Examining Asia's Casino Landscape: Is There a Glut or a Mismatch?

More than a decade after casino magnate Sheldon Adelson boldly predicted Asia could host "10 Las Vegases," the region's integrated resort (IR) sector is showing signs of considerable strain. While some experts unequivocally point to a casino glut, others argue the issue is more nuanced, highlighting a significant product-market mismatch and mismanaged assets.

Evidence of market challenges is widespread. The Philippines, for instance, saw its gaming revenue drop by 16% in the first quarter of this year, with properties like Okada Manila reporting a $15.9 million decline in Q1 EBITDA. Distressed IRs are evident from Incheon to Australia, and in Japan, only one qualified bidder emerged for three IR licenses in 2022. Even Macau, despite its substantial gross gaming revenue (triple that of Las Vegas last year), saw five out of six concessionaires report revenues and EBITDA below their 2019 levels.

Paul Steelman, CEO of Steelman Partners, firmly states, "There is definitely a glut of casinos throughout Asia." He suggests that gaming is now readily accessible to a large portion of the regional population. This perspective is echoed, in part, by John DeCree, head of institutional investor research at CBRE Capital Advisors. DeCree, who co-authored a 2019 report projecting an Asian gaming oversupply, notes that while the term "supply glut" might be imperfect, "markets and projects that are struggling to ramp and high-ROI opportunities are harder to come by." The report had identified over $65 billion in gaming projects slated for launch by 2025. Although the COVID-19 pandemic somewhat mitigated immediate supply risks by slowing development, DeCree highlights a paltry 0.5% return on investment for the estimated $21 billion poured into Asian land-based gaming since 2019, reinforcing earlier concerns.

However, other industry leaders offer a different diagnosis. Nicola Greenaway, managing director of Nikau Design Group, believes that while a simple "supply glut may be too simplistic," there is a clear "mismatch between scale, timing and proven demand." She attributes this to properties built on overly optimistic assumptions regarding VIP gaming and rapid tourism recovery, alongside the decline of VIP play and a shift towards digital channels. Vitaly Umansky, a senior analyst at Seaport Research Partners, argues against a general glut, instead identifying "mismanaged assets and overbuilt assets for the markets in certain areas." Similarly, Niall Murray, chairman of Murray International Group, suggests struggles stem from investments that fail to cater to current customer needs, persisting with a focus on a VIP and junket clientele that has largely disappeared.

Andy Choy, a seasoned gaming executive, encapsulates this by stating, "there is definitely a glut of casinos designed and built for high-end gamblers from mainland China." He points to a fundamental "product-market mismatch," with most Asian properties chasing the same high-end segment. Choy’s analysis suggests a significant underserved mid-market segment across Asia, estimating that demand in key hubs like Macau and Singapore could be underrepresented by a factor of more than two, given China's large feeder market.

Several specific integrated resorts illustrate these challenges. Inspire, a $1.6 billion IR in Incheon, South Korea, developed by Mohegan Gaming, faced significant hurdles as a foreigner-only casino in a market already saturated with similar properties. Despite its attractions, it struggled to generate the critical mass needed without local participation. Consequently, Mohegan defaulted on a loan, leading lender Bain Capital to take control of the property last year. In Vietnam, Hoiana, originally designed to serve clients of Macau's former top junket promoter Suncity, encountered severe difficulties after Suncity chairman Alvin Chau's arrest in 2021, forcing a re-evaluation of its business model before being acquired by Chow Tai Fook Enterprises.

Australia's Queen's Wharf Brisbane (QWB), a $2.5 billion project, also exemplifies the issue of targeting a vanished clientele. Originally envisioned to attract Asian high rollers, the property found this customer base no longer frequenting Australia for gambling, particularly after strict regulatory investigations into casino money laundering. Star Entertainment, one of the original partners, sold its stake to focus on other assets, with Chow Tai Fook Enterprises and Far East Consortium becoming equal partners. Umansky notes that QWB needs to reposition itself as a local casino, diverging from its initial high-end, international focus.

The consensus emerging is that the Asian gaming market is undergoing a crucial recalibration. Future developments are likely to be more measured, flexible, and grounded in actual demand, rather than merely expanding in size. The industry needs genuine innovation and a strategic shift away from an overreliance on the shrinking luxury market to tap into the broader, underserved customer segments.