Macau policymakers rely too much on gaming operators to diversify economy: G2E Asia panel

The Macau government should take a more active role in diversifying the offerings of the city than simply relying on gaming operators to do so, a G2E Asia 2022 panel heard today (Thursday).

On the second day of G2E Asia 2022 Special Edition: Singapore, a three-day gaming industry trade show held for the first time in the Southeast Asian country, a panel session, titled “Transforming Macau”, took place, in which gaming executives and market observers discussed the outlook of the Macau gaming market.

One of the topics addressed in the panel today was the recently-launched public tender for up to six 10-year gaming concessions in Macau that will begin in the start of 2023, as the current six gaming concessions and subconcessions will expire by the end of this year. The tender process, which runs until September 14, requests potential bidders to submit proposals explaining how they will attract overseas gamblers and tourists for Macau, and come up with non-gaming offerings from MICE and gastronomy to sports and health tourism.

While it makes sense for the Macau authorities to request the future concessionaires to diversify the city’s sources of tourists, mandating the concessionaires to develop and introduce non-gaming offerings in multiple aspects might be too much to ask for, the panellists pinpointed.

“The Macau government tends to rely on the concessionaires because they think they have the resources and the global reach to bring a lot of these [non-gaming] offerings to Macau,” said Chen Si, the newly-appointed chief operating officer of Inspire Entertainment Resort, an integrated resort in South Korea that is now being built by the U.S.-based Mohegan Gaming & Entertainment.

“But in reality, the government should be in the driver’s seat,” he added, who has only left Macau in recent times, following his stints in local gaming operator Sands China Ltd and satellite casino firm Macau Legend Development Ltd.

“There’s an absence of leadership from the government in the working level to coordinate, develop policies and design mechanisms to drive these offers into Macau,” he said. “That’s not really the concessionaires’ role. They have the resources and space to support, but to have them in the driver’s seat is a bit far-stretching.”

In regards to the expectations of the tender result, another panellist, Jorge Godinho, a veteran Macau gaming legal academic, believes it is likely the current six operators will remain in operation in the next decade but he does not rule out there might be surprises.

“It’s clear the consensus is that [there’s] a 90 per cent chance that the current concessionaires and sub-concessionaires will make it, but I wouldn’t put that at 100 per cent,” said the associate professor of law at the University of Macau. “You never know what can happen in a public tender — history shows that a public tender is a box full of surprises.”

Discretionary powers

Besides a public tender for new gaming concessions, the city has also seen in recent months the approval and implementation of a revised gaming law that has heightened supervision, as well as the demise of junket operators over the arrests of junket bosses Alvin Chau Cheok Wa and Levo Chan Weng Lin.

“We’re not witnessing a major crackdown on the gaming industry,” said Mr Godinho. “What we are witnessing is the correction of the situation that could be seen as excessive.”

In his perspective, the operational model of VIP rooms run by junket operators — or known as gaming promoters in the government terms — was “a casino inside a casino” before the revised law and arrests. “This was never intended to happen but had evolved over the years, and now there is a line being drawn — we don’t want anymore ‘a casino inside a casino’,” he added.

Addressing the revised gaming law, Mr Si thinks it gives “a lot of discretionary powers” to the authorities. “The general sense on the ground — and I just left there [Macau] a few weeks ago — is that there’s a lot of vagueness by design in this new structure that concessionaires are very concerned about the liability,” he remarked.

“That’s something people are mindful of given the broader context of what happened in [Mainland] China, Hong Kong and even in Macau in the last few years,” he continued. “There are a lot of hidden things that you don’t know where you’re going to walk to, and the liability associated with that is something on the concessionaires’ mind.”

Another panellist Michael Zhu, senior vice president of gaming consultancy The Innovation Group, also highlighted today the revised gaming law gives power to the Macau Chief Executive to revoke a concession at any time, for instance, due to the threat of national security.

“Not to say that [the Chief Executive] is going to do it at some point, but the focus is that everything has to be 100 per cent aligned with the government’s policy goals and measures, and everything is under the leadership of the government,” he added.

Rapid change

In the first seven months of 2022, the gaming revenue in Macau only totalled MOP26.67 billion (US$3.33 billion), down by 53.6 per cent from a year earlier over the fluctuations of Covid-19 development and a slowing Mainland Chinese economy, latest government data show. The tally only translated to 15.3 per cent of the pre-COVID volume.

Concerning the outlook of the Macau gaming market, the panellists expressed optimism, but Ken Jolly, vice president and managing director for Asia of gaming equipment provider Light & Wonder, stressed the key to the recovery relies on the lifting of the current border restrictions and the stable flow of mainlanders to Macau.

Talking about Beijing’s evolving stance towards the Macau gaming industry in recent years, Mr Si said it is due to the fears of capital flight amid a slowing economy and the geopolitical tensions.

“At this time, they’re [Beijing is] tilting towards Macau — the gambling industry — is not as helpful or as good as it used to be from a policy standpoint, but this could change,” he said. “The economic conditions and geopolitics can change very rapidly and that could change Macau’s fate as well.”