South-east Asia bets big on casinos, but who will take Singapore’s crown?

SOUTH-EAST Asia is fast cashing in on the casino business.

Whether it is to woo tourism dollars, boost the local economy, create jobs, or stamp out illegal gambling, some Asean economies are playing their best hands as they vie for their slice of the casino pie.

The stakes are getting higher as these regional neighbours attempt to put their own spin on replicating Singapore’s and gambling mecca Macau’s successes in the integrated resorts industry.

Gary Bowerman, an analyst of Asia travel and consumer trends and director of Check-in Asia, tells The Business Times that the foresight of these gambling hubs has changed the whole landscape, with entertainment, leisure and conference facilities being supported by casino gaming revenues as the key driver.

Players such as the Philippines and Thailand “have really looked at Singapore and Macau and realised that gaming transforms the whole tourism industry, not just the casino segment”, he says.

“It’s not just about the tables. It’s about how you invest to really change the game, and it has changed Singapore tourism hugely,” notes the Malaysia-based analyst.

Of dices and vices 

The tiny island-state boasts two integrated resorts (IRs) – Marina Bay Sands (MBS) and Resorts World Sentosa, which are run by rivals Las Vegas Sands (LVS) and Genting Singapore, respectively.

Both IRs, which began operating in 2010, have raked in healthy earnings, both in gaming and non-gaming revenue.

In the first quarter of this year, MBS saw its casino revenue jump 44.9 per cent year on year to US$859 million from US$593 million. This is also an increase from the US$741 million recorded in the fourth quarter of last year.

Likewise, Genting Singapore recorded a 69.5 per cent increase in gaming revenue to S$576 million in Q1 2024 from S$340 million a year prior. This also stands as an increase from the S$441 million in the previous quarter.

Both IRs jointly contributed about 1 to 2 per cent of Singapore’s gross domestic product annually, the trade ministry revealed last in 2019.

Construction of a new fourth tower for MBS is slated to begin by July next year and targeted to be completed by July 2029. The IR’s current casino space is likely to be expanded as well.

But while Singapore’s bet on casinos has paid off, South-east Asia still has a delicate relationship with gambling despite its long history in the region. 

Gambling is frowned upon by some of the widely practised religions here. Add to the equation moral and ethical concerns, a heavy social price tag, as well as associated undesirables such as trafficking, scams and sex work, and betting becomes a highly contentious and politically charged topic.

Indonesia, for example, has prohibited gambling for years, with offenders having to do jail time.

More recently, furore ensued in Malaysia in April after word got out that the Muslim-majority country was reportedly mulling over plans to allow a second casino to operate in Johor Bahru’s Forest City. The country has so far granted only one casino licence to Genting Group, in 1969.

Conglomerate Berjaya Corp was quick to dispel the rumours that its founder Vincent Tan – Malaysia’s 29th richest this year according to Forbes – was in discussions with the government over a casino in Forest City.

Also refuting the claims was Prime Minister Anwar Ibrahim, who has been treading a tightrope between winning over conservative voters and mollifying his liberal supporters.

Regardless, Genting Malaysia has been charting good growth and drawing in tourists for the nation. Though the group’s financial statements do not separate its gaming revenue from non-gaming for each territory, total revenue for the leisure and hospitality sector of its Malaysia operations grew 24.7 per cent in the Q1 2024 to RM1.75 billion (S$503 million) from RM1.4 billion a year prior.

Nevertheless, it is unlikely that Malaysia will be making any more moves in the casino space – much less its larger neighbour Indonesia.

So, while Singapore currently wears the crown in South-east Asia, the gambling table is starting to get crowded as the Philippines and Thailand enter the fray.

Does the Philippines hold the winning hand?

The strongest contender in the region so far seems to be the Philippines. Gambling is legal in the archipelago, with the state gaming regulator Philippine Amusement and Gaming Corp established in the late 1970s in response to calls to clamp down on illegal casino operations across the country.

The nation is now going all in on the gaming space with glitzy new resorts and multiple upcoming casino projects, on top of the 43 such facilities it has so far.

And that’s not all – it also wants to dethrone Singapore, and it is not shy about its ambitions.

The chairman and chief executive of the gaming regulator, Alejandro Tengco, has remarked publicly several times that Singapore could be overtaken by the Philippines as Asia’s second-largest gambling destination, after Macau, as early as next year.

He has also said that he expects the archipelago to achieve its gross gaming revenue target of 450 billion to 500 billion pesos (S$10.4 billion to S$11.6 billion) by 2027, a year earlier than anticipated.

All of this sounds ambitious, but it is not bluff and bluster.

Last year, the Philippines posted a record 285 billion pesos in gross gaming revenue. South-east Asia’s fastest-growing economy is projected to achieve a fresh high of 336 billion pesos this year.

Two months ago, local developer and operator Bloomberry Resorts opened its new and highly anticipated 38-storey IR in Quezon City that boasts four gaming floors with more than 160 tables and at least 2,600 electronic gaming machines, on top of 530 hotel rooms, and event halls.

Also on the drawing board are up to eight more casino projects in places such as former US airbase Clark and tourist hot spot Cebu, as well as plans for the state regulator to sell its casinos to beef up government revenue.

These moves come as the Philippines turns to the gaming space to win back tourists after the pandemic.

Senior gaming analyst Vitaly Umansky of Seaport Research Partners describes the Philippine casino scene as the combination of a strong local market and foreigners, notably South Koreans and some Japanese and Chinese customers.

“That market has actually grown quite nicely,” he continues. “The government there has done a good job with trying to groom the industry... The local market there has been quite strong and the benefit of the Philippines vis-a-vis some of these other markets has been that they allow locals to gamble.”

That said, a flood of gaming facilities alone is not enough to turn the country into a gaming hub and revive the tourism industry.

Tourism analyst Bowerman believes the archipelago also needs friendlier visa policies and better flight connectivity to win tourists over.

“The Philippines is a big market, but it really underperforms in the tourism segment for a couple of reasons,” he says. “One is its visa system, and two is access – it doesn’t have the same flight connectivity that Bangkok or Singapore have.”

Another concern for operators is its relationship with China, adds Bowerman.

Diplomatic ties between the countries have soured as tensions over territorial disputes in the South China Sea continue to escalate, and this could affect visitation from China, he says.

“Could it supplement that with visitors from other markets? That would be the big question,” he notes. “But in terms of its potential for growth, it’s definitely there for sure.”

“(The Philippines) should attract a lot more people than it does, but it will have to liberalise its visa policies and attract more flights... It definitely needs better airports.”

Thailand: The new kid on the block

Another contender that has been making headlines recently is Thailand.

While talk of legalising casinos has been on the docket for years, it is starting to take shape more prominently now.

It was announced in June that Thai Prime Minister Srettha Thavisin had ordered the drafting of a Bill that would propose to lay the legal foundation for establishing entertainment complexes.

This follows the nation’s 500-member House of Representatives voting in March in favour of a study that found that allowing casinos to be housed within such complexes could lure high-spending visitors.

The push comes as Srettha struggles to jump-start Thailand’s lagging economy by boosting tourism – weak growth prints have left the underperforming kingdom in the dust, well behind its regional peers.

Beyond other traditional reasons such as job creation and tax benefits, the Thai administration is also looking to regulate the gambling sector. With the exception of betting on state-controlled horse races and the lottery, gambling is prohibited in Thailand, and this has translated into a thriving illicit punting scene.

Border territories such as Poipet in Cambodia and Bokeo in Laos have also become playgrounds for Thai punters, as gambling in these countries is illegal for citizens but not foreigners. Popular as they may be, these Cambodian and Lao casino towns are frequently accused of being money laundering fronts and hubs for scam operations and human-trafficking schemes.

However, legalising casinos in Thailand could help keep gambling revenue within the country.

Bowerman believes Singapore and Thailand would be in direct competition, but that both destinations would likely market themselves based on their differentiating factor.

“Thailand would probably play the card that it’s not as expensive as going to Singapore... Singapore would probably counter that by saying it’s been doing this for years and has more range of experiences,” he says.

Operators such as LVS, Galaxy Entertainment Group and MGM Resorts International have been said to be studying the potential of opening casino resorts in Thailand.

At LVS’ Q1 2024 earnings call on Apr 17, its chairman and chief executive officer Robert Goldstein reiterated that they “absolutely have interest in Thailand”.

“It’s a very, very exciting market on a lot of levels,” he had said then, singing the same tune as at an earlier earnings call in January 2023 when he remarked that the group would “love to have a presence there in the future”.

But while many are bullish on Thailand, some still have concerns.

Operators need to know where the proposed locations are, what the passenger flows there will look like, whether there will be transport infrastructure such as airports or high-speed rails in the area, and the number of licences that will be offered, point out Bowerman.

“If only one or two casino operating licences are awarded, I think there will be strong interest and it will be competitive. If it’s going to be five, six or seven licences, it will be more challenging for Thailand to find concessionaires for all of them because the scarcity factor is not there.”

If these operators are looking to attract Chinese punters, they also need to consider if it will affect their operations in other South-east Asian countries, notes the tourism expert.

Umansky, however, is sceptical about Thailand’s ambitions vis-a-vis large-scale IRs.

People tend to compare Thailand with Singapore, but there are significant differences, he notes, pointing out that Singapore has a stable government, a strong local economy and regulations in place that are transparent.

The Hong Kong-based analyst is concerned that Thailand will not be able to build up a strong enough regulatory landscape to attract the big developers, raising political stability as a key factor.

“It’s possible we get one sizeable (IR) that might be built over several phases over (say) a 10-year period. But I think the notion that we’re going to have all these IRs or multi-billion dollar developments all over Thailand – that’s not realistic,” he says.

“Thailand is going to be a very different animal.”

What are the odds?

Besides Philippines and Thailand, others such as Vietnam, Cambodia and Laos are also slowly ramping up their casino presence, even as they lag behind their more ambitious neighbours in this space. Whether they intend to scale up their casinos to compete regionally remains to be seen.

But this begets the question: Is the pie big enough for everyone?

Bowerman says: “Is everybody just going to be fighting for a similar portion or will it actually grow the regional market? That is still to be confirmed and I think that’s why progress has been slower in Japan and Thailand than they would have liked.”

Operators who are due to invest huge sums to get in on the ground floor indubitably want big returns, he notes, and, so, they want to be sure their revenue streams remain strong over the long term.

Others believe that South-east Asia’s casino race is not a zero-sum game.

The market here is not yet oversaturated, says Umansky. “When Singapore opened, there was a fear in Macau that it was going to lose a lot of business. That didn’t happen at all,” he notes.

“That local market matters,” he says. “Singapore has done well, the Philippines has done well, Macau has done well because a good portion of the stable business is local.”

The way Umansky sees it, casinos that are looking to cultivate the Chinese market may find it more challenging moving forward.

“China has taken a much more paternalistic view of its citizens going and gambling outside of (the country),” he points out, noting that the economic powerhouse has been putting “a lot of pressure” on Cambodia and the Philippines to stamp out online gambling.

“There are opportunities to develop a local market. You just have to do it right.”