G3 MARKET INSIGHT MACAU
create sub-concessions, though to be clear, sub-concessions are exactly the same as real concessions, there's no operational difference. SJM sold its half to MGM and Wynn sold its sub- concession to a joint venture between Melco and Crown Resorts. James Packer and I bought the Wynn license for US$900m.
I'd say that I’m one of the biggest supporters for the opening up of the Macau market because again, without competition there wouldn't be any motivation to continue to invest in Macau. Since the liberalisation of the market, around US$40bn of hard capital has been injected into the market in terms of all the new Integrated Resorts. It’s thanks to the handover that the dingy old Chinatown-esque casinos have been replaced. What we've built between us at Melco, LVS, MGM and Wynn are some of the most expensive and impressive Integrated Resorts anywhere in the world with the best five-star hotels, the most Michelin starred restaurants, etc. All of this began with Edmund Ho’s vision to transform Macau.
The funding to building Melco’s resorts was raised directly from the public markets. When I was taking part in roadshows to raise capital in London and the US back in 2004, I remember people asking, ‘so what's Macau?’ I said, ‘well if you look at the map, the little dot next to Hong Kong, that’s Macau.’ It seems odd to consider that today when everybody knows about Macau. Macau has gone from a market pre- liberalisation of around US$2bn a year to its peak in 2013 of US45bn. In total, around 80 per cent of Macau's government spending each year comes directly from casino gaming tax. I think it’s fair to say, therefore, that Edmund Ho’s vision has been transformational.
In your opinion, have the regulatory changes imposed from 2013 onwards increased the rate of diversification in the Macau market?
Lawrence Ho: I think regulation is definitely the biggest factor, not just in the sense of the Macau regulatory environment, but more so in China. Given that 90 per cent of our revenue comes from China, the country’s tightening of regulations in terms of capital outflow has certainly changed the market. I’d say that Macau has done an outstanding job. The casino industry is second only to banking as the most regulated industry in the world and Macau takes this regulation very seriously.
Since 2013, there's been a significant shift in the dynamics of the market. For the first 10 years or so of the development post- liberalisation, the market was driven by the VIP sector. At one point, the VIP market represented over 75 per cent of the entire market, with 25 per cent mass and slots. Today, in 2021, it's almost totally flipped, so 60 per cent of the market is mass and 40 per cent is VIP. I believe this has been a healthy development over the years in terms of the market being less reliant on VIP and, by association, less reliant on junkets. Macau has mirrored the growing middle-class in China and Asia, which are the fastest growing economies in the world.
As regards the premium mass customer and the growing middle class in China - how would you describe the evolution of your projects in Macau?
Lawrence Ho: At the time that Melco Resorts opened our first
“Since 2013, there's been a significant shift in the dynamics of the market. For the first 10 years or so of the development post- liberalisation, the market was driven by the VIP sector. At one point, the VIP market
represented over 75 per cent of the entire market, with 25 per cent mass and slots.
Today, in 2021, it's almost totally flipped, so 60 per cent of the market is mass and 40 per cent is VIP.”
P188 WIRE / PULSE / INSIGHT / REPORTS
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