Casino shocker: The UAE could be the site of the next Las Vegas or Macau

There is growing confidence that the Marjan Island region in the United Arab Emirates could be the world's next big gambling region. It is a shocking development considering that gambling is prohibited under Islam and is still illegal in the UAE. While no casinos currently exist in the six Gulf Cooperation Council countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, there are casinos operating in Lebanon and Egypt.

Efforts to build casinos in the United Arab Emirates (NASDAQ:UAE) have gained significant momentum recently, driven by the potential economic benefits and the establishment of a regulatory framework. Ras Al Khaimah and Abu Dhabi are at the forefront of these developments. Meanwhile, Abu Dhabi is exploring potential sites for similar projects, with Yas Island being a prime candidate due to its existing entertainment offerings. Dubai, despite being a major tourism hub, has currently opted out of pursuing casino developments, focusing instead on its established attractions. Notably, at least 20 developers have projects in various stages of design and construction on the Marjan islands off the coast of the Ras Al Khaimah in the UAE. Meanwhile, the emirate’s small international airport is expected to expand with a new terminal, aimed at boosting capacity to 2 million passengers a year by 2027. Luxury hotel capacity is already over 200,000 hotel rooms, and could grow over the next few years.

Last year, the UAE established the General Commercial Gaming Regulatory Authority to oversee the potential legalization and regulation of gambling activities. The new federal body, led by industry veterans Jim Murren and Kevin Mullally, aims to create a well-regulated gaming environment that adheres to high standards and strict guidelines. The GCGRA's formation is seen as a critical step towards decriminalizing gambling through federal decrees or legislative changes to the criminal and penal codes.

Analysts forecast that the UAE could generate substantial revenue from legalized gambling. Bloomberg Intelligence estimated that the country could earn up to $6.6 billion annually, a tally that is higher than Singapore's annual gaming revenue. Looking ahead, CBRE analyst John DeCree thinks the development of integrated resorts and casino gambling in the UAE is one of the most attractive global gaming opportunities available today.

“We anticipate an operator-friendly environment given the country’s progressive approach to attracting investment and tourism... We expect an efficient regulatory process, unlike other jurisdictions such as New York and Japan that have been riddled with delays and setbacks. This, coupled with a favorable long-term economic growth outlook and very limited competitive gaming supply in the region, make the UAE a very attractive IR opportunity.”

Wynn Resorts (NASDAQ:WYNN) has already begun preliminary construction on a $3.9 billion integrated resort on Al Marjan Island in Ras Al Khaimah, set to open in 2027. CBRE believes Wynn Al Marjan Island should generate strong returns, high property margins and a greater non-gaming mix than Macao and even potentially the two integrated resorts operating in Singapore. DeCree and his team returned from the visit even more bullish on the upside for Wynn Resorts (WYNN). CBRE now has a long-term forecast for the Wynn (WYNN) property of gross gaming revenue of $1.38 billion, net revenue of $1.8 billion, and property EBITDARM of $921 million. While consensus is forming that property margin will be in the mid-30% range, CBRE thinks that an operator-friendly regulatory regime, low GGR tax rate, and virtually no competitive supply in the region set up Wynn (WYNN) to generate property margins as high as 50%.

Looking further down the road, Las Vegas Sands (NYSE:LVS), Caesars Entertainment (CZR), Genting Group, Hard Rock International, Galaxy Entertainment (OTCPK:GXYEF), Melco Resorts (NASDAQ:MLCO), and MGM Resorts International (MGM) are seen as potential developers in the UAE if gaming is approved. Hilton Worldwide (HLT), Marriott International (MAR), and Hyatt Hotels (H) could also benefit from a surge in general tourism.

The iShares MSCI UAE ETF (UAE) is a catch-all investor bet on upside for the UAE.