Gaming: Choose wisely which rabbit hole to go down this year
KUCHING: Maybank Investment Bank Bhd (Maybank IB Research) sees plenty of variables for gaming players such as Genting Bhd (Genting) and its subsidiaries across the world for the year of the Water Rabbit.
These include the return of Chinese visitors and the downstate casino license tender in New York; as well as the potential legalisation of Thai integrated resorts (IRs).
To recap, 2022 started well for Genting Malaysia’s Resorts World Genting (RWG) when 1Q22 visitor arrivals hit 72 per cent of 1Q19 (pre-Covid) levels. The RM3 billion Genting SkyWorlds theme park finally opened on February 8, 2022.
“As the Omicron wave subsided and the last vestiges of Covid-19 restrictions were lifted in 2Q22, operations improved with 3Q22 visitor arrivals hitting 97 per cent of 3Q19 levels.
“We understand that visitor arrivals were quick to recover also because few Malaysians were gambling overseas due to lingering fears of contracting Covid-19 and fear of being kidnapped in Cambodia.
“Yet, RWG 1Q22 revenue was just 48 per cent of 1Q19 levels and 3Q22 revenue was a higher 78 per cent of 3Q19 levels. The reason for RWG revenue underperforming RWG visitor arrivals is due to the lack of available hotel rooms.”
It is well documented in the gaming industry that hotel guests spend way more than day trippers due to longer lengths of stay (room rates, shopping, food and beverage) and play (gaming).
Recall that RWG reopened on September 2021 but only about 5,000 out of 10,500 rooms were available due to lack of manpower. That said, by end3Q22, the number of available rooms improved to circa 8,000.
“For Genting Malaysia, we do not expect the return of Chinese visitors to RWG to greatly impact its operations and earnings positively,” it said. “In 2019, Chinese accounted for only four per cent of RWG total visitor arrivals.
“For Genting Singapore, we do expect the return of Chinese visitors to Resorts World Sentosa (RWS) to impact its operations and earnings positively.
“In 2019, we understand that Chinese gamblers contributed circa 25 per cent of its GGR. Yet, we gather that the Chinese gamblers who will return to RWS may not be of the same quantity and quality.”
The New York State Gaming Commission (NYSGC) is expected to issue Request For Proposals in 1Q23 to award three downstate commercial casino licenses by end-2023.
The research firm said a license will be the ‘ultimate prize’ as it will allow holders to deploy table games in or near New York City and capture some of the GGR that has been flowing to surrounding states like Pennsylvania, New Jersey and Connecticut.
“We believe NYSGC will give a preference to Genting Malaysia’s Resorts World New York City as the latter can deploy table games and generate taxes quickly at its existing operations.”
Meanwhile, on January 12, 2023, Thailand took the first step towards potentially liberalising its integrated resorts (IR) industry when the House Of Representatives formally received a report from a special committee studying the feasibility of IRs.
“Even without IRs, Thailand welcomed more Chinese tourists in 2019 than Singapore and Malaysia combined,” Maybank IB Research said. “To be sure, Thailand will require two to three years before liberalising its IR industry, if at all.
“Yet, we fear that Thai IRs could seriously impact Singaporean IRs like Genting Singapore RWS negatively if they do materialise.”