OPINION – Uncertainty in Macau and Way Forward

Desmond Lam is a Professor in Integrated Resort and Tourism Management at the University of Macau. [email protected].

I read with great interest on recent articles that mentioned that Macau casino gaming stocks are “un-investable”, a term that I would not have thought would apply to the Macau market. One reason is the uncertain future of this market. “Un-investable” is a spooky term that will certainly raise one’s eyebrow and perhaps even more than that. But what can be more “un-investable” than a closed mind?

Despite the uncertainty that some observers feel, it is clear, from the very beginning, that greater scrutiny of the Macau casino gaming will occur as we move from Macau Gaming 1.0 to 2.0 in the next 20 years. There is also an expectation of closer alignment of governmental and societal demands to corporate needs. Corporate social responsibility is no longer a requirement, but a necessity if we see the next phase of Macau casino gaming development as a form of corporate-societal integration. Nonetheless, operators that choose this market will, I believe, eventually strive in this new environment as incumbents had done, so well, in the past 20 years – but just in different ways this time.

(Xinhua/Cheong Kam Ka)

If one looks carefully, there is actually not as much uncertainty in this market; but rather whether one is willing to accept the risk of operating in this unique market. The future of Macau’s gaming industry is clear enough for most of us living in the city. Some trends, especially demographics, can be clearly identified – for example, Macau is sitting next to a large pool of potential visitors from mainland China who are increasingly wealthy, educated, demanding and willing to try new experiences. Another trend is the growing call for the diversification of the product offerings of this market to include more non-gaming, and also non-tourism, segments. This does not mean a deliberate attempt to de-market the gaming sector; but, simply, to rely less on gaming as the main economic driver.

Uncertainty can bring forth unnecessary fear to the people and the market. But many issues in Macau are not exactly the unknown at this point. In times of uncertainty, the usual recommendation is to maintain some level of organizational flexibility to allow for changes. Hugh Courtney, Jane Kirkland and Patrick Viguerie wrote an article in the Harvard Business Review back in 1997 titled “Strategy under Uncertainty”. In this classic article, the authors state that there are three strategic postures that a company may undertake when facing an uncertain business environment. They are: 1) shape the future, 2) adapt to the future, and/or 3) reserve the right to play.

Shapers not only accept the new environment but actively drive it; thus, creating directions and terms that induce opportunities that they can then capture. Sharpers set the pace but getting involved. Adapters accept the new game rules and try to adjust their business strategies to make use of any opportunities that they offer, often focusing more on when and how to compete. Finally, companies adopting the “reserve the right to play” make small investments/contributions to ensure they are still in the game until the environment becomes clearer. We may apply such strategic intents to the current situation in Macau, depending on each of our corporate status, commitment and interest.

As the saying goes, “where there’s a will, there’s a way”. Perhaps we should all handle this better to ensure win-win outcomes as the industry and the society as a whole move forward in near future.