By Wally Chang
The formal gambling industry, dating back to the 17th century, long beckoned the spirited to wager their valuables for the small chance to win big. In more recent years, gambling has become a circumscribed industry, confined to massive casinos in cities built for entertainment and leisure, such as the notorious “Sin City” of Las Vegas, Nevada, the former gambling capital of the world.
Popular culture depicts Vegas as the mesmerizing city of casinos, glamour, and excess. Yet, for its gleaming, gold-plated renown, casinos in Vegas are nothing more than that: a façade over a more complex economic situation. For one, Vegas has begun to stray from its traditional bread and butter gambling revenues, relying more on non-gaming revenue streams to remain profitable. And while Las Vegas was once considered the gambling capital of the world, two new gambling capitals in Asia, Singapore and Macau, offer wider profit margins and larger consumer bases—incentives for casinos to look eastward.
In the present day, the gambling industry has grown considerably in Macau, generating $36.7 billion in Gross Gaming Revenue (GGR) in 2019. For comparison, casino gaming revenue in the state of Nevada totaled $8.8 billion that year. Singapore does not fall far behind, with a 2019 GGR of $5.9 billion and the goal to surpass Vegas by incentivizing new casino entry and spurring existing casinos’ growth with construction funding and licensing for larger gaming floor space. Considering Asia’s population size, gambling culture, and rapidly growing economies, the Asian market has not gone unnoticed by casino companies, which have been acutely aware of these trends for the past two decades.
In 2004, Las Vegas Sands Corporation, a leading American casino and resort company, opened Sands Macau, their first Asian casino. Six years later, Sands opened the Marina Bay Sands (MBS) in Singapore, hoping to continue capitalizing on the flourishing Asian market. By the end of 2018, Sands’Asian operations were generating 72% of net revenues, with only 28% coming from North America. Then, in a major move in March 2021, Sands Corporation sold off its largest Las Vegas property, the Venetian Resort, and shifted its focus to Asia (except its headquarters, which will remain in Las Vegas).
Sands’ decision comes as a result of the coronavirus pandemic, the death of Sands Corporation’s founder and CEO Sheldon Adelson, aforementioned operational incentives in Asia, and—perhaps most importantly—the woes of operating as a gaming company in Las Vegas. Investors seem optimistic about the profitability of gambling in Asia, considering that Sands Corporation shares hit a 52-week high following the announcement of the Venetian sale.
Sands’ move seems obvious when taking a closer look at operating numbers. A 2017 Reuters article found that much of the success in Macau was due to their large operating margins: pure gaming made up 86% of Wynn Resorts’ net revenues. Conversely, in Las Vegas, Wynn’s gaming revenues composed only 30% of net revenues, with the rest stemming from non-gaming sources. Operating in Las Vegas is also much more expensive, as a higher wage floor requires considerable employment expense.
Unsurprisingly then, the move of Sands Corporation comes with expansion in mind. In April 2019, the Singaporean Ministries of Trade and Industry, Finance, Home Affairs, and Social and Family Development struck deals with the Marina Bay Sands (MBS) and Singaporean gaming company Resorts World Sentosa (RWS) granting the companies exclusive rights to operations in Singapore until 2030. In exchange, these resorts would invest heavily in developing new venues to increase tourism in Singapore, as well as paying higher GGR taxes. Both the MBS and RWS would also benefit from an additional 15,000 square meters of approved gaming area. Two years later, Singaporean development continues to exhibit promising returns on investment compared to Las Vegas. With the approximately $6.25 billion sale of the Venetian, it is likely that some of those funds will be funneled into this ongoing project.
Although major casino players have already begun to restructure their assets, ample opportunity continues to exist, with other gaming companies likely to make the move. Yet falling gaming revenues have persisted for decades. On the Las Vegas Strip, the most popular section of Vegas, gaming revenues have already decreased from 57% in 1993 to 35% in 2019. However, an accelerated gaming floor exodus to Asia would not debilitate the city’s economy. Instead, it would arguably transition the city.
According to the Las Vegas Sun, Vegas struggles to uphold its socioeconomic diversity and prosperity due to an overdependence on tourism and gaming. Las Vegas lacks professionals with experience in STEM fields and as a result, its economy is homogenous. According to the Bureau of Labor Statistics, Las Vegas employs 1960% more dancers than the average community, 84% fewer mechanical engineers, 76% fewer electrical engineers, 54% fewer people in computer and mathematical occupations, and 22% fewer elementary school teachers. There is an obvious difference between the labor market in Vegas and that of an average city, and this difference has only grown more stark in the face of the precipitous drop in COVID-era tourism. The removal of some casinos and the introduction of technology and a clean energy-focused industry would be beneficial to diversifying the city and increasing residents’ socioeconomic prosperity and stability.
Looking east, Asian cities like Macau and Singapore offer great opportunities for existing casino operators in Las Vegas. At the same time, Vegas operators should focus on downsizing their gaming floors and, instead, expand their entertainment, food and beverage, and non-gaming offerings to best engage the changing palette of their customers. Vegas would also benefit by expanding into STEM fields to increase overall socioeconomic prosperity and diversity. With the inevitable rollout and distribution of COVID-19 vaccines, we can soon expect to see casino patrons again, ready as ever to hit gaming floors, and wagering their dollars for a chance to make it big. But as we look towards the future, these casino-goers might not be strolling in the glitzy lights and classic-Americana of the Vegas Strip; instead, the grand boulevards and looming casinos might be brightly lit by the glow of gold-plated Chinese characters.