It is one of the dilemmas to be solved in the Macau economy: non-gaming is the solution to diversification or just help, although it costs a lot of money.
MB June 2020 Special Report | Diversification now or never
Five years ago, Lawrence Ho, during an interview with the Macau Daily Times, said: “Non-gaming doesn’t make any money and it will never make any money. For all the foolish people out there that think non-gaming is going to save [Macau’s] day, it’s not.”
Today, it is safe to say that Ho would not repeat such assertion not only because over the past five years non-gaming has become a mantra for economic diversification but also due to the fact that the end of the gaming concessions is edging near. Now, no one will be surprised if the bet on non-gaming is a key criterion for the new public tender. The fact that Lawrence Ho (who heads one of the few operators that has keep its focus on shows with ‘The House of Dancing Water’ show) wouldn’t say it again doesn’t necessarily mean he has changed his mind.
“Although Macau inherits many holidays, festivals, events, and activities from Chinese and Portuguese culture, and can easily develop many new attractions and markets, such attempts have not been successful. The growth rate of non-gaming revenue is considerably lower than the growth rate of gaming revenue,” argue researchers Jian Ming Luo (Macau), Chi Fung Lam (Hong Kong) and Ben Haobin Ye (Guangzhou) stated.
“Although the House of Dancing Water is a successful show, the revenue generated from the show is considerably less than the revenue generated from the gaming sector. In addition, this non-gaming sector investment is risky,” they add in the research paper Barriers for the Sustainable Development of Entertainment Tourism in Macau (2019).
The three authors quote “for example, ZAia, a circus show operated by Cirque du Soleil, and the first residential show in Asia, was shut down due to the lack of audience.”
Non-gaming “will never be a significant component of Macau industry revenues,” according to a report from brokerage Sanford C. Bernstein Ltd in Hong Kong (2016).
The Dean and Professor of the Faculty of Business at City University of Macau, José Alves, shares his concerns with Macau Business’ readers: “tourism-related diversification does not help to reduce dependency on tourism, so MICE and other entertainment offerings are not likely to be a long-term solution for economic diversification.”
“You need infrastructure, skilled workers, venues, etc., to build a new industry,” advises Florence Lei. “If the emerging industry utilizes some existing resources (as in the case of MICE), it makes the reallocation of resources more feasible and quicker. Switching to other industries would be more challenging. As explained in my model, an economic contraction would create even less favourable market conditions for diversification. All and all, I would like to believe that ‘if there is a will, there is a way.’ However, things don’t happen overnight,” adds the Assistant Professor School of Business and Law, University of Saint Joseph.
Professor Leona Li from the University of Macau adds another perspective, “I tend to believe the better approach is not by aggressively subsidizing and pushing the development of completely irrelevant industries. We do not have the competitive edge and economy of scale to achieve the same economic performance by relying on other non-tourism industries.”
Macau Economic Association understands “even Macau has a comparative advantage in the tourism and gaming area, while the development of emerging industries is costly and very time consuming, it does not mean that Macau should put all the eggs in one basket to focus solely on one sector.”
Considering “moderate economic diversification could be able to offer improvement, if not the perfect solution to the situation,” the Association also points out to Macau Business that “after the outbreak, we should review the current development progress of the emerging industries, investigating if we should increase our investment, which can be considered as one of the economic stimulus.”
It is often heard in Macau that the Chinese patron wants to gamble and not waste time or money on ‘varieties’. But what is happening in Singapore, where non-gaming revenue accounts for about a quarter of the two resorts’ total combined revenue, compared with Macau where non-gaming is only about 10 per cent of the total revenue.
“I think that Traditional Chinese Medicine (TCM) is a useful strategy for Macau,” emphasized Professor Alves to Macau Business.
First, TCM is about healthcare, “which is a growing sector around the world.”
Second, “even though Macau has no initial advantage in upstream research activities, the city is developing TCM capabilities through higher education institutions.”
And, third, more importantly, “the history of Macau as a place for trade and meeting of cultures suggests that Macau can become a business hub for TCM.”
Given the example of the flower cluster in the Netherlands, which trades about 60 percent of flowers in the world, the Dean and Professor of the Faculty of Business, City University of Macau, think “the potential of TCM rests in aggregating, adding value, and providing support to the TCM to become a global TCM hub.”
However, “this is a long-term goal that can only happen with proper institutions, policies, and high-skilled workers” and, concludes Mr. Alves, “the success of TCM in Macau depends mostly on our capacity to develop and attract high-quality talents. Otherwise, others will grab the opportunity.”