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Macau gambling industry:
current challenges and
opportunities next decade
Matthew Tingchi Liu
University of Macau, Macau, China
Tina Tsing Gya Chang
Bank of China, Macau, China
Edmund H.N. Loi
Macao Polytechnic Institute, Macau, China, and
Andrew Chi Hong Chan
Galaxy Entertainment Group, Macau, China
Abstract
Purpose –The viewpoints from industry briefly review the success in last decade, analyze what
challenges and difficulties came across currently and forecast opportunities/development in next
decade of Macau gambling industry. The paper aims to discuss these issues.
Design/methodology/approach –Practitioners from banking and gambling industries offered their
cutting-edged analysis and viewpoints with scholars’observation.
Findings –Macroeconomic and political factors in China are the principal direct cause of Macau’s
gambling revenue decline in 2014, implicating the vulnerability and unsustainability associated with
the VIP business model of gambling industry. Although Macau continues to face challenges since late
2014, the prospect of Macau gambling industry is still optimistic in the long term, as there are emerging
positive catalysts which will boost demand. From casino operators’perspective, they should continue
to try to increase revenue from mass market and non-gambling business by relocating the resource and
adding more non-gambling amenities.
Originality/value –This paper provides a fresh perspective, and a new line of thinking with regard
to how gambling industry in Macau will develop in next decade since 2015. It therefore potentially
directs a new path of research in the area.
Keywords Diversification, Global business, Macro marketing, Gambling industry, Macau, VIP market
Paper type Viewpoint
1. World’s fast growing gambling capital
Macau has developed rapidly over the past decade, primarily due to the liberalization of
casino gambling since 2002 (Wong, 2011), and it is the only jurisdiction in China that
allows casino gambling (Liu et al., 2014a). Since this liberalization of the gambling
industry in Macau, some international players were introduced to the industry.
In addition, individual visit scheme which allowed citizens from selected Chinese cities
to obtain permits to visit Macau without the need to join a tour was opened in 2003.
The Macau gaming industry experienced a robust period of growth. Data compiled by
Macau’s Statistics and Census Service show, Macau gross gaming revenue (GGR)
reached a historical high-US$ 45 billion in 2013, seven times that of Las Vegas Strip.
In 2014, it generated US$ 43.94 billion in gambling revenue or about a 12-fold increase Asia Pacific Journal of Marketing
and Logistics
Vol. 27 No. 3, 2015
pp. 499-512
© Emerald Group Publishing Limited
1355-5855
DOI 10.1108/APJML-03-2015-0045
Received 16 March 2015
Revised 2 April 2015
Accepted 2 April 2015
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1355-5855.htm
This work is supported by research grant from University of Macau (Ref. No. MYRG2014-00095-
FBA).
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since 2003 (Gaming Inspection and Coordination Bureau Macau SAR, 2015, see
Figure 1). The compound annual growth rate of gambling industry in Macau in
mentioned period (2003-2014) reaches 18 percent even experienced global financial
tsunami in 2008 and European debt crisis in 2012. The share of gambling revenue in
GDP increased from 41.73 percent in 2002 to a historical peak 91.6 percent in 2010,
and then slightly dropped to 87.52 percent in 2014. The gambling tax generates and
accounts for a huge proportion of government revenue in Macau (see Figure 2).
In 2014, 83.5 percent of government revenues came from gaming tax according to
data compiled by Statistics and Census Service. Currently, there are 35 casinos in
Macau –with six major casinos –including the six major casinos: SJM, Galaxy
Entertainment Group, Sands China, Melco Crown Entertainment, MGM China and
Wynn Macau, (generally called “The Big Sixes”) (Liu et al., 2014b). At the end of 2014,
SJM was the leader on Macau’s gaming market which held 24.1 percent market share.
Source: Gaming Inspection and Coordination Bureau Macau SAR (2015)
3,584 5,172.25
5,755.875
7,077.875
10,377.75
13,596.5
14,921.125
23,542.875
33,483.375
38,017.375
45,093.625
43,940.125
29%
44%
11%
23%
47%
31%
10%
58%
42%
14%
19%
–3%
–10%
0%
10%
20%
30%
40%
50%
60%
70%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD(million) yoy change
Figure 1.
Gross gambling
revenue in
Macau (2003-2014)
(million USD)
37,189
53,710 62,259 69,871
88,488
122,972
144,995
175,949
156,071
20,748 31,920 43,208 45,700
68,780
99,660 113,378
134,383 136,710
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
government revenues gambling tax
Figure 2.
Macau Government
revenue and tax
revenue from
gaming sector
(million MOP)
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Galaxy Entertainment Group ranks the second with 21.6 percent market share.
Sands China Ltd. took the third spot with 19.4 percent market share (previously it held
second place with 22.1 percent). The fourth place was taken by Melco Crown
Entertainment with 14.6 percent. MGM China was listed fifth and the sixth spot was
taken by Wynn Macau with 10.1 percent (Wells Fargo Securities, 2015).
2. The first drawback ever in late 2014
The fast growth seems unstoppable until May 2014. Then, the monthly gaming
revenue year-over-year started to drop from June 2014, and continued to decline for
ten consecutive months (till present, March 2015, year-over-year). The GGR in 2014
is about US$ 43.94 billion, slightly down 2.6 percent year-over-year. According to
latest released statistics from Gaming Inspection and Coordination Bureau (DICJ),
the GGR at Macau’s casino suffered a 48.6 percent decline in February and a
39.4 percent decline in March 2015 year-over-year –also the worst back-to-back
bimonthly decline on record.
The market continues to deteriorate as premium mass affected by some unfavorable
factors. Macroeconomic and political factors in China are the principal direct causes,
including the anti-corruption action in China, the shortening of visa period, prohibiting
middle/high-leveled public servants to visit Macau, anti-laundry, strict monitor in
UnionPay, etc. The impact from some other tightened regulations, such as smoking
ban, removing of UnionPay devices in casinos, is relatively small (Figure 3).
2.1 Anti-corruption action in China
The anti-corruption campaign in China was launched in late 2012 –targeting officials
from ruling party, government, military and state-owned company in China who are
suspected of corruption. From that on, hundreds of officials in Mainland China have
been investigated and prosecuted. It discourages conspicuous consumption and
prohibits middle- and high-leveled public servants to visit Macau, which causes a
certain part of high rollers and premium mass players, to refrain from visiting Macau.
Meanwhile, junket industry also becomes cautious about lending money under this
Source: Gaming Inspection and Coordination Bureau Macau SAR (2015)
28,739
38,007
35,453
31,318 32,354
27,215
28,41528,876
25,564
28,025
24,269
23,285
23,748
19,542
7%
40%
13%
11%
9%
–4% –4% –6%
–12%
–23%
–20%
–30%
–17%
–49%
–60%
–50%
–40%
–30%
–20%
–10%
0%
10%
20%
30%
40%
50%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
yoy change
Jan-14
Feb-14
Apr-14
May-14
Jun-14
Aug-14
Jul-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-14
Figure 3.
Monthly gambling
revenue in 2013 and
2014 (million MOP)
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tension. The above phenomena lead to the continuing decrease in VIP gaming revenue.
At the same time, the non-gaming revenue of some casino operators, such as Wynn
Macau, also declined due to the decreasing conspicuous consumption.
2.2 Tighter transit visa policy
Starting from July 2014, transit visa term was shortened from 14 days to five days.
This policy do not have significant impact on visitors because most of visitors using
transit visas are not for gambling, except some VIP gaming promoters and high rollers.
Even the VIP gaming promoters and high rollers, they usually stay in Macau less than
five days. In this sense, the number of visitors to Macau has continued to grow since
that. From December 1, 2014, increased scrutiny on transit visa is implemented, which
makes it difficult to use this transit visa scheme without actually traveling to a third
country. This policy have negative influence on VIP market which already weak since
mid-2014 because most of junket operators, VIP gaming promoters and high rollers are
from Mainland China (many of VIPs usually use transit visa scheme to visit Macau
without actually traveling to a third country).
2.3 Remove UnionPay devices in casinos and anti-laundering
The mobile swipe card devices, a system registered in Mainland China, were brought
into Macau casinos for cash transfers. The leaks of application of the card devices
also unveil: evasion of foreign transaction fees and circumventing the Mainland’s
cross-border currency control on daily limit of UnionPay card cross-border consumption,
both led to capital flight and make the China Central Government’s supervision more
difficult. In May 2014, China UnionPay, the largest electronic transaction system operator
in China[1], took action to “combat overseas money laundering, capital flight and other
illegal bank card use,”and focussed on illegal transactions using mobile UnionPay cards
posters/devices in casinos (Sevastopulo, 2014). Furthermore, Macau Government
removed UnionPay devices in casinos accordingly. Pawnshops around casinos have been
banned from applying for new UnionPay swipe terminals since July 2014. This action
primarily has influence on premium business, because only premium mass players need
to source cash by such transactions.
2.4 Smoking ban on mass gambling floor
Macau Government initiated a “50% smoking ban”two years ago, which requires that
50 percent of Macau’s casino floor should be designated non-smoking areas. However,
smoking in VIP rooms is still allowed, and the casinos can install isolated smoking
rooms. Therefore, this policy only has a little negative influence on gambling revenue.
Although no one claimed that smoking ban was largely responsible for the declining
revenue of casinos, some casino operators are afraid that smoking ban is the last straw
to break camel’s back, especially at the moment of downturn in general economic
conditions. The process of smoking ban is full of controversies, but Macau’s casino
operators will accept this result. After all, Macau is the only legal casino market in
China and other Asian gaming jurisdictions are not easily reachable.
3. Future challenges
Besides the macroeconomic environment and political factors in Mainland China, there
are other critical reasons behind this shrinkage starting from the second-half of 2014.
The reasons are associated with VIP-oriented business model. In the long run, there
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could be also some challenges that needed to be overcome, including the offshore
online gambling sites, regional competitions, human resource shortage and increased
labor cost.
3.1 Inherent vulnerability of the casino-junket model in Macau
Different from the business model in Las Vegas or Singapore, Macau’s gambling
industry has heavily relied on VIP business, which is controlled by junkets and
dependent on VIP gambling promoters, rather than casinos operators. Over the past
decade, VIP market possesses a proportion of around 70 percent of Macau’s annual
gambling revenue, the leading session without doubt. However, behind the rapid
growth, there are some problems derived from junket VIP gambling operation.
Different from Las Vegas and Singapore, casinos in Macau rely on middlemen to
extend credit to high rollers and recover debts. The number of middleman in gambling
industry in Macau is larger than the figure officially released by Macau Government.
Moreover, most of the middlemen are non-Macau residents, taking around 80 percent of
the total number. These non-resident VIP gambling promoters are connected with more
VIP players, especially the high-end players from Mainland China. Those promoters
have unique method to bring them to tables, including offering not only free
transportation, accommodation and entertainment, but also un-regulated credit for
gambling during their stay. However, the credit risk assessments to high rollers are
insufficient, over-borrowing phenomenon is common –mostly are associated with loan
sharks. The situation increases the operating risks of the junkets or VIP gambling
promoters. Credit collection is a thorny issue, majority of the debt to be repaid by
gamblers are based overseas, especially Mainland China. But nowadays China shows a
slowdown in economic growth. The regulations in real estate industry and excess
production capacity industry have weakened the Mainland businessmen’s ability to
repay the debts, thus it may produce a large number of bad debts and break the capital
chain (Loi and Cheong, 2015).
In addition, the VIP junket runaway incident happened in April 2014 triggered
tightening of credit extension. A junket operator absconded with about US$ 1.2 billion.
Part of junket money is sourced from private investors or private loans except the
principal invested by junkets themselves; hence the junket runaway incident triggered
investor redemption or cause investors to withdraw their money, which would
further tighten junket capital liquidity. Nowadays, There are some junkets are looking
to downsize VIP rooms where they are receiving less favorable commission rates
due to the decrease demand and liquidity problem. While most of the junkets have
tightened credit to their clients, dragging down rolling chip volume and VIP GGR
numbers is expected.
3.2 Internal competition between casino operators may drag down margins
VIP system and mass market system are not only operated differently, but also driven
by different social and economic forces fundamentally. High rollers are introduced to
casinos via junket agents or gambling promoters. With the purpose of earning a higher
commission, these agent groups are more likely to introduce their customers to more
high-risk games, where they could gain the most abundant availability of credit. As the
competition in VIP junket segments become more and more intense, the commission
rates offered to Macau junkets by all the casinos have been increasing. That would
drag down the profit margins of casino operators. The profit of six concession holders
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was influenced in the competition. Increased competition among Macau’s casinos
should lead to contractual terms more favorable for at least some (licensable) VIP
promoters, as well as to the evolution of other arrangement to cater to premium players
in Macau. Profit margins enjoyed by casinos from traditional VIP room operations will
be pushed downward. Furthermore, to the extent that VIP promoters operate in highly
competitive environments (with ease of entry and exit), a higher proportion of their
revenues will be absorbed by costs related to attracting and sustaining VIP customers,
including rebates on losses or handle to customers as a form of price cutting.
3.3 Offshore online gambling
Nowadays, some gambling companies have registered in other countries where
gambling is illegal. They are operating offshore virtual casinos, and advertising the
offshore online gaming system in Macau. Gamblers no longer need to actually visit a
casino but can play online gambling through the network. To some players,
participating offshore online gambling is more convenient than visiting casinos in
Macau, especially when the tighter transit visa policy was implemented. Therefore,
more and more online gaming systems took and will take away a part of gamblers and
gaming revenue from Macau.
3.4 Increasing regional competitions
Casinos and integrated gambling resorts are becoming increasingly popular in Asia,
giving rise to more opportunities for industry participants and increasing regional
competition. With new casinos opening in the rest countries of Asia, visitors/players
have more choices. Actually, besides Macau, there are six other Asian countries had
legalized gambling business. Macau junkets are able to bring some VIP businesses
to other countries –especially to the Philippines and Malaysia –during the sensitive
period. Nowadays, South Korea, the Philippines and Malaysia have already taken
part of market share. Singapore has two casino operators and became the
second largest gambling market in Asia with total GGR around US$ 6.07 billion in
2013 (Rachel and Anshuman, 2014); South Korea has 17 casinos in operation with
total GGR around US$ 2.7 billion in 2013. In addition, in the long run, there are some
potential legal gambling jurisdictions, such as Japan, Taiwan and Thailand.
Japan is likely the biggest threat, as its pachinko market has already reached about
US$ 25 billion; Taiwan could be a potential competitor to Macau because Taiwan
owns its geographic proximity and economic reputation, which help to attract
Chinese gamblers.
3.5 Human resource shortage and increasing labor cost
Human resource shortage is one of the biggest challenges that all industries, including
casinos, face especially after the new Cotai properties of six casino operators are
launched. It is expected that all new projects that are under construction will be
completed by late 2017. It reported that Wynn Palace require around 10,000 workers,
MGM Cotai, SJM Cotai, Melco’s Studio City and Galaxy Macau Phase 2 require around
8,000 workers, respectively. Parisian Macau of Sands China even requires around
20,000 workers in two years. As the local labor force has not grown these years, a
serious question comes out: is there enough labor force for the new casino-resorts’
operation and the additional tables in new properties? It is known that the
unemployment rate in Macau has been consistently lower than 2 percent in the past few
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years, which is quite low, so human resource shortage will be a very critical issue to
both government and casino operators.
The human resource shortage problem also led to increasing staff cost for all casino
operators. Starting from the mid-2014, the frontline workers in many casinos asked for
better compensation and welfare –even a series of protests were carried out during
these years. In order to retain employees and attract more new employees, all casinos
averagely have raised base salaries by 5-10 percent and increased extra bonus by one
to two months in recent two years. Therefore, the overall staff cost will increase for
casino operators.
3.6 Full smoking ban will be implemented
In January 2015, it is reported that the Macau Government planned to “submit a bill to
the legislative council proposing a full smoking ban in casinos, including the possible
removal of the airport-style smoking rooms currently allowed on mass floors”probably
in late 2015. It is expected that complete smoking ban could be extended to VIP rooms
soon. If the full smoking ban is fully implemented, the high rollers’willingness to visit
casinos in Macau will be negatively affected, so is gambling revenue.
4. Opportunities in next decade
4.1 Focus on mass market
When the VIP market is shrinking due to many unfavorable factors, casino operators
focus far more on mass market, which will lead to increased internal competition for
market share between casino operators. Recently, Macau’s mass market witnessed
an increase in the growth rate in customers. The growth is mainly due to the rise of
the Chinese middle-class population. While the VIP segment in Macau has been
volatile, more profitable mass market continued growing. Casino operators are
planning focus more on growing Chinese middle class, international visitors, family
visitors and even backpackers. That will be the key for success in 2015 and
afterwards.
From the gambling industry as a whole, VIP gambling revenues are accounted for
more than 70 percent of gross gambling revenue before 2012. The situation reflects how
Macau casinos heavily relied on VIP players for the past decade. VIP contribution fell
from 74 percent in third-quarter 2011 to 61 percent in fourth-quarter 2014. The figure
shows that the gambling revenue structure has gradually become rational. In the end of
2014, mass market (including premium mass market) already takes about 40 percent of
total gambling revenue in Macau, while the percentage is about 70 percent in Las
Vegas and 50 percent in Singapore. The change should lead to a more sustainable
business model as: first, VIP business is more controlled by junkets than casino
operators themselves; second, VIP business has much lower profit margin than mass
market/slot because of the return commission to junkets is very high; third, VIP market
is more sensitive to Chinese economic conditions (including credit conditions, interest
rates, commercial and residential real estate markets, and even stock market) than the
mass market is; and fourth, VIP gambling system also cause some problems affecting
the long-term social and economic sustainable development. The adjustment of
gambling revenue structure can not only reduce the dependence on VIP gambling and
improve the ability of policy and market risk resistance, but also reduce junket
commission costs to improve profit margins, thus providing more abundant funds for
the new projects (Figure 4).
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4.2 New projects with non-gaming amenities
New properties/projects in Cotai will be positive catalysts for Macau’s next boom. Six
major casino operators are extensively building new casinos and mega resorts –all
projects are expected to complete by late 2017 in Cotai strip in Macau. Most of the new
projects have some non-gaming amenities. For example, Melco’s Studio City will
cooperate with Warner Brothers and DC Entertainment Company on this new project,
introducing the batman stories of virtual reality games, home entertainment center and
magic show hosted by magic masters and so on. It will introduce the highest Ferris
wheel in Asia called Golden Eye, which exactly aims at the mass market (Melco Crown
Entertainment, 2015). Wynn Palace will be a floral-themed casino which presents
visitors with an elegant floral world, and will be fronted by a massive lake with a
light-and-fire show (Farah, 2013). The Parisian Macau will be a Paris-themed integrated
resort, and will feature more than 490,000 sq. ft. of retail space, diverse food and
beverage offerings, new meeting and convention facilities and a 50 percent scale replica
of the Eiffel Tower (Las Vegas Sands, 2014). SJM’s first casino-resort will include a
hotel bearing the trademark “Palazzo Versace”with a total of approximately 2,000
rooms and facilities for shopping, dining and entertainment. Galaxy will further
corporate with two luxury hotels, the Ritz-Carlton Macau and JW Marriott Macau to
target high-end customers. More brand shops, banquet space, diverse food and
beverage offerings will be introduced. Table I shows the related information of new
projects under construction. Most of the new properties will feature large non-gaming
amenities and providing more non-gaming offerings, in order to satisfy diversified
customer needs. According to the data of Statistics and Census Service Macau SAR, the
number of visitors to Macau in 2014 has set a new high of 31.5 million while the overall
economic potentiality and purchasing power of visitors remain strong. Currently,
non-gaming revenue accounts for a small part of the overall revenue of six major casino
operators, but there is still plenty of room for growth, as visitors to Macau is
continuingly increasing. In the long term, non-gaming amenities will gradually increase
its contribution to Macau casino operators’revenue.
4.3 Gambling industry –led industrial diversification
The Chinese Central Government supports Macau to appropriately diversify its
economy structure by developing its tourism and leisure industry. Macau has been
committed to develop to a center for leisure, business and entertainment and create the
trading platform of China and Portuguese nations. Over the past decade, gambling
industry in Macau has a tremendous impact on local economy and related industries
like hotel, transportation, restaurants, event venues and so on –promoting diversified
development of Macau’economy to some extent. Besides, Macau’s financial industry,
Mass Market
Macau Singapore Las Vegas
VIP Market
60%
40%
50% 50%
30%
70%
Figure 4.
Current approximate
distribution of
gambling revenue
sources
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Casino operator
(stock symbol,
HK)
Name of
project
Estimated
completion
time
Estimated
cost
Gambling
facilities and
hotel rooms
offered Non-gaming amenities
Galaxy
Entertainment
(00027, HK)
Galaxy
Macau
Phase 2
Mid-2015 US$ 2.5
billion
500 tables
1,000 slots
1,350 rooms
Two new luxurious hotels,
many brand shops, diverse
food and beverage
offerings. Phase 2
significantly increased
more meeting, event and
banquet space than Phase 1
Macau Legend
(01680, HK)
Legend
Palace
Hotel
Mid-2015 US$ 3
billion
117 tables More luxury hotel rooms
and suites
Melco Crown
(06883, HK)
Melco’s
Studio City
Q4-2015 US$ 3.2
billion
500 tables
1,000 slots
1,600 rooms
Batman stories of virtual
reality game in Gotham
city, family entertainment
center, magic show, ferry
wheel
Sands China
(01928, HK)
Parisian
Macau
Early-2016 US$ 2.7
billion
450 tables
2,500 slots
3,000+rooms
Paris-themed integrated
resort, diverse food and
beverage offerings, luxury
hotel rooms and suites, new
meeting and convention
facilities, an “Eiffel Tower”
Louis XIII
(00577, HK)
Louis XIII Early-2016 US$ 1.0
billion
66 tables
230+rooms
Ultra-luxurious hotels,
introducing Michelin three-
star Parisian restaurant
Macau Legend
(01680, HK)
Legendale
Hotel
Mid-2016 US$ 2.7
billion
117 tables More luxury hotel rooms
and suites
MGM China
(02282, HK)
MGM Cotai Q3-2016 US$ 2.9
billion
500 tables
2,500 slots
1,600 rooms
85 percent of the floor area
will be used for non-gaming
elements, including
luxurious hotels, brand
shops, diverse food and
beverage offerings, and a
theater
Melco Crown
(06883, HK)
City of
Dreams
Phase 3
Q1-2017 US$ 1
billion
700+rooms
Wynn Macau
(01128, HK)
Wynn
Palace
Q2-2017 US$ 4.0
billion
552 tables
1,000 TBD
1,700 rooms
Floral-themed mega resort.
Integrate flowers, water,
natural light, and a massive
lake with laser, music and
light show
SJM
(00880, HK)
SJM Cotai Late-2017 US$ 3.8
billion
700 tables
1,000 slots
2,000 rooms
five star hotel
Galaxy
Entertainment
(00027, HK)
Galaxy
Macau
Phase 3-4
2017-2018 US$ 7
billion
1,000 tables
3,000 slots
5,500 rooms
Multi-purpose arena with
over 10,000 seats.
A convention center.
More luxury hotel rooms
and suites
Table I.
Ongoing casino
expansion projects
in Macau
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MICE industry (meetings, incentives, conferencing, and exhibitions) and cultural
creative industry are also developing quickly. Therefore, in the future, Macau will
become more attractive to tourists and investors all over the world.
4.4 Professional management and HRM optimization
Casinos spend more resources to keep valued human resources. For example, Sands
China has increased base salary by 5 percent and offered extra one month salary
(as bonus) two times in 2014. In addition, the working environment was improved, such
as implementing the full smoking ban policy in its casino; some employee benefits were
also improved. Some casinos have created a reasonable career path to retain employees
and attract more talents. Meanwhile, pushed by the tight labor market in Macau,
casinos have hold several recruitment fairs in Mainland China, Manila and Vietnam, to
recruit non-gaming staff for their up-coming projects. It is believed that there will be
new rules in Macau to attract more and more talents and valued labors from all over the
world to support further development.
4.5 Responsible gambling: an ethical and sustainable way to follow
Macau’s efforts to promote responsible gambling include public awareness to different
communities and free treatment services to residents if they are diagnosed as
pathological gamblers. For example, Macau Government introduced a law to ban
minors under the age of 18 years from entering a casino and to ban casino employees
from entering their employers’casinos outside work time. Macau Government also has
taken measurement to control the number of new casinos, gambling tables and slots.
Most of casino operators have taken some actions to help address problem gambling
prevention and treatment. A resilience center was set up in 2005 to treat, prevent and
research problem gambling. Voluntary self-exclusion service was also conducted for
years. In addition, the casino operators provide information about problem gambling
prevention and treatment to public.
4.6 Infrastructure development conducive to long-term development
On the one hand, more infrastructures in neighboring areas will boost market demand
in the near future. Some key infrastructure projects in the region have been improving
Macau’s connectivity to other regions in Mainland China, so there will be more visitors
come to Macau. For example, the high-speed rails connecting with the cities in
neighboring Guangdong province and inland provinces have established. The Hong
Kong-Zhu Hai-Macau Bridge (under construction) consists of a series of bridges and
tunnels, the bridge will connect these three major cities on Pearl-River-Delta in China.
Eventually, the high-speed rail network and the bridge will be connected/integrated.
These new infrastructures will accelerate internal connections within Pearl-River-Delta
area. On the other hand, Macau’s light rail system, new hotels, integrated resorts and
public facilities are also under construction. When they are all established, the
hospitality capacity will be enhanced significantly.
4.7 Port infrastructure construction and 24-hour border crossing will bring more
visitors
The Macau authority announced extension of the border gate opening hours for two
hours on the Gongbei border and a 24-hour border crossing on Hengqin Border starting
from December 18, 2014 (Macau Daily, 2014). By implementing the policy, more visitors
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will be attracted with higher willingness to prolong their stays in Macau. The policy is
probably an accelerator to Macau’s tourism industry, and may have a positive impact
on gaming industry.
4.8 Regional cooperation facilitates tourism resources integration
World class non-gaming development in Hengqin Island will help enhance the
attractiveness of Macau and the Pearl-River-Delta. Hengqin Island is a reform zone of
Guangdong Province, targeting cooperation with Zhuhai, Macau and Hong Kong.
It has an area of 106 sq km, 3.5 times as large as Macau, and has very strong ties with
Macau geographically and in economic connections. Hengqin has set several
preferential policies on its own development and the corporation with Macau (O’Neill,
2014). It is development focus on tourism and leisure, logistics and commercial trade,
science, education, R&D, cultural creation, high-tech, medicine and healthcare and
financial services. A park called Chime long International Ocean Resort already started
operation in early 2014. The non-gaming elements in Hengqin Island and Macau
tourism industry will help to attract more diversified tourists.
4.9 Lowering commercial banks’reserve requirements will boost demand
The Central Bank of China announced to reduce the commercial banks’reserve
requirements to encourage economic growth, as China’s economy shows a sign of
slowing down. Lowering reserve requirements signals it has entered a monetary easing
cycle, which may be a positive catalyst for the china’s economy, thus bodes well for
Macau VIP gambling recovery.
5. Conclusion
5.1 Macau’s next step
The performance of gambling revenue has been hurt in part during the ongoing
“adjustment period”with regulatory and policy influences. In short term, the mass
market and non-gaming revenue cannot make up for the decline in VIP gambling, and
the investment in non-gaming amenities cannot be profitable for the casino operators
instantly. What’s more, Macau Government’s gambling review may trigger more
regulation; therefore, the temporary pain of Macau gambling industry may linger
a while. Despite the slump, new opportunities are arising from long-term
perspective –including the new projects in Cotai strip with more non-gaming
amenities and infrastructure improvements. Each casino operator has a new resort
and/or major addition under construction. In general, the prospect of Macau gambling
industry is still optimistic in the long term, as there are emerging positive catalysts which
will boost demand. In the aspect of casino operators, they should continue to try to
increase mass market revenue and non-gaming revenue by reallocating the resource and
adding more non-gaming amenities. The opening of Galaxy Macau’s Phase 2 and Melco
Crown’s Studio City by late 2015 may be a turning point. Both new projects may provide
some must-see attractions, unique experiences and world class service –they may help
Macau to implement the diversification and extend the market far beyond Mainland
China. Though the miraculous era of Macau casino industry is gone, observers still believe
that Macau is a highly attractive tourist destination in the next decade and beyond.
The governmental policy definitely can influence and lead the industry to a new
direction. Macau Government’s role is critical. For example, Singapore’s Government
adopted stringent restrictions on junket promoters and created serious responsible
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gambling program to protect Singapore’s vulnerable citizens. One good example is
the gambling tax. If Singapore does not want its citizens to gamble, the best alternative
is to attract foreign high rollers. The tax structure, with a 15 percent levy on mass
market and 5 percent on VIP, can encourage VIP play. But Singapore set strict rules for
junkets and their employees to qualify for licensing. Now, only three junkets have been
licensed, two are from Malaysian and one is from local –all for Genting Singapore’s
Resorts World Sentosa. As to Marina Bay Sands, it has to run business without any
junket promoter. In Jeju Island, South Korea, junket operators have to set up tangible
shop to offer gambling chips on loan, which can help players sidestep China’s limits on
taking currency out of the country. Well-designed rules can help the industry develop
sustainably, so responsible gambling is an ethical and sustainable way for Macau to
follow. Given that Macau is the only place in China where gambling is legal, Macau’sis
still the industry leader in the world even facing more and more challenges from
neighboring countries.
5.2 Implications to international marketers
For the international and domestic casino operators who have interest in Macau, they
have two ways to enter Macau’s gambling market, one is to apply license at 2020;
another is to cooperate with one of six license holders. The first one is uncertain
because no one knows whether Macau Government will release any new license or not.
The latter one may be less attractive and profitable but can be implemented. For any
international gaming company who has intention to enter Macau’s market, it has to
learn how to deal with these changes. If the casino operator has the political sense and
good relationship with government, the uncertainty and loss from the change of policy
can be reduced to a large extent.
Entering new markets is also a possible alternative. Some of Macau’s Asian rivals
have benefited from Mainland China’s anti-corruption campaign. In other words, there
are many opportunities in other emerging market. Take Singapore as instance. When
Singapore allowed opening casino in 2005, no one could forecast that Singapore would
overtake Las Vegas as the world’s second largest gambling center. Besides, Japan may
create next casino industry boom in Asia. Japan Government plans to move forward.
Base on estimation, Japan may generate US$ 40 billion in annual gambling revenues. It is
noteworthy that around 9.6 percent of males and 1.6 percent of females in Japan were
found to be gambling addicts in a 2010 survey of over 4,000 respondents. The
proportions are much higher than 1.4 percent in the USA and 1 percent in UK. Unlike
Singapore, the Philippines and Vietnam, Japan could be a very big domestic gambling
market without Chinese gamblers. Thus, it would make sense for international casino
operators to invest in Japan subject to casino legalization.
Building international alliance is a trend. City of Dreams Manila is Melco Crown
Entertainment’s first resort opened outside Macau with international partnership.
Melco Crown Entertainment is seeking for new market and growth opportunity; the
Philippine market is also counting on Melco Crown’s mature connection and system to
bring in Chinese high rollers. Moreover, Vietnam is going to declare that its citizens are
allowed to play in selected casinos on an experimental basis. China’s crackdown on
corruption is keeping wealthy Chinese gamblers away from Macau’s casinos. One of
Macau’s top casino-junket operators, Suncity, will team up with Chow Tai Fook, a
leading Hong Kong jewelry brand, to develop a US$ 4 billion casino resort in Vietnam.
Actually, Suncity already developed its base in the Philippines and hired hundreds of
local staff in Manila.
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Note
1. China UnionPay is the third largest card payment system in the world after Visa and Master
Card. By the end of 2014, the company has 30 million merchants worldwide and 1.8 million
ATM machines. There are 13 million overseas merchants and 1.2 million ATM machines
which accept UnionPay cards. There are 90 million UnionPay card holders in China, and
totally about 500 million UnionPay cards issued.
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About the authors
Dr Matthew Tingchi Liu, PhD, is an Associate Professor of Marketing, University of Macau.
He teaches marketing course to not only undergraduate and MBA, but executives and managers
in gambling industry. His work has appeared in several journals, including Marketing Letters,
Industrial Marketing Management,European Journal of Marketing,Journal of Service Marketing,
Journal of Consumer Marketing,Asia Pacific Journal of Marketing and Logistics,Journal of
International Consumer Marketing,Journal of Euromarketing,International Journal of
Contemporary Hospitality Management,International Journal of Mobile Communications,
among others. Before joining academia, he worked for Ernst & Young as a Consultant.
Dr Matthew Tingchi Liu is the corresponding author and can be contacted at: MatthewL@umac.mo
Tina Tsing Gya Chang is an Executive Assistant and Strategic Analyst of Strategic Research
& Brand Management in the President Office, Bank of China (Macau). With five years of
working experience in banking, she has done some research on Macau economy, including the
development of gambling industry and banking industry in Macau, as well as financial service
innovation.
Dr Edmund H.N. Loi, PhD (Economics) is working in the Macau Polytechnic Institute.
His work has appeared in several journals, including Reformation & Strategy,Shanghai
Economic Review,Guangdong Social Science, among others. He also published economic
comments for Macau local newspaper and media.
Andrew Chi Hong Chan is an Assistant Vice President of Business Development of the
Galaxy Entertainment Group (Macau headquarter). With the experiences in gaming operation
over 20 years plus seven years in gaming training, he has edited several table game textbooks,
such as Fan Tan and Blackjack and Baccarat. He was invited by the Labour Affairs Bureau
(DSAL) of Macau Government to map out the standard for license of dealer.
For instructions on how to order reprints of this article, please visit our website:
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