Macau gaming industry still caught in diversification “paradigm shift” – Research

The issue was raised in a research paper co-authored by Ryan Hong-Wai Ho, a Lecturer at the Centre for Gaming and Tourism Studies of the Macao Polytechnic University, and by Jenny Phillips, an Associate Professor at the Faculty of Business and Law of the University of Saint Joseph.

The study paper, titled ‘Macau 2.0: New Gaming Law and its Implications for Casino Market’ states to be “among the first” to review the scope and impact of the revised gaming law, and its associated managerial and operational implications for Macau casinos.

The SAR’s general gaming law – in force since 2001 – was revised and amended, with a new legal framework implemented since the beginning of this year.

The overhaul created a new operational framework for casino gaming and all industry participants, including gaming concessionaires, gaming promoters and collaborators, and management companies operating satellite casinos under the umbrella of gaming concessionaires.

In the paper Ho argues that “Macau has been a victim of its own success” since the liberalization of the gaming industry, and that with the commencement of the new 10-year concessions, stricter regulation of the gaming industry is now in place to protect the local casinos against “persons exercising improper influence”

“While the city’s economic diversification plan requires some time to take shape, the strategic and operational implications in light of the new gaming law will be felt much sooner. The regulatory and industry-wide changes will gradually be compounded into substantial differences over the next decade and beyond,” the paper states.

The report adds that local authorities have set a clear direction for the casino and non-gaming development and allocated considerable resources and efforts to reduce the city’s reliance on gaming.

“Concessionaires are presented with new opportunities and risks associated with the transition. While the city’s economic diversification plan requires some time to take shape, the strategic and operational implications in light of the new gaming law will be felt much sooner. The regulatory and industry-wide changes will gradually be compounded into substantial differences over the next decade and beyond,” Ho and Phillips argue.

The research points out that a wide variety of non-gaming projects are contractually required to be inaugurated by concessionaires to meet the concession requirements and multiple consumer needs, with concessionaires expected to make some near-term financial sacrifices to ensure the gaming industry’s sustainability in the long run. 

Local gaming operators have committed to investing a total of US$15 billion in the coming decade, 90 per cent of which must be spent on non-gaming offerings and attractions.

“The pledged investment in non-gaming amenities and attractions is expected to translate into diverse leisure offerings; eventually, it will not be just casinos that are the sole source of tourism and entertainment in Macau,” the researchers indicated.

“Yet, the success of these non-gaming projects largely depends on how each concessionaire identifies and attracts the target market segments. Concessionaires need to be realistic about their ability to stimulate their potential customers to visit and patronize their properties”. 

With the business focus shifting away from the junket model, the paper argues that foreign markets are where concessionaires are “doubling down” on both premium and recreational players, with the premium mass market targeting the upscale clientele considered the “strategic focus” for most Macau casinos and “potentially a key revenue driver” for the local gaming industry.

Still, the paper warns that Macau remains in the “shadow of a weak labor market and macroeconomic uncertainty” with concessionaires struggling to fill service-related jobs on their properties after the border reopening.

“Since Macau is seeking to increase foreign visitation, concessionaires need to address the shortage of skilled labor facing the industry,” the researchers warn.

In line with goals to increase visitors from foreign markets, the report suggest operators should optimize their talent acquisition and retention and place greater emphasis on skill development and enhancement within the organizations.

“Communication competence, for instance, is essential for industry practitioners to serve, connect and empathize with guests from diverse cultural and linguistic backgrounds.”