

In 12 months to 24 months (48%) It will take longer than 24 months (18%)

50

Q. HOW MANY EGMs ARE CURRENTLY ACTIVE?

Q. VISITATION IS AT WHAT % OF PREPANDEMIC LEVELS? NSW VIC QLD

Less than 25% are active (13%) Between 25 and 50% are active (16%)

Other 0

25

50

75

100

Between 50 and 75% are active (39%) More than 75% are active (32%)

Weekday

Weekend

Asia Gaming Briefings | December 2020