Japan integrated resorts can each expect to generate around US$3 billion in gross gaming revenue annually, according to ratings agency Fitch. But their impact on Macau’s gaming industry will be minimal, with Korea and Russia more likely to feel the effects should the Japanese Diet pass its long-awaited IR Implementation Bill this year.
The projections formed part of a briefing titled “Macau Gaming Sector Outlook 2018” hosted by Fitch on Thursday, which estimated Japan’s casino industry could be worth up to US$9 billion each year depending on the number of IRs authorized.
“The estimate is based on comparison to other large scale integrated resorts with favorable supply/demand dynamics such as Marina Bay Sands,” Fitch said of its US$3 billion per resort figure. However, Fitch warned that, “Like in Singapore, Japanese gaming regulations are likely to impose restrictions, which will limit the market potential.”
Either way, it is unlikely that Macau’s momentum will be halted to any meaningful extent should Japan open up its gaming industry in the coming years.
“Expansion of APAC gaming outside Macau will not have a material negative impact on Macau but might be a mild headwind for Macau’s gaming growth, especially at the high-end of the market,” it said. “We expect cannibalization to be more regional in nature.
“Japan’s integrated resorts will have a more material negative impact on casinos in Korea and Vladivostok while the expansions in Philippines and Malaysia appear to have a bigger impact on Singapore than Macau. We expect Macau’s market to be more driven by the macro-economic conditions and secondarily by the expansion of amenities and infrastructure in and around Macau.”
In the short term, Fitch sees Macau’s gaming industry slowing in 2018, with growth falling from 19% in 2017 to around 11% over the next 12 months. VIP will feel the most pain in that regard, slowing from 21% to 8% growth while mass can expect to grow by around 14%.
That’s good news for Sands China, who Fitch sees as being best placed to capitalize on an impending shift towards mass gaming.
“Mass as a whole will comprise nearly half of total GGR, up from roughly a third during the market’s prior peak,” it said. “This is a positive for the market as the mass segment is more stable and … remains underpenetrated in the Asia-Pacific region.
“In the longer term, as the center of gravity shifts to Cotai and Macau becomes more mass-market oriented, Fitch believes that Las Vegas Sands, with heavy exposure to Cotai, is best positioned for long-term growth.
“LVS’ upgrade of Parisian’s hotel product, build out of Four Seasons and St Regis suites and US$1.1 billion conversion of Sands Cotai Central into the Londoner support this view.”
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