A new report from CBRE Capital Advisors dubbed the United Arab Emirates the “next gaming frontier” that could generate $8.5 billion, rivaling Las Vegas in gaming revenue and Singapore in profit margins.
“We believe the UAE represents one of the most compelling opportunities in global gaming, given its robust tourism industry, high propensity for luxury and consumer spending, business-friendly operating environment, strong transportation and lodging infrastructure, and virtually no gaming competition in the region,” according to the report. John DeCree, head of institutional investor research, and Colin Mansfield, head of credit research, were the lead authors.
The CBRE report says it anticipates an “operator-friendly environment,” thanks to the country’s progressive approach to attracting investment and tourism. CBRE expects an efficient regulatory process, unlike other jurisdictions, such as New York and Japan, that have been riddled with delays and setbacks. That, coupled with a favorable long-term economic-growth outlook and limited competition “make the UAE a very attractive integrated resort opportunity.”
“It could be the Las Vegas of the Middle East and I say that under the notion that only 25% to 30% of revenue in Las Vegas Strip casinos comes from gaming today,” DeCree said in a webinar. The Las Vegas Strip generated $8.9 billion in gaming revenue in 2023, up from $8.28 billion in 2022.
“Sixty to 75% isn’t from gaming, so we don’t think it will be that high yet, because there’s not enough hotel rooms. Las Vegas is more akin to a non-gaming destination, even with a significant gaming component, but from the perspective of a true IR experience, the UAE is well on its way to doing that.”
“Incrementally more exciting” is the lack of regional competition, DeCree said. The UAE is pouring billions of dollars into its airports to add to capacity and help take tourism to the next level for generations, Mansfield added.
“You have to fly four hours before you get to the nearest integrated resort in Cyprus or Athens, where Hard Rock is being built,” DeCree said. “If you’re looking at something similar in size and scale to what we see being built in RAK, you’re flying seven or eight hours. You have all the ingredients for a margin-rich opportunity.”
CBRE developed the report after visiting the UAE in May. That includes stopping at Wynn’s integrated beachfront resort underway in the emirate Ras Al Khaimah at Marjan Island that’s scheduled to open in 2027.
DeCree said Abu Dhabi appears to be the likely second mover in the country, with Yas Island a logical location for an integrated resort, given its tourism focus. In Dubai, The Island project at Jumeirah Beach is a contender for a possible IR where MGM Resorts International is the development manager and has a non-gaming management contract. Construction is well underway there.
“We’re strong believers that regulated gaming and integrated resorts are coming in the near term,” Mansfield said. “We’ve heard skepticism, and after being in the marketplace, it’s evident to us that things are moving quickly.”
Other possible sites widely discussed are Atlantis The Royal and the former Caesars Palace Bluewaters Dubai, now branded Banyan Tree, DeCree said. A potential integrated resort in Dubai could be used to anchor a new development zone, such as the Palm Jebel Ali, similar to how Wynn anchored Al Marjan Island.
“Most global integrated-resort operators, including Caesars, Galaxy, Genting, Hard Rock, Las Vegas Sands, Melco, MGM, SJM Holdings, and others could all be interested in integrated resorts in Abu Dhabi or Dubai,” DeCree said.
Previously, MGM Resorts CEO Bill Hornbuckle said the operator is keeping its options open for a potential casino license at its planned hotel-only project in the UAE by setting aside 150,000 square feet that could be used for gaming or retail. Former MGM CEO Jim Murren serves as chairman of the UAE gaming authority.
As for regulated gaming, DeCree said it’s coming to the UAE in the near term, following a similar relaxation of previously prohibited activities, like alcohol consumption by non-Muslims. Decriminalization of gaming will likely take the form of a federal decree or legislative changes to the criminal and penal code.
“Given the increase in activity in the region and in public-company commentary, we anticipate these legislative changes to be forthcoming in the next few months,” DeCree said. “In fact, the decree may have already been signed, but not yet published, and we wouldn’t necessarily expect a very public announcement when it is published.”
The regulatory framework in the UAE is expected to be “operator-friendly, allowing one integrated resort per emirate and at the emirates’ discretion,” DeCree said. The national-lottery regulations and operator licensure would likely be first, followed by a framework for integrated resorts.
While CBRE estimates that potential gaming revenue in the UAE is “upwards of $8.5 billion,” the report pointed out, however, that supply constraints would be the “primary gating factor.”
Three integrated resorts in Abu Dhabi, Dubai, and Ras Al Khaimah alone could generate about $6 billion in gaming revenue collectively, DeCree said.
“With a population of 9.7 million people (of which 88% are expats), a robust tourism industry with about 25 million annual visitors with a high propensity to spend, virtually no gaming competition in the region, and an expectation for an operator-friendly regulatory regime, the UAE presents one of the best integrated resort investment opportunities we’ve seen in a long time,” DeCree said.
With the tourism statistics in the UAE, DeCree said most investors “can get comfortable with the idea” that the gross gaming revenue opportunity could be compelling and the more underappreciated part of the story is the margin potential.
“We’ve seen consensus forming in the mid-30% property margin range for Wynn Al Marjan Island and other integrated resorts in the UAE,” DeCree said. “However, with an expected tax rate and regulatory regime that would rival Singapore and Las Vegas, relatively favorable labor conditions compared with quotas in Macau and unions in Las Vegas, and virtually no competition, we would expect operating margins to be more akin to Singapore in the 50% range.”
As for Wynn Al Marjan Island, DeCree said it should generate strong returns, high property margins, and a greater non-gaming mix than Macau and even potentially Singapore. This should be driven by strong underlying demand, an anticipated favorable regulatory construct (low gaming tax), and limited direct competition.
“We’re assuming non-gaming spend and mix to rival that of Singapore due to the high propensity to spend and healthy UAE tourism industry,” DeCree said. “Wynn Al Marjan Island will initially be the only integrated resort in the region, so gaming yields should be strong, similar to Wynn’s U.S. properties and Marina Bay Sands in Singapore. Given Macau’s composition of high-intent gamblers from China, we model the UAE using lower gaming yields than Macau.”
CBRE estimates Wynn’s management contract and 40% share of project economics would translate to $356 million of annual free cash flow in 2030, which could be worth $18 a share of present value based on a free-cash-flow yield of 9%. That valuation is based on a forecast model for $1.38 billion of gaming revenue, about 40% non-gaming revenue mix, high average daily room rates akin to luxury hotels in Dubai, and 50% property margins.
“We don’t think mid-30%, which is some of the consensus circling around, is the right number,” Mansfield said. “It’s closer to 50% or more, because a lot of very strong factors of the landscape lead back to really strong free cash flow, which as credit guys we love, but it’s a really great equity catalyst as well.”
CBRE models a three-year ramp to stabilization, but it could be much quicker, DeCree said. First-to-market properties, like Marina Bay Sands and Sands Macao, have ramped more quickly, thanks to the historical lack of gaming supply in those markets.
DeCree said investors won’t price in the value of Wynn Resorts yet and some have been hesitant, given the company’s minority stake.
“We think the opportunity is so significant that you can supplement the economic interest and dividends with management fees that yield significant free-cash-flow accretion,” DeCree said. “This is one of the best global gaming growth opportunities on the horizon and quite tangible. We’re not seeing the market price it in yet, but there are some mini catalysts, such as an official announcement. And now that Wynn is coming out of the ground in haste, we can also see project financing, which could bring traditional investment dollars to the market and certainly start to raise awareness.”
There’s already a lot of built-in demand in the UAE where tourist spending is strong by generating about $48 billion of revenue, comprising about 9% of GDP, CBRE noted. The UAE has more 200,000 hotel rooms and hosted upwards of 25 million hotel guests in 2023.
“This market works regardless of locals being able to gamble or not,” Mansfield said, “particularly because of the strong international tourism already there and a high expat population. Even if you take a more conservative tilt to regulations, there’s a lot to be excited about. We’ve seen a lot of elements of previously strict social laws that have been eased over the last few years. We wouldn’t be surprised if eventually, locals could gamble, even if initially, they weren’t allowed to. We saw alcohol consumption get relaxed and they moved the weekend from Friday/Saturday to Saturday/Sunday. They amended laws around cohabitation where people can get married. There’s been a push to align a lot of things with international standards and norms. The country is on the forefront and has done a great job of attracting expats as well because of those reasons.”
CBRE estimates that international visitors to the UAE spend about $1,900 per visit, although visitors that exclusively visit Dubai spend a little more at about $2,000 per visit.
“These levels meaningfully exceed similar spending metrics in places like Singapore, Macau, Las Vegas, New York, and Miami,” DeCree said. “This is fueled by a large lodging footprint, high mix of five-star hotels, and an average length of stay of three to four nights.”
