Fitch director: Gaming demand biggest obstacle to diversification

The strong demand for gaming from Mainland and Hong Kong visitors to Macau tends to marginalise the non-gaming elements and drive non-gaming visitors away from the territory. This is the opinion of Fitch Ratings director Alex Bumanzhny in an article titled ‘Macau’s Drive for Diversification Faces Uphill Climb’.
“To meet the insatiable demand for gambling Macau packs over 5,800 gaming tables into less than 12 square miles of tropical hills and landfill. And even amid the current slowdown, each table game generates more than US$12,000 per day, more than double the most productive Las Vegas Strip casinos. This strong gambling demand tends to shrink the non-gaming aspects as a percentage of the whole pie and price out more casual gamblers and non-gamblers”, the author explains.
This strong demand is mentioned as the “biggest impediment to diversification”. Conversely, it is said to be the main strength of the territory for casino operators and investors.
The article also points to other limitations such as “the lack of a world class airport, shortage of hotel rooms and meeting space to handle large scale conventions”. Regarding these it explains that the expansion of the resorts in Cotai and the construction of the Hong Kong-Zhuhai-Maacau Bridget will resolve these issues.
While Macau strategy may be trying to change from the Monaco of the East to the Las Vegas of the East – betting more on the mass market than the VIP sector – according to Fitch there is still a long way to go. This is based on the fact that in 2014, 63 per cent of the revenues in Las Vegas came from non-gaming activities, while in Macau Fitch estimates that non-gaming activities accounted for less than 10 per cent of the resorts’ revenues.