Gaming market in Asia poised for growth, Macau leads the way

Praveen Choudhary, managing director of Morgan Stanley

The Asian gaming market, with Macau at the forefront, holds significant potential for growth, according to a conference presented at the Global Gaming Expo (G2E) Asia.

Praveen Choudhary, the managing director of Morgan Stanley, provided key insights into the market’s performance and future prospects yesterday as part of the G2E Asia 2024.

“Macau is the biggest gaming market, but there is also interest in other Asian markets like Singapore, Thailand, UAE, Sri Lanka, and Vietnam,” Choudhary said.

He compared the gaming market in Las Vegas and Macau to demonstrate the growth potential in Asia. Choudhary explained that Las Vegas has reached a saturation point with a penetration rate of around 12% to 13%, while Macau and Guangdong China have much lower penetration rates, suggesting further growth potential.

He emphasized the need to assess markets based on their stage of development, noting that while Las Vegas has higher non-gaming revenue compared to Macau, the latter has experienced a shift from VIP to mass market gaming, which is considered more sustainable in the long run.

Choudhary’s report also delved into the performance of Singapore’s gaming market, stating, “Singapore’s massive revenue has grown from 101% last year to 135%, whereas Macau is running at 60% to 130%.”

He added that Singapore’s “neutral place in Asia allows them to also keep wealth,” and its position as a gateway to Asia has contributed to its attractiveness for wealth and business growth.

The analyst discussed the impact of concessions, stating that, “the first 10 years are always the good period” for concession. However, he mentioned that governments then ask for more money, and the returns become much lower. He then emphasized the need to ensure returns do not fall too low compared to the cost of capital.

The conference also addresses various aspects of the market, including capital expenditures and returns on investment (ROI).

The executive noted that the capital expenditure numbers provided revealed a range of figures “like 48%, 50%, 20%”, and over 4% for an engine prototype. He added that the returns are still decent, with Starboard at 50%.

However, he cautioned that some of the numbers are “not that flattering” and that the hope is that the Q1 numbers will improve further, but noted that “this market is not as exciting or high ROIC as it used to be.”

Meanwhile, regarding reinvestment costs, he said that companies are claiming they are paying higher reinvestment costs compared the pre-Covid-19 period, but added that this is “just a cost of acquisition or customer,” not necessarily a problem. He noted that companies may need revenue to be “130% of pre-Covid levels” to reach pre-Covid EBITDA levels, despite having 80% fewer employees globally compared to the pre-Covid period.

The institution executive also highlighted the differences in market recovery across various regions. Choudhary said that the US, Singapore, and Philippines have seen stronger recoveries in terms of GGR compared to visitation, adding that Singapore’s VIP market has grown, now making up 31% compared to 8% previously.

Moreover, the Asian gaming market, led by Macau, holds substantial growth potential, despite the challenges posed by the pandemic. Choudhary’s comprehensive analysis provides insights into market dynamics, highlighting the differences between Las Vegas and the Asian markets, as well as opportunities and considerations for investors and industry players. As the market continues to evolve, the ability to adapt and capitalize on the changing landscape will be crucial for the industry’s success. Staff Reporter