Macau’s six gaming operators are to invest over $13 billion in non-gaming projects in the region to boost its economic strength outside the casino industry. Gaming concession contracts for the next decade came with a non-gaming investments clause.
On Friday, 16 December, the Macau government announced the signing of gaming contract agreements for its six gaming concessionaires for the next decade. Besides standard gaming operations procedures, the inked arrangements stipulate that operators plow a combined amount of about $13.4 billion into several in-gaming projects in the Chinese Special Administrative Region (SAR). The contracts were signed by government officials and the six operators, which include MGM Grand, Galaxy Entertainment, Sands China, Melco Resorts & Entertainment, Wynn Resorts, and SJM Holdings.
The requirement is part of an initiative by the Chinese government to diversify the Macau economy away from just gambling revenue. The SAR has been struggling financially since the Covid-19 outbreak in 2020. With this new plan, the six concessionaires will contribute to the total beginning on 1 January 2023 and ending in 2033.
Post-Pandemic Recovery Strategies Set to Improve the Economy
Each concessionaire has already pledged an amount that they would be investing for the next decade. Moreover, on 24 December, representatives from the companies will attend a conference where they will outline their respective investment plans for the 10-year license period.
The agenda of the meeting would be to discuss job maintenance ideas for the existing workforce, how to expand the entertainment industry to include more than just gambling, and opportunities for promoting the tourism sector. Seeing as the gambling revenue has suffered tremendously for several reasons over the past few years, the conference’s outcome will be pivotal to the region’s financial recovery.
Addressing the press after the contracts were signed, the Macau Secretary for Administration and Justice André Cheong said:
Quote“Each company will need to submit, at the end of September each year, their non-gaming investment, development, and implementation plans for the following year to relevant government departments for approval and follow-up.”
Cheong added that the government was hoping that non-gaming projects, such as the development of exhibition centers, sporting events, and performances, would boost tourism in Macau. The goal would be to attract tourism traffic from all over the globe while encouraging visitors to stay for extended periods, hence promoting Macau’s economy. Visitors from mainland China will also be expected to resume trips to Macau, albeit in phases, beginning with Guangdong, Shanghai, Jiangsu, Zhejiang, and Fujian.
Just before the contracts were signed, the government had announced a new scheme that would see inbound traffic increase in the coming weeks. Already travel and quarantine terms have been changed as per the ‘0-5’scheme. So, essentially, visitors will undergo daily antigen tests upon entry into the region. After five days of being cleared, they will be free to go about their business in Macau.
Regarding the benefits that are expected from the lifting of Covid-related restrictions, Ben Lee, a managing partner at IGamiX Management & Consulting, noted:
Quote“The lifting of some of Macau’s more onerous zero-Covid restrictions holds out some hope for the new concessionaries that next year will be better than this one.”
Operators Already Pledged Investment Amounts
As the six concessionaires prepare to fulfill the set obligations, the operators have already stated precisely how much they would be plowing into projects within Macau.
Sands China is the biggest contributor to the pledged amount, reporting that it will invest MOP27.8 billion (~$3.75 billion) in various tourism-related ventures in Macau and overseas. One of the most significant investments will be marketing campaigns launched in South East Asia, the USA, South Korea, India, and Japan to bring in more outside traffic. In its press statement, the operator also highlighted that:
Quote“Sands will also develop several new restaurants and introduce innovative international culinary concepts to support Macao’s position as a city of gastronomy. The company will also launch a luxury yacht experience featuring onboard dining and entertainment, including celebrity appearances, as well as water sports,”
The other five gaming concessionaires have planned to support the SAR’s non-gaming endeavors as follows:
Solid Foundation for More Well-Rounded Revenue Streams for the Future
The past few months have been especially difficult for Macau as mainland China’s Zero-Covid policy has dealt a big blow to its economic lifeblood. So, regrettably, 2022 has indeed been one of the worst years for the Chinese SAR.
Gambling is undoubtedly the most lucrative revenue source for investors in the region, which is why attempts to get them to explore other sectors have been unsuccessful in the past. Thus, laying out the conditions in the bidding process is a smart move for the government as it would push companies to rethink their business strategies to make their investments work.
If things play out as expected, Citi Research global gaming research lead George Choi predicts a rise in the GGR by 165% during Q2 2023. Further, to maintain a tighter hold on the industry, the number of satellite casinos has been cut to 11 from 18. Each of these is already linked to one of the six concessionaires.
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