At times echoing the official city line, four Global Gaming Expo Asia panelists said a post-COVID Macau will be a different place.
University of Macau associate professor Jorge Godhino launched the proceedings by mourning the passings of Macanese robber barons Stanley Ho and Sheldon Adelson. “It’s a pity that there’s no time to have a forum celebrating these men and their achievements. They started very young and very small and made it all the way,” he remarked.
Turning from Macau’s past to its future, Godhino said the latter lay in the public tenders for casino concessions (details of which are still unknown) and their configuration. “Public tenders are really the Big Bangs of this industry,” Godhino explained. “Surprises may occur,” he continued, referring to the unexpected choice of Ho as casino monopolist in 1962 and the selection of Las Vegas Sands and Wynn Resorts as concessionaires four decades later. “There’s a 90 percent chance that the current concessionaires will make it, but I wouldn’t make it 100 percent.”
Degrees of optimism for Macau’s future varied. Noting that Melco Resorts & Entertainment had posted 10 straight quarters of losses, Light & Wonder Managing Director for Asia Ken Jolly said, “They’re just bleeding money,” then expressed doubt that the Macanese economy could return to previous levels.
“I’m bullish on Macao,” replied South Korea’s Inspire megaresort COO Chen Si, a Macau veteran. He predicted that in three to five years, mass-market play will be back to 2019 altitudes or higher still. Also, the slow demise of satellite casinos owned by third parties will push more business to the Cotai Strip and to the handful of flagship properties downtown. Many urban amenities, though, might wither or close outright, as gamblers gravitate toward Cotai. Still – and depending on governmental leadership – “Macau will become Vegas on steroids.”
Innovation Group Senior Vice President Michael Zhu agreed, emphasizing that Macau is a cluster of high-quality resorts in an underserved provincial area. Citing the rapid Philippine casino rebound as a precursor, Zhu predicted Macau’s comeback will be “sooner rather than later.”
Si attributed some of his outlook to what he described as a pragmatic outlook in Beijing, saying the latter’s “political calculus has always been practical. It’s less morality-based than Japan’s. However, macroeconomic conditions in China have deteriorated. The peril of capital flight is very real and that’s the point.” In other words, the government wants to keep Chinese money in China. He cited an unstable geopolitical situation as another complicating factor.
So is the new gaming law in Macau, which Godhino was at pains to downplay. “We had a fabulous run all the way through 2013-14,” he reminisced, saying the central government was trying to reinvent Macau as a mass-market destination and the revised statute was “correcting the situation.”
Jolly was less enthused, saying concessionaires faced a “higher risk profile,” not least because their license lengths had been halved (to 10 years). “There’s a lot of vagueness by design” in the law, Si added, to keep casino operators on edge.
While allowing that the new minimum-revenue requirement (complete with penalties for falling short) was something new, the bowtied Zhu thought the concession-revocation power now granted to the Macanese chief executive was being overemphasized.
Likewise, Si found no clarity whatsoever with regard to mandatory-revenue benchmarks, saying, “Any logical person would assume that depends on the economic environment, [but] it could be like a 55 percent gaming tax in some scenarios.”
He was sanguine about the 10-year concession terms, at least for incumbent operators. “Sands, they’ve already made their money back,” Si said, adding that it would be a greater disincentive to potential newcomers. But would there be any? “Prior to COVID, yes,” opined Zhu, continuing that now that conditions in Macau have undergone manifold changes, the government will be more inclined to stand pat.
However, those concessionaires who stay, as all six are expected to do, will be required to diversify still further and specify in advance what capital investments they will make and how much. “Singapore was obviously paying close attention [to Macau] and learned very well,” said Godhino.
However, Macau is heavily built-out, he continued, and the onus of diversification is being placed on operators. “The dust will settle in a year or two or three and we’ll see what is possible.” Water parks and cinemas can already be found in Macau resorts, Jolly added, but bringing in marine tourism and international travelers will be more difficult, especially during the current adversity.
Si agreed that the concessionaires would embrace a more diversified player base, but being mandated to promote health tourism and sports events might be a different story. “Those are very specialized areas that the concessionaires are not expert in. They’re just not their core competencies,” he said. “That’s a challenge with the Macau government, which tends to rely on the concessionaires, because they think they have the resources and the global reach to bring these offerings to Macau. But in reality, the government needs to be in the driver’s seat here.” He called it a “disconnect” between public policy and practicality.
One point on which panelists differed was the future of junkets, the former vehicle of VIP play, which itself has shrunk dramatically in recent years.
Jolly said the outflow of what he called “under-the-table money” was what caught Beijing by surprise.
Codhino minimized the ensuing policy changes as “not a major crackdown on the gaming industry as such,” merely a reform. Even so, he said of junket-run VIP rooms, they were “casinos inside the casinos, which never should have been allowed.” Ditto satellite casinos with the complicated ownership structures and revenue-sharing policies.
Zhu predicted that junkets would continue in attenuated form, but “it makes pretty good sense to me [to] clean it out” and leave gambling operation to the six concessionaires. He added that, post-COVID, the Beijing government could open access to Macau like a spigot and that’s why “a better balance” between gaming attractions is desirable. Despite his disapproval of them, Jolly doesn’t think we’ve seen the last of junketeers. “They’re all pretty creative, so let’s just see what happens in the next 10 years.”
