IAG 2016-06 Jun - page 4

insid
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Ju
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EDITORIAL
BenBlaschke
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Macau’s lost opportunity
A
ta timewhenMacau’s concessionairesaredesperately searching for new revenue
opportunitiesamida rapidlyshiftingmarket, thedecisionby theGaming Inspection
and Coordination Bureau (DICJ) to extend Macau Slot Co Ltd’s monopoly on
sports betting comes as a real slap in the face.
According toMacau’s Official Gazette, Macau Slot’s limited concession – which allows
for betting only on football and basketball at 10 outlets in and around SJM properties – has
been extended for five years until 5 June 2021. Betting on any other sport or anywhere else
remains banned at least until thenewdeal expires.
Yet this defies the government’s very ownmandate todiversify theMacaumarket.
Theeconomicdownturn thathasseengrossgaming revenue fall by50% from itsFebruary
2014peak ofMOP$38billion (US$4.75 billion) has become awell-worn tale.
Chinese President Xi Jinping’s anti-graft campaign sawMacau’s fortunes change almost
overnight, with the resultingdecline inVIP visitors contributing to24months (and counting)
of declining year-on-year revenues.
In conjunctionwith theMacauSARGovernment, the counter-measurehas been an edict
for Macau’s concessionaires to diversify their offerings – specifically, to provide more non-
gaming attractions tohelpboostMacau’s tourist appeal.
Thegeneral concept isasoundone. Forall thegiddyexcitementMacau’ssoaring fortunes
created at the time, just about everyonewe’ve spoken toover thepast two years agrees such
incredible growthwas never going tobe sustainable. The industry needed a reality check.
But what does diversification reallymean?
According to the government’s own decree, Macau needs to reshape its image from a
purely gaming destination to one with much broader tourist appeal – one set apart by its
disparate and distinct array of world class entertainment. As explained in our “Reinventing
the integrated resort” article in the edition of IAG you are holding in your hands now, the
modern thinking is that new properties opening inMacau over the next 18months need to
position themselves as resortswith a casino, rather than casinoswith a resort.
It would be a huge mistake, however, for the government to view diversification as a
purely non-gaming pursuit. Quite the opposite in fact, Macau’s casino floorsmust undergo
a transformation of their own if they are to keep pace with this newmassmarket customer
heading theirway.
That’swhere sports betting comes in.
InLasVegas,wherenon-gamingattractionsnowaccount for almost 70percent of annual
revenue, gross gaming revenue has remained largely stagnant in recent years despitemass
market visitor numbers steadily increasing.
The one sector to have bucked that trend is sports betting. TheUS$292millionwagered
on sports in April 2016was an all-time recordwith revenues up a whopping 70% on a year
earlier. It also continued a run that has seen sports wagering increase in 32 of the last 36
monthswith annual holdhaving almost doubled since 2010.
The crucial factor for Macau is that these are the same mass market customers being
targetedbyMacau’sdiversificationpush.Walk intoanyglitzyLasVegassportsbetting lounge
and you’ll find a healthy smattering of tourists for whom betting sports is all part of the Las
Vegas Strip experience. The last place they want to be is sitting at a crammed baccarat table
bettingminimumHK$1,000 ahand.
Back in2014whenMacau’sVIP roomswerebustling,massandpremiummasscustomers
accounted for around 35% of the city’s gross gaming revenue. That figure now stands at
almost 54% and is expected to rise to around60%by 2020.
ButasMacau’svisitordemographicevolves, itscasinofloorsmustevolvewith them.That’s
why this five year extension of the current sports bettingmodel inMacau defies all logic. To
activelypromote thegrowthof themassmarket sector thendeny concessionaires aproduct to
matchsuggests theMacauSARGovernment isstill struggling tofindaclearplan for the future.
AsDrAllanZemanobserves inour cover story this issue, they areagovernment inneedof
avision.Until they sit downanddeviseone, the“newMacau”will struggle to fulfil itspotential.
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