Macau casino industry diversification future

Lawrence Ho says that while Macau may diversify, it will never move away from casino gambling as a central focus of its economy. (Image: Getty Images)

Macau is synonymous with gambling. That is the result of a decade of incredible growth in the Chinese enclave, a period that took Macau from a local gambling hub to the world’s gaming powerhouse, far surpassing Las Vegas or any other city in terms of gaming revenues.

But over the last year, Macau casinos have watched their revenues drop precipitously: in February, year-over-year monthly revenues were cut nearly in half for casinos there.

And that means that changes are going to have to come to Macau, even if not everyone with a stake in the region agrees on exactly what that means.

Some in Macau seem content to work with mainland China to better control the flow of money and tourists to the gaming hub. In recent days, Macau’s government has made statements suggesting that they would be amenable to putting a cap on the number of tourist visas that they would issue each year, something that would likely aid China in their efforts to curb the illegal flow of money off of the mainland and into casinos.

Macau to Report on Tourism Capacity

According to Macau Chief Executive Fernando Chui Sai, the Macau government plans to submit a report to Beijing that will talk about the maximum capacity for tourism in the city and how both sides can optimize the flow of travelers from China to Macau.

Chinese visitors to Macau and Hong Kong currently obtain permission to travel through China’s individual visitor scheme (IVS) that was set up in 2003 to encourage more travel after the SARS outbreak that year. Chui said that the specifics of the policy may have to be revisited now that Macau is receiving far more visitors than it was at the time the IVS was put into place.

Any cap on the number of visitors allowed in Macau from China would be yet another sign that casinos won’t be seeing the kinds of revenues they enjoyed just a year ago again any time soon. Now that the casino operators are beginning to adjust to this new reality, some are rethinking their plans and cutting back on extravagant expenses.

Sands Cutting Back on Big Ticket Entertainment

For instance, the Las Vegas Sands is talking about cutting back on some of their big-ticket entertainment events, the kinds that were originally planned to help encourage growth in the mass market segment. The Sands has been focused on the mass market because the VIP segment has been hit hardest by China’s corruption crackdown, however, so the cutbacks may be more a matter of figuring out what’s most cost effective rather than giving up on this strategy entirely.

“We’re not looking to take it apart, the whole structure, but reexamine where [there are] opportunities to run it cleaner and better,” Sands president Rob Goldstein told investors.

That’s not necessary what Macau officials want to hear. The city’s government wants people to know that there’s more to do there than gamble, even though efforts to diversify have so far been slow in developing. For instance, officials had hoped that conventions and exhibitions could start to generate more revenue locally, but that remains a very small part of Macau’s economy.

Ho Says Gambling Will Always Be Focus in Macau

That doesn’t mean that gambling has to go away entirely, of course. In a panel meeting in Beijing, Lawrence Ho stressed that Macau was still easily the largest gambling hub in the world even after the revenue freefall of the last year. Given the size of the industry, Ho said, it will always remain an inseparable part of Macau’s economy. Other experts on Macau agree with this assessment.

“Macau will not be a one-horse town, only based in casinos, but the diversification will take place within the tourism and hospitality industries,” said Michael Gift, a visiting associate professor at the University of Macau.