China, Japan and South Korea key to Asian gaming recovery:  Goldman Sachs

By Noah Taylor Updated
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Three Asian countries will be at the heart of the casino industry’s future growth, the latest report from Goldman Sachs has revealed.

China, Japan and South Korea, three of the continent’s richest countries, will drive the bulk of casino gaming activity in Asian in the years ahead, Sachs said.

Speaking at the recent Japan IR Forum Online, Goldman Sachs managing director Simon Cheung said gamblers from that trio of nations will combine for 80 per cent of Asia-Pacific’s total addressable market going forward.

He adds that players from those countries are underserved in their home markets.

Japan approved integrated resorts, but those venues are several years from opening, leaving pachinko as one of the dominant forms of gaming in the Land of the Rising Sun.

South Korean gaming venues are primarily accessible to foreign visitors, while Macau is the only Chinese territory where gambling is permitted.

“This is why structurally, for the last 10 years, Singapore and Malaysia have been growing much slower than Macau or the Philippines,” Cheung said.

The Goldman Sachs director said casino spending as a percentage of disposable income among Chinese, Japanese and Koreans is lower than their counterparts in countries such as Malaysia and Singapore.

When Japan’s highly anticipated initial trio of integrated resorts opens, it’s likely those venues may not drive a significant increase in gaming numbers among domestic gamblers, but rather, will eat into pachinko’s share of the market.

“Once integrated resorts are allowed to open in Japan, it may not drive a significant amount of Japanese gaming spending, but perhaps more of a dilution of market share from pachinko business,” Cheung said.

Japan has yet to decide which cities will be home to the first three casinos, though Nagasaki, Osaka and Yokohama are among the leading contenders.

Following a series of bureaucratic delays, it is unlikely Japan’s integrated resorts will open before 2026 or 2027.

Domestic gamblers key in COVID-19 bounceback

In the near term, Cheung believes the Asian markets with the most devoted domestic gamblers will recover more rapidly from the effects of the coronavirus pandemic than destination markets.

Those slated for rapid rebounds in his opinion are Cambodia, Macau and Malaysia.

Overall, he sees the Asia-Pacific region’s gaming figures returning to pre-pandemic levels next year are driven by pent-up demand from mass market gamblers.

Cheung’s view on the 2022 timeline to recovery is similar to forecasts set forth by other analysts.

Many believe Macau will rebound faster than Singapore and that it will be mass and premium mass players, not VIPs, doing the heavy lifting.

Macau gaming revenues rise during first quarter

Macau’s gross gaming revenues are on the up, reaching US$1.14 billion in the first quarter of the year.

GGR Asia reported in April that this value is up 19.7 per cent sequentially, according to data released by the Gaming Inspection and Coordination Bureau.

The figure is still down 38.3 per cent from the prior-year period.

VIP baccarat, which in 2019 accounted for as much as half of all Macau GGR, accounted for 38.6 per cent of the city’s GGR in the three months to March 31.

That was an increase from the 34.9 per cent share it had in the fourth quarter of 2020.

A number of industry observers said that the VIP segment has been placed recently under commercial pressure due to a combination of regulatory and pandemic-related factors.

Mass market games, including video poker machines, provided 61.4 per cent of all Macau’s casino GGR in the first three months of 2021.

The figure was up 2.1 per cent from the previous quarter, but down 7.4 per cent from a year earlier.

Mass market baccarat alone made up 51 per cent of all GGR for the first quarter of 2021.

JP Morgan Securities said in a recent note that the VIP revenue in the Macau market was “bad” in the first quarter of 2021, “hovering at circa 20 per cent of pre-COVID-19 levels.”

The mass segment had “fared better” in the three months to March 31, at 39 per cent of pre COVID-19 levels, estimated the institution.

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