Ping pong or baccarat?

June 30, 2024 12:30 PM
Photo: Shutterstock
  • Ken Adams, CDC Gaming Reports
June 30, 2024 12:30 PM
  • Ken Adams, CDC Gaming Reports

The casino industry in Macau is undergoing a culture change.

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Gambling has dominated the economy, if not the culture, of Macau since the middle of the 19th century. After 1999, when Macau reunited with Mainland China, casinos continued to operate and in 2002, the government formalized gambling’s role by granting casino concessions to gaming operators. Twenty years later in December 2022, the government of Macau renewed the concessions, with some changes.

The six approved concessions had to agree to spend approximately $15 billion over the next 10 years. Over 90 percent of the money is to be spent on nongaming infrastructure, marketing, and new events. The casinos are also committed to restoring historic districts within Macau. Macau under the direction of Mainland China has two objectives: It wants to increase tourism and, in particular, draw more international tourists; and it wants to increase nongaming revenues. In the abstract, the plan resembles the changes in Las Vegas that began with the Mirage.

The Mirage introduced the era of departmental profits. The hotel, restaurants, shopping outlets, entertainment, and other amenities were expected to generate a profit. Prior to the Mirage, most of the amenities, including the hotel rooms, were tools to attract gamblers. In particular, restaurants and entertainment outlets operated at a loss. In time, the other Strip casinos followed the Mirage. Few other jurisdictions have been able to replicate that model.

The Chinese plan is more elaborate, demanding more nongaming revenue and more international tourists. The casinos are expected to build tourist attractions that will draw customers from countries other than China. It is easy for Macau to attract Chinese tourists. It is the closest to China; they speak the same language and share a common culture. Visitors from other countries in Asia are more challenging, although Korean gamblers do like Macau. Even for the Korean gamblers, there is a lot of competition. There are casinos in Korea, Laos, Vietnam, Cambodia, Singapore, and the Philippines. Japan and Thailand are expected to have casinos within 10 years. 

Most of those jurisdictions want to limit the gambling of local citizens. Casinos are forced to look to other countries for gamblers. China is the number-one target. But China has systematically made it difficult, if not impossible, for Chinese gamblers to go to other countries. Beyond Asia, casinos in Macau compete with casinos in Europe, Africa, South America, Canada, and the United States for international gambling tourists. It is a challenging situation. But the license agreements leave no choice. Macanese casinos have to chase a broader market and not just gamblers, but international tourists.

Every September, the casinos are required to submit a plan for the following year. The plans include new entertainment venues, themed spaces and parks, more hotel rooms, and a wide variety of events. MGM has announced a plan to add more hotel rooms and health spas and other wellness services. The target is the developing wellness market. Another major piece of the new attractions consists of big-name Asian entertainers. Superstars from Korea, Japan, and other Asian countries have or will be performing in Macau.

In a very creative move, Sands Resorts signed the international soccer superstar, David Beckham, as a brand ambassador. Beckham is cooperating with a London design firm to design 14 suites. Beckham will personally invite guests to visit Macau and enjoy the highlife a la Beckham. The idea may seem a bit farfetched, though not so for those who remember the success of Mohammed Ali as an ambassador for Caesars in Africa. The Sands, like the other operators, are required to do something new every year. On average, the casinos in Macau will be spending $26 million a day to fulfill the mandate.

The situation is intriguing. Every week, there are events, dragon-boat races, Formula 1 and go-cart racing, and footraces from 5k to marathons. There are ping-pong championships, swimming meets, basketball and soccer games, and martial arts tournaments. Over the 10-year period, it is likely that every sport will have at least one contest in Macau. Besides sports, art is a centerpiece of the new culture. Each of the casinos has hosted or will host artists and art exhibits. It reminds me of Reno in the 1980s.

In the 1980s, Reno was faced by two realities. The first was Las Vegas. The Las Vegas casino industry had grown and dwarfed Reno. Las Vegas was the first choice of traveling gamblers, Atlantic City was second, and Reno was a distant third. The second reality was the seasonality of gambling tourism. In response, Reno embraced special events, even aspiring to become the special-events capital of the nation. Reno had balloon, airplane, and bicycle races. It had a rodeo, a five-day car carnival, gaming tournaments, rib cookoffs, sports car, jazz, and movie festivals. Besides the citywide events, the casinos also had their own special events. The strategy worked for a while. It worked until Indian gaming and other gaming expansion took hold.

Macau is becoming the special event capital of Asia. The stream of events will continue at least until 2032. It has a couple of advantages that Reno lacked. The events are driven by mandated spending, so if they do not break even it won’t matter. If an event does not draw enough people, a new event will take its place. Macau has another advantage; it is the favored choice of the Chinese government. China does not want its citizens to gamble, but if they must gamble, China wants them to go to Macau. That $26 million every day will foster a lot of creativity and experimentation. There will be many failures, but there will also be major successes.

Macau is part of the Chinese managed economy. The Macau experiment will be a major test in successful economic management. The casinos are not the only element in the mix in Macau. Technology, medicine, education, finance and incentive-based developments are also in play. In 10 years, Macau will be a different place. The casinos and gambling will still have a role, but the role will be reduced. A ping-pong palace will not replace one of the casinos, but ping-pong tables may very well replace some of the baccarat tables.