As reported by Bloomberg News, Hong Kong-based Galaxy Entertainment Group Ltd. and Las Vegas-based MGM Resorts International, two leading giants in the iGaming industry, are currently exploring opening casino resorts in Thailand, because they want to protect themselves against a worsening outlook for their Macau operations.

A stressful situation for both companies:

The moves to expand their presence and enter new markets mark casino operators’ stress over a worsening outlook for their Macau businesses, which once generated six times the gaming income of Las Vegas and provided historically high returns.

In this regard, people who didn’t want to be identified because they consider this to be something private, said: “Galaxy Entertainment Group Ltd. and MGM Resorts International are studying the potential of opening casino resorts in the country. However, Galaxy, the gaming, retail and hospitality group controlled by billionaire Lui Che-woo, is also exploring starting gaming operations in the United Arab Emirates.”

Shares of Galaxy Entertainment expanded their gains to as much as 5.3% in Hong Kong trading on Friday, while MGM China, an affiliate of MGM Resorts, grew over 6%. Additionally, this helped boost a Bloomberg Intelligence gauge of the Macau casino operator shares by over 5%.

China’s desire to move Macau away from gambling in the future:

China’s main goal is to move Macau away from gambling and toward entertainment. To do this, it clamped down on high-value players it suspected of laundering money, while forcing increased surveillance on gambling activities.

Although China’s reopening of Macau’s borders caused a tourism boom that helped Macau’s gaming profits return to nearly 60% of pre-Covid levels in May, there is a possibility that this tourism explosion could potentially drop later this year as pent-up demand subsides and the increase in flight capacity causes a large number of Chinese to go abroad. Additionally, it will likely take many years for the city to add more non-gaming attractions and events to lure more visitors to fill the void left by VIP gamblers, who were responsible for half of total gaming income.

Gaining an advantage:

Since both operators know that Thailand and the UAE are likely to legalize casinos in the coming years, they want to gain an advantage with the aforementioned consideration. According to Bloomberg Intelligence analyst Angela Hanlee, Thailand is “one of the world’s top tourist destinations, especially for toursits from other Asian countries. During the time before the pandemic, the Chinese were the biggest group of visitors to the country, responsible for nearly 28% of total foreign arrivals, followed by Malaysians and Indians. On the other hand, the UAE could generate as much as $6.6 billion in gaming income yearly and eventually surpass Singapore, home to the famous Marina Bay Sands resort.”

“Furthermore, Galaxy has already set up offices in both Thailand and the UAE to promote its business in Macau, while also using that local presence to glean on-the-ground information. MGM, which is set to manage an entertainment resort in Dubai, has set up a base in Thailand and was one of a number of firms that spoke with a Thai parliamentary committee looking into legalizing casinos. The discussion took place before May’s general election and, while it’s unclear what legislation the new government will enact, the committee’s proposal that several casino resorts be established was approved by the House of Representatives in January,” according to people familiar with the matter.

However, a Galaxy representative offered no comment on the company’s plans, and MGM does not have a primary office in Thailand and has not spoken to the committee, according to what a company spokesperson said in an emailed statement.

Good financial situation for extension:

Las Vegas Sands Corp. has shown interest in Thailand again and again. On that note, Chief Executive Officer Robert Goldstein said throughout an earnings call in January that “the group is looking hard at the country and would love to have a presence in the market.”

All three companies are currently in a good financial position to extend. Galaxy has managed to retain more money than debt through the pandemic, because of the company’s conservative financing and spending strategy that has been in place for the past two decades. As for MGM, its asset-light model has seen a surge in sales of properties that are then leased back, which strengthened its cash position, while the $6.25 billion sale of Sands’ Las Vegas properties has provided ample funding.

Although any potential entry into new markets depends only on Thailand and the UAE legalizing casinos, the industry is already predicting that change will happen. In addition, Thailand is still in a leadership transition, but the casino resort proposal has already gained cross-party support and is projected to be officially approved by the new government. As for the UAE, over the past month there have been early discussions in the state about legalizing gambling, which has led to some operators holding informal talks with authorities, although senior government officials have said “there are no imminent plans to allow the pastime.” On a related note, MGM Chief Executive Officer Bill Hornbuckle said on a recent earnings call that “he anticipates further developments on the legalization in coming months.”