Diversification?  “Is the responsibility of the government. Not IRs”

The same person who worked at the Venetian, Grand Lisboa and MGM Cotai, Niall Murray has a long list of clients and work completed, through Murray International Group, which he founded and directs. With work carried out in places as diverse as New York, Beijing, Paris or Las Vegas, he is based in Macau and “is one of the leading experts in designing, developing, opening and operating the world’s largest and most successful Integrated Resorts & Multi-use properties.”

MB July 2020 Special Report | Crossroads of Macau tourism

Three years ago, Lawrence Ho, during an interview with Macau Business, said: “having these non-gaming attractions, you know, frankly, in Macau, they don’t make any money.” More than asking you to comment on this sentence, I would like you to interpret the concessionaires’ mindset on the topic.

Niall Murray – while non-gaming may not make much money or in fact be a loss leader for many IRs in Macau, this is not the case in other jurisdictions.

Gaming versus non-gaming revenues vary widely from region to region. Let us look at the situation in Las Vegas, Singapore and Macau.

Las Vegas with a population of 2.6 million relies predominantly on its 42 million visitors and to a far less extent on its 6.7 million international visitors (16 per cent of visitors). Las Vegas is predominantly a national offering, where visitors can flow freely from anywhere in the USA, without visa or trip duration limitations, on very well-developed air transportation and road networks.

Singapore with a population of 5.5 million can rely to a larger extent on local visitation (accounting for 70 per cent of revenue) and on their more diversified 19.11 million international visitor arrivals. Singapore’s top 3 visitor arrival markets are China (3.42 m), Indonesia (3.02 m) and India (1.44 m). Singapore IRs earn approximately 25 to 33 per cent of total revenues from non-gaming. Singapore’s economy is highly developed and diversified beyond gaming. Singapore has a large and rapidly developing MICE sector accounting for approximately 2 million visitors per annum. In fact only 3 per cent of Singapore tax revenues are derived from gaming taxes. 

That is not the case with Macau. Macau with a small population of 650,000 means that IRs are dependent on our international visitors. Mainland Chinese visitors accounted for 3 out of every 4 of the 39.4 million visitors to Macau in 2019.

Overall, visa restrictions, short trips and dependency on mainland visitation result in limited non-gaming spending and the opportunity for significant growth. To increase non-gaming spending, IRs must welcome more visitors from other countries. Mainland visitors must have more time to avail of the facilities; with more overnight stays, more than one of each meal period option (breakfast, lunch and dinner), more time and payment options to explore retail, and entertainment experiences offered in Mandarin, tailored to meet the needs of mainlanders, their tastes and preferences. This should be accompanied by a relaxation of general and MICE specific visa restrictions, and an expansion of the IVS scheme to more cities.

“Singapore approach could serve Macau well in the future”

Can Macau can learn from Singapore’s example?

N. M. – Macau can learn quite a lot from Singapore, in relation to diversification, its expansion of the IR Industry and extension of the Casino operating licences in a cooperative, win-win and sustainable manner. Both Marina Bay Sands and Resort World Sentosa have agreed to expand their IRs significantly ($9 billion investments, 2/3rd of the original $15 billion investment) over the coming years, especially their non-gaming offerings, in return for guaranteed casino operaton exclusivity until the end of 2030.

The Singapore government remains realistic and sought and agreed to a win-win agreement to allow the IRs to also expand gaming, although to a lesser extent than non-gaming, to remain commercially and financially viable.

“To increase non-gaming spending, IR’s must welcome more visitors from other countries”

Singapore does not expect the IR industry to spearhead diversity, but to contribute to economic development in a measured, reasonable and responsible way. And, although the Singapore government is pushing both IRs to grow and expand over the coming years, they are doing so in a fair manner. By asking them to expand both gaming and non-gaming they are not placing an unfair burden on the IRs. Also, insisting that they have to contribute more than their fair share towards economic diversification; an approach that could serve Macau well in the future. 

An expert said recently “The Chinese who come to Macau are not very sophisticated and are not prepared to spend money that American and European consumers are”. Do you agree?

N. M. – Although the IFT annual tourism “Intention of Visit” surveys say that only 7 per cent of visitors from mainland China are interested in gambling, the reality is far from that statistic. The majority of mainland visitors come to Macau to gamble.

In many cases, mainland Chinese can enjoy comparable alternatives to what Macau IR non-gaming facilities offer, back in China. The only thing mainlanders cannot legally participate in the mainland is gaming.

In many cases, there is not a lack of sophistication on the part of the mainland visitor that prevents them from spending money on non-gaming offerings in Macau. Mainland consumers are often far more sophisticated and advanced than given credit for. In fact, it is often the case that mainlanders feel that their needs are better served at home with regards to language, convenience, price, cultural tastes, preferences and ease of doing business.

“Non-gaming” definition conveniently puts excessive pressure on IRs”

“Despite the efforts of previous MSAR governments, over the years, in promoting economic diversification, there are no notable results. The weight of the convention and exhibition industry and of the cultural and creative industries promoted by the Government, in the Gross Domestic Product does not reach 1 per cent”, CE said last week. Do you share this analysis or do you have a more optimistic outlook?

N. M. – In Macau, the gaming sector is both shaped by and, in turn, influences political dynamics. A focus by policymakers on short-term taxes from IRs and their allocation to ensure political survival has sometimes distracted from policies and investments necessary to sustain growth in the long term and has often been associated with increased internal conflict, with adverse effects for diversification.

It would be convenient to state that all economic activities and revenue generated in Macau that are not derived from gaming are non-gaming activities. But, it appears that definition conveniently puts excessive pressure on IRs to substantially increase their non-gaming revenues to be more in line with Las Vegas and Singapore, and that IRs will magically solve the Macau government’s diversification problem and show less reliance on gaming as its principle source of revenue. It is not possible given current government policies, mainland visa regulations, international visitor arrivals, and actual visitor spending patterns, to diversify Macau simply by demanding that IRs increase non-gaming revenues.

In Macau, the gaming sector is both shaped by and, in turn, influences political dynamics”

To diversify beyond gaming, given its current labour laws and shortages, Macau must focus on technologically advanced value added services that leverage its unique position under the one-country two systems: as an SAR, located in the Greater Bay Area, connected to the Belt and Road Network, the New Silk Road and as a Gateway to China. The Macau government must push development in this area in all preferential trade agreements (PTAs) and trade talks with mainland China, Hong Kong and other countries and international trade organisations.

In conclusion, the IR business is not responsible for the diversification of the Macau economy; that is the responsibility of the government and they should bring together a “Macau Economic Diversification Taskforce”. Macau can diversify successfully over the coming decades by working closely with mainland China, and regionally, to establish a framework for diversified expansion; and by reallocating resources from existing sources to fund critical investments in human capital, infrastructure and institutional assets.