Thailand Set to Become Macau’s 'Frenemy' with Casino Legalization: CLSA

In an in-depth research spanning 100 pages, analysts Jeffrey Kiang, Naphat Chantaraserekul, and Leo Pan indicate that with the first entertainment complex potentially launching by 2029, Thailand’s nascent gaming sector is poised to attract substantial interest.

Despite the potential influx of Chinese tourists—a critical demographic in Thailand’s post-COVID tourism recovery—key distinctions between Macau’s and Thailand’s tourism offerings are expected to preserve the resilience of Macau’s gaming industry.

Macau, known for its well-established gaming infrastructure and unique cultural heritage, offers a different experience from Thailand’s emerging market. Thailand’s tourism market is renowned for its affordable, high-quality offerings and has swiftly recovered from the pandemic, with visitation projected to reach 35.5 million in 2024, just 11 percent below 2019 levels, according to the Bank of Thailand.

Looking ahead, China and India, which accounted for 33 percent of Thailand’s visitors in 2019, are anticipated to drive long-term growth. With travel penetration rates of 0.8 percent for China and 0.1 percent for India, which are lower than those of other Asian countries (ranging from 1.4 percent to 14.5 percent), they have significant potential.

While Thailand may become a new growth driver for Macau’s gaming concessionaires, analysts believe that gaming legalization in Thailand ‘will not significantly cannibalize Macau’s tourism market.’

‘The vast differences in visitor profiles, such as length of stay and origin, support this conclusion’. This diversification in tourist attractions ensures that both markets can coexist and potentially drive growth through regional tourism synergies, benefiting both destinations.

Growth driver for the next 20 years

Macau’s casino operators increasingly view Thailand as a promising avenue for organic growth over the next two decades. With supportive policies and a robust tourism industry, Thailand could eventually generate annual gross gaming revenues of $15.1 billion, potentially ranking as the world’s third-largest by 2023. In terms of geography, visitor mix, and appeal, Singapore emerges as the most comparable market to Thailand, according to CLSA research.

Under the proposed 17 percent gaming tax rate, Thailand’s entertainment complexes are expected to achieve an EBITDA margin of 40 percent or higher once fully operational. This is favorable compared to Singapore’s integrated resorts, which, with a similar gaming tax rate, have achieved EBITDA margins of around 50 percent.

In contrast, Macau’s properties, facing a 40 percent gaming tax rate, have seen EBITDA margins between 25 percent and 30 percent. As such, Singapore serves as a more accurate benchmark for assessing profitability in Thailand compared to Macau, as noted by CLSA.

With a minimum required investment of $2.7 billion per license holder, Thailand’s gaming properties are likely to provide significant economic value when compared to Macau’s six concessionaires. The favorable gaming tax rate and potentially less stringent regulations regarding table and slot machine counts make Thailand an attractive investment destination.

CLSA estimates that the return on invested capital (ROIC) could reach up to 23.9 percent, ‘surpassing the weighted average cost of capital (WACC) of 9.6 percent to 13.2 percent for the six companies.’

Regional Impact

The potential expansion of Thailand’s land-based gaming market is expected to impact the broader Southeast Asian gaming landscape, with significant implications for regional operators.

According to CLSA research, although there may be some risk of cannibalization, particularly in markets similar to Singapore, ‘the threat to Macau remains limited,’ due to its unique appeal to mainland Chinese tourists compared to Thailand’s international visitor base.

Among Macau operators, ‘Galaxy is likely to experience the greatest impact,’ due to its interest in expanding beyond regional markets and its financial capacity to support such initiatives. In contrast, ‘Melco and SJM are less likely to bid for a Thai concession,’ due to their current strategic priorities and financial considerations.