Special Report – Offside: Doing more with less

“It is high time for operators to reconfigure and retrofit existing equipment, and each retrofit will cost billions; otherwise, tourists will just go elsewhere,” according to a Macau-based scholar

Macau Business | July 2022 | Special report | Video games in Macau: the new era

During the second of four public consultation sessions organized by the Macau SAR government to discuss changes to the gambling law, a member of the public demanded an explanation of what is meant by non- Game.

In response, Deputy Director of the Gaming Inspection and Coordination Bureau (DICJ), Lio Chi Chong, said, “There is no concrete definition of a non-gaming item yet. We want more opinions to see how we should define non-gaming items.”

It is likely that this definition will be better understood when the public tender is launched, but it seems certain that the government currently faces a dilemma: how to demand more non-gaming elements from concessions that are supposed to be less profitable?

“Generally, dealers will invest more in non-gaming when they are more profitable,” Changbin Wang, director, professor, Center for Gaming and Tourism Studies, Polytechnic University of Macau, said in a statement. Macau Business.

Market expert Alidad Tash agrees: “More non-gambling, otherwise known as diversification, is nothing new. It makes sense, but it’s hard to achieve, especially with less GGR and EBITDA supporting game companies.

Kevin Clayton, former CMO of Sands China and Galaxy Entertainment, was more specific, linking future investments to the context of the pandemic in a statement quoted by the Dossier on games in Asia: “After more than two years of cutting expenses, including marketing, for a while there will be very little appetite to increase station advertising and promotions. Instead, marketing investments will continue to focus on relationship management, as this has a direct impact on revenue.

“Generally, dealers will invest more in non-gaming when they are more profitable” – Changbin Wang

A recent IMF report notes that “the collapse of economic activity [in 2020]mainly due to weak services exports, highlighted Macao SAR’s overreliance on the gambling industry.”

A “multi-pronged set of structural reforms is needed to close the skills mix gap and overcome barriers to economic diversification. Advancing the government’s diversification agenda will require investments in skills building and infrastructure, including for digital infrastructure, improving the efficiency of public institutions and improving the business environment,” continues the report.

Ryan Ho, a lecturer at the Center for Gambling and Tourism Studies at the Polytechnic University of Macau, explains: “The COVID-19 pandemic has disrupted the local gambling industry, and Macau’s casinos have not have not yet experienced a recovery. Aside from the pandemic, it remains to be seen whether the upcoming concessions will be less profitable or not, but what is certain is that the mass-market driven business model will certainly be more sustainable for Macau casinos in long term.

“While the business focus will gradually shift away from the junket model, it will take some time for gross casino revenue to return to pre-pandemic levels,” Ho adds in a statement to Macau Business. “The mass market relies on a steady flow of tourists and their attendance. Most operators have made great efforts to develop non-gaming equipment to attract customers over the past two decades. It is high time for operators to reconfigure and retrofit existing equipment, and each retrofit will cost billions; otherwise, tourists will simply go elsewhere.

It is against this backdrop that the government’s proposal to consider reducing the overall effective tax rate on casino GGR by up to five percentage points if the city’s casino industry is able to to attract players from outside of China.

A move, by the way, in line with what Chief Executive Ho Iat Seng said in his last policy speech, when he blamed the tourism industry for what he saw as its over-focus on Chinese tourists. .

“Hengqin doesn’t need more generic hotels”

“Instead of simply replicating the concept of Las Vegas, Macau should formulate its optimal model to better fit the local context and regional environment. The Greater Bay Area initiative will deepen and broaden Macau’s economic integration with the mainland. Casino operators and other tourism businesses will benefit from the rise of China’s middle class and their demand for tourism products,” said Ryan Ho, a lecturer at the Center for Gambling and Tourism Studies. Macau Polytechnic University.

He says Macau Business“Operators based in Macau and others can collaborate with their counterparts in Hengqin to offer all-inclusive vacation packages with transport, accommodation and activities included. Macau and Hengqin can complement each other in providing different tourism products, marketing Macau-Hengqin in as a potential tourist destination for domestic and foreign travelers.

Sports tourism could be a good example, because “this type of leisure travel attracts spectators and participants to a particular destination. Instead of building new arenas, Macau can partner with Hengqin to host national and international sporting events.

Ryan Ho expects some Macau-based casino operators and other local businesses to make non-gaming investments. “This will definitely help the diversification process, alongside the regional economic integration initiative.”

But “Macao and Hengqin need to work better as complements, rather than competitors, to provide tourists with a unique multicultural experience. Hengqin doesn’t need more generic hotels. It’s already a crowded accommodation market out there. All non-gambling investments, such as resorts and themed attractions, must differentiate themselves from others and provide a strong connection to Macau, ultimately attracting more visitors to the enclave.

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