‘Las Vegas of Asia’ tells casinos to grow beyond gaming

‘Las Vegas of Asia’ tells casinos to grow beyond gaming

Losing money due to COVID, the American casino giants that helped turn Macau into the “Las Vegas of Asia” face a new challenge: the tiny Chinese territory wants them to help reduce its reliance on gambling by paying construction of theme parks and other attractions. The former Portuguese colony stayed out of business decisions for decades and is now aligning itself with official strategy in mainland China, where foreign companies must help pay for the ruling Communist Party’s development ambitions, profitable or not.

The licenses of MGM Resorts, Las Vegas Sands, Wynn Resorts and three Chinese rivals that have invested billions of dollars in Macau expire in December. The rules published in early July say that anyone who wants to operate during the next 10-year period faces an additional requirement to invest in “non-gaming projects”. Casinos face even more financial pressure after they were ordered to close this week, along with most other businesses, as Macau tries to get a new coronavirus outbreak under control. They were already operating under rules imposed in late June that limited the number of their employees to 10% of normal.

Financial analysts expect Americans to win the licenses, but the government says the bidding is open to anyone. The territory of 700,000 people crammed into a 30-square-kilometre (12-square-mile) peninsula that juts out into the South China Sea near Hong Kong is the world’s biggest gambling hub, but it’s under pressure from the president’s government. Chinese, Xi Jinping, to be less dependent on its dominant industry.

Beijing wants theme parks, entertainment and conventions to attract more non-Chinese visitors. Even before tourist travel was shut down to fight COVID in 2020, mainland China was trying to limit the flow of gamers across the fenced boundary separating Macau from Guangdong province. Macau is “dedicated to steering the composition of industries towards proper diversification,” its economy secretary, Lei Wai Nong, said at a government meeting on May 31. An added complication for Americans: Relations between the Xi government and Washington are strained by disputes over trade, technology, human rights and other vexing factors. Other businesses have been hit with retaliation for US fee increases, but Macau casinos have not been targeted.

“There is a high risk that at least one, if not two, will not get a new concession,” said Ben Lee, managing partner of IGamiX, ​​a gaming industry consulting firm in Macau. “Why would 50% of such a dominant industry in Macau be ceded to foreigners, particularly Americans?” Pressure for change comes as Macau faces increasing competition from potential non-Chinese players from casinos in Singapore, Malaysia and Cambodia.

Financial analysts expect the MGM, Sands and Wynn licenses to be approved because of the jobs and tax revenue they generate. Its casino hotels with thousands of employees rise above the narrow alleys of Macau’s centuries-old city center and Cotai, a strip of land reclaimed from the sea. Still, the risk of an established operator not receiving a license “should not be ignored,” Fitch Ratings said in a June 16 report. Chinese competitors include SJM Holding, part of the empire of the late Stanley Ho, a competitive ballroom dancer and Macau’s “King of Gambling,” who had a four-decade government-granted monopoly on casinos until 2001. .SJM is run by Ho’s daughter Pansy. The others are Melco International, run by Ho’s son Lawrence, and Galaxy Entertainment Group.

The decision to allow foreign-owned casinos in 2002 brought a flood of money to Macau, once again known in China for its Portuguese-style egg tarts, and billions of dollars in profits for its operators. In total, the six license holders operate 41 casinos. Annual revenue from slots, craps and other games peaked at $45 billion in 2013. That was equal to $65,000 for every man, woman and child in Macau and more than triple Nevada’s revenue in 2021. of $13.5 billion. But revenue was declining even before COVID hit in 2020. Beijing was tightening controls on how often players from the mainland could visit. Restrictions were placed on financial transfers to Macau in a campaign against money laundering and tax evasion. By 2019, before the pandemic, gaming revenue had plunged 19% from the 2013 level to $36.4 billion. In 2020, it collapsed a further 80% to just $7.6 billion. Last year, revenue jumped back up to $10.8 billion, but that’s down 75% from 2013.

Macau’s economy, arguably the most tourism-dependent in the world, has halved since 2019, according to government data. The government has asked casino operators to avoid laying off employees. Macau’s lure is so powerful that Las Vegas Sands Corp., traditionally the world’s largest casino operator by revenue, sold its namesake Las Vegas hotel in 2021 to go all-in on its six Macau properties and one in Singapore. The company has invested an estimated $13 billion in Macau. It is in the midst of a $2.2 billion refurbishment of one of its hotels.

However, betting so heavily on Asia meant that Sands suffered the biggest blow from COVID. The company reported a first-quarter loss of $478 million. Revenue fell 21% from a year earlier to $943 million. Wynn Resorts Ltd. said revenue at its two Macau casinos fell, but its Las Vegas properties helped limit its total loss to $183.3 million on revenue of $953.3 million, putting it temporarily ahead of Sands.

MGM Resorts said its first quarter revenue of $268 million in Macau was down 76% compared to the pre-outbreak level of $734 million in the first quarter of 2019. Adding non-gaming assets would make Macau more like Las Vegas, where casinos try to attract families and non-gamblers with roller coasters, music, shopping malls, art exhibits and water parks.

SJM operates a zipline and indoor skydiving attractions. It has dropped an earlier proposal for a Hello Kitty theme park. The mogul behind Galaxy talked about a possible theme park similar to the movie “Avatar”, but it never came to fruition. “Theme and entertainment parks are expensive to run, with questionable returns,” Lee said. Regulators need to craft investment requirements “very carefully,” Lee said. “You can’t force dealers to invest in theme parks and entertainment with no return unless it’s black and white.”

Melissa Galbraith
Melissa Galbraith is the World News reporter for Globe Live Media. She covers all the major events happening around the World. From Europe to Americas, from Asia to Antarctica, Melissa covers it all. Never miss another Major World Event by bookmarking her author page right here.