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Las Vegas of the East: Chinese Impact and Prospects of the Macau Gambling Market

9 January 2020, 11:39
Votes: 2

Pedro Cortes, a lawyer at Rato, Ling, Lei & Cortés, has professional membership in the Macau Lawyers Association, International Association of Gaming Advisors, Justice Department of Guangdong and a number of other reputable organizations. The expert has shared with the Login Casino team his deep knowledge of one of the most lucrative gambling markets in the world – Macau.

Las Vegas of the East: Chinese Impact and Prospects of the Macau Gambling Market

In 2019, during Golden Week, thirty-five Macanese casinos’ revenue fell by approximately 12% in comparison with the previous year. Besides, in general, it is already known that the current year has not met the expectations of operators who work in Macau. What do you see as the reason for this decline?

First of all, the situation in Hong Kong. Most of the visitors who come to Macau from mainland China have visas also to Hong Kong. It might not worth to come only to Macau. In addition, the current global economic conditions which have, of course, impact in the People’s Republic of China which is at what is called “trade war” with the United States of America. 75% of the Macau visitors come from Mainland which means that if the economic situation is unstable they will not have the same resources to expend in the casinos.  Moreover, the competition from less regulated markets (Vietnam, Cambodia, Lao) and regulated markets (Singapore and Philippines) may also have an impact on the revenue of the gaming industry. Finally, if one looks into the figures, in the second half of 2019 the GGR started to decrease every month, which means that the situation in Hong Kong might explain and be the first reason for the fall in the revenue. But, in the end, all Macau gaming operators are still distributing huge amounts of dividends to their shareholders.

The current year has been marked by difficult political and social problems in China (I mean 2019 Hong Kong protests). According to some experts, this is one of the factors that has had a negative impact on the gambling industry in Macau and has led to a decrease in the casino’s revenue. At the same time, other experts believe that such a situation, on the contrary, contributes to the development of casinos in Macau as everyone wants to have fun from time to time. Whose opinion do you share?

As mentioned, I am of the view that the situation in Hong Kong which lasts for 6 months now had the biggest impact on the gambling industry in Macau. On the other hand, I tend to also share the opinion that the situation in the neighbor Special Administrative Region might be an opportunity to the Macau economy, with the gaming industry in the pole-position to catch that opportunity. How? Firstly, with more visitors coming to Macau. We are already reaching 40 million. Secondly, the fact that Hong Kong is already in recession may make the companies look into Macau has a plan B for certain industries: financial and other types of services conglomerates with strong links with the Mainland China may look into Macau as the safe harbor for the turbulent sea we see on the other side of the bridge. There have been initiatives of the Central Government and of the Macau Government for that purpose. In addition, next to Macau we can find the special economic district of Hengqin New Area which, in my view, will, in a short term, play a very important role. In a macro view, we have the Great Bay Area initiative which gives the role of international tourism destination to Macau (and Hengqin). All this may finally diversify the economy of Macau.  

This December, China’s President Xi Jinping realized a three-day visit to the gambling hub of Macau to mark the twentieth anniversary of its handover to China. Some of the country’s media classified the visit as the President’s aim to turn Macau into a new financial center. Do you believe that this will happen soon? If yes, what impact will it have on the region’s gambling industry?

Hong Kong will still be Hong Kong, i.e., an international first-tier financial center. Macau cannot take the place of Hong Kong in this area for various reasons. Nonetheless, I am confident that Macau will have a higher role for the financial services within the Great Bay Areas and its role as a platform between China and the Portuguese Speaking Countries. There are plans to create a yuan-based stock exchange in Macau which would make the facies of the city different from what we have today. Notwithstanding these plans, Macau will continue to be the gaming mecca of the East. I do not like to say the Vegas of the East, because if we look strictly to the gaming industry then Vegas is the Macau of the West. Of course, Vegas has much more to offer to the visitors than solely gaming parlors. And, in that sense, Macau has a lot to learn with the other industries such as the MICE and entertainment.

Earlier, the region’s gambling regulator’s representative claimed that the body is developing a draft with new rules aimed at raising the standards for verifying the data of those who work in the Macau junket industry. What are your expectations regarding this?

Those who work in the legal field are expecting that to happen since 2001/2002. It is stated in the Gaming Law (Law 16/2001) that there will be regulations to define who are the key employees of the gaming concessionaires (and sub-concessionaires). The same is stated in the Administrative Regulation 6/2002, which regulates the gaming promoters (junket) operations. I am not in favor of revolutions or reforms when the industry is stable. Macau needs a kind of fine-tuning in its laws and regulations. A lot happened in the last 18 years and there were new laws and regulations since then. However, in order to enter what may be considered as the fourth era of the gaming regulation and the second since the liberalization, it is important that the new government decides first what is going to happen after 2022. A new public tender? An extension for 5 more years of all concessions (and sub-concessions), which I still believe might be on the table? More concessionaires? After this definition of the policy then the laws and regulations shall be in line. It is very easy, under Macau Basic Law, to the Government to define policies and to have the approval of the laws in the Legislative Assembly.

Do you share the opinion that Macau's transition from the VIP sector to the mass gambling market will benefit the region? Why?

It will make the industry more sustainable and less dependent on the VIP sector. It is already making the gaming operators offer other types of entertainment experiences, including shopping. The view of Mr. Adelson turns out to be correct when he decided to build the casino of The Venetian and gave the idea to the Macau Government for the Cotai area. The mass market is the future of the industry but one shall not disregard the VIP patrons. These days, it seems they are looking into other Asian destinations but no one knows what can be the future. One of the biggest players of the industry (Suncity) still represents around 25% of the total GGR, more than almost all the concessionaires (and sub-concessionaires).

Macau has already become the world capital of gambling. In your opinion, in the future, will the region be able to continue drawing on a large number of gamblers taking into account the fact that this industry is developing in other countries of the world?

Macau will continue to be the world capital of gambling by the Government needs to consider that when Japan opens, there might be a big impact on the market. When looking into the post-2022, and assuming there will be a new bid, the most important item shall be on demanding diversification from the concessionaires. If it was possible to build Vegas and make Vegas what it is today, why in Macau we cannot have the same type of tourism, with shows, conventions, expositions, etc? Macau shall be a world tourism destination where gambling shall be one more factor to the tourists and not the decisive factor.

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