Casino Resorts Look to Diversify Asia Growth Beyond Macau

The CEOs of several U.S.-based casino resort companies shifted tones in recent weeks in a sign they aren’t putting all their eggs in one basket when it comes to Asia. 

The Chinese special administrative region of Macau overtook Las Vegas as the world’s largest casino gaming market in terms of revenue in 2006. Major American casino resort companies like MGM Resorts, Las Vegas Sands, and Wynn Resorts have all pumped billions into developing mega-resorts in the city to appeal to the highly lucrative Asian casino business. Las Vegas Sands’ $6.25 billion Venetian and Sands Expo and Convention Center sale in Nevada is to focus on growth in Asian markets like Macau. 

But a string of pandemic setbacks in the region appears to have many of these companies looking elsewhere in Asia for a growth story to tell amid China’s more stringent coronavirus mitigation policies. 

“It’s impossible in Macau to rationally predict anything until the government makes decisions on the visitation,” Las Vegas Sands CEO Rob Goldstein said on an investor call last month. “It’d be silly for us to speculate something that’s so speculative.”

Goldstein later added a note of confidence, saying Macau will “explode when it opens back up again” likely in the second half of this year. But earnings calls and recent development announcements have moved away from just hyping growth in Macau. Goldstein led the call by announcing a $1 billion renovation project at the company’s Marina Bay Sands resort in Singapore. 

While he also mentioned a $2.3 billion Londoner Macau and Four Seasons project was nearly complete, the focus on Singapore builds upon Goldstein’s comments last fall on a third quarter investor call regarding the resiliency of Marina Bay Sands without Chinese travelers. Las Vegas Sands can still make as much as $1.5 billion from travelers from other Asian markets like South Korea, Malaysia, and Japan, Goldstein said at the time.

“Obviously, part of our business is dependent upon access to the Chinese market, but it’s not [entirely] dependent,” he added.

Eyes on Japan: MGM Resorts CEO William Hornbuckle’s first comments regarding growth in Asia on the company’s fourth quarter earnings call earlier this month focused on the company’s push into Japan. 

“We have substantial progress in Japan where the city of Osaka chose us as their partner to build and operate a new world-class integrated resort,” Hornbuckle said. “Doing so will allow us to continue to diversify geographically into what we believe will be one of the world’s largest gaming markets in the world.”

When he did eventually get to Macau and MGM China, Hornbuckle noted the “continued choppiness in the operating environment.” 

Revenues at MGM China, which includes the MGM Macau and MGM Cotai resorts, were down 57 percent compared to the fourth quarter of 2019. This is due to the travel and entry restrictions into Macau amid case spikes throughout China and the country’s policy of rolling out lockdowns to mitigate. Revenue at MGM’s Las Vegas Strip resorts was 26 percent higher than at the end of 2019. 

A Balancing Act: MGM isn’t the only company looking for geographic diversification. Wynn Resorts announced plans late last month for a multibillion-dollar resort in the United Arab Emirates, potentially paving the way for another international gaming destination outside of Macau. 

This is all a departure from recent years when multibillion-dollar resort deals in Asia almost entirely focused on building market share in Macau. But these companies can’t afford to only focus on a market where there are such strict travel restrictions and the potential return to lockdowns in the event of a future crisis. 

Hotel companies continue to beef up their portfolios in China: The country ended 2021 with a hotel development pipeline at its highest ever recorded level, according to Lodging Econometrics. But investor chatter in recent weeks has surrounded the idea of whether the country’s stringent lockdown measures would weigh in the back of minds when considering future deals there.

The developments and comments also come as China is increasingly cracking down on Macau and junket operators who bring wealthy gamblers to casinos. The government’s review of gaming licenses and likelihood of increased regulation in the region tanked stock prices last fall.

That said, gaming companies aren’t giving up on China and Macau. After all, it is the world’s largest gaming destination in good times. 

“Our company is divided primarily into three material areas, the most important being Asia, the portfolio in Macau and Singapore,” Goldstein said on the Las Vegas Sands earnings call.

IHG and Accor Differ on Expansion Strategies

When it comes to mergers and acquisitions, the CEOs of two hotel companies long rumored to one day join forces have very different outlooks. 

IHG CEO Keith Barr, in an interview with Skift last week following the company’s fourth quarter earnings call, said the company was eyeing ways to get into the urban micro hotel (think along the lines of smaller rooms and larger public spaces a la CitizenM or Moxy) sector as well as all-inclusive resorts. 

Given IHG’s return to profitability and strong cashflow, a tuck-in brand acquisition is an option as well as an organic launch of a new brand.

“[It] just shows again how strong and resilient this business model is,” Barr said. “That gives us capacity to invest in organically launching brands, or, you know, what we’ve done in the past: We could acquire small brands.”

Tuck-in mergers are generally how industry CEOs have envisioned future deals transpiring as opposed to mega-mergers seen in the past like Marriott and Starwood.

But Accor CEO Sebastien Bazin had a different outlook on future mergers and acquisitions. The company appears to have its hands full beefing up its portfolio of lifestyle hotels under a joint venture with Ennismore. 

“We are not looking at any M&A opportunities,” Bazin told an analyst on last week’s Accor investor call. “We haven’t been looking for the last two to three years. It’s not in my list of [top] 10 priorities.”

China and the U.S. Cement Leadership Status for Global Hotel Development

It won’t come as a shock that China and the U.S. dominate the world’s hotel development pipeline, with China winning out for room count and the U.S. taking the top spot for total number of projects. 

China ended 2021 with 700,567 rooms in development across 3,693 projects, according to Lodging Econometrics. The U.S. had 581,953 rooms in development across 4,814 projects. The two countries together account for 62 percent of all hotels in development around the world. The U.K., Indonesia, and Germany, respectively, round out the top five.

Marriott, Hilton, IHG, and Accor are the top four companies, respectively, leading the development pipeline in terms of project count. Together, the four firms account for 56 percent of all hotel projects in the global development pipeline.