most analysts are of the view that Macau is not considered as part of the mainland.
So Macau is viewed as an aberration, rather than a success?
Ben Lee: From the recent spate of announcements and edicts, one could probably draw that conclusion.
In view of this, do you believe the liberalisation of Macau was part of a scheme to evolve the gaming industry into a broader tourism sector?
Andrew Klebanow: I think that's exactly what the plan was; the Macanese government recognised that in abandoning the monopoly, the market could attract investment capital. I have a hard time believing anyone with the exception of Sheldon Adelson and Steve Wynn could have envisioned how big Macau was to become.
I think that they saw this peninsula, across the harbour from 10 million people in Hong Kong and Guangdong province with 90 million people, and thought that if we build 'something attractive,' they will come.
Certainly, if you look at Macau before 2002, there wasn't a whole lot of 'attractive.' Te genius of the plan was to attract outside investment and bring visionaries to Macau to build integrated casino resorts. Tey just did the math. What we've always known about casinos is that proximity and ease of access are the primary drivers of revenue. Te closer you place your casino to a population centre, the more successful you will be.
In the initial years, as Cotai was in development, it was all about increasing supply because demand was almost limitless. However, as a strategy for diversification, there are lots of problems with this model, and so the Macau Government started limiting growth by restricting the volume of table games. Which is why, to this day, if you walk the beautiful expansive casino floor at Wynn Cotai, it still seems a little light on tables.
With major developments such as the construction of the Hong Kong – Zhuhai – Macau Bridge and the recently published Macau Tourism Industry Development Plan or Master Plan, how do you envisage the future of Macau and its gaming industry?
Rui Pinto Proença: I think there is definitely a push, which was very apparent in the policy changes announced by the Macau government this year, for diversification into financial services. Tis region continues to explore and attempt to understand what role it can play in the financial services sector in the near future. However, it remains unclear, when you consider the powerhouses of Hong Kong and Shenzhen on our doorstep, what exactly is Macau’s niche in this fiercely competitive sector?
I think the plan is still being thought through and from planning to execution, we’re still at the early stages of this process. However, even if such a scheme were successful, I think any plan to replace the gaming industry as the key economic driver in Macau would be extremely difficult to achieve. Financial services can
Andrew Klebanow, Principal, Klebanow Consulting
Andrew Klebanow is the Principal of Klebanow Consulting. He brings nearly 40 years experience in the casino industry with the past 12 years spent as a gaming consultant. He has completed assignments in jurisdictions throughout North America as well as in 15 countries. Over the course of his career he has visited nearly 1,000 casino properties. Andrew has authored over 120 articles for trade publications; contributed academic papers and is a periodic lecturer at Cornell University’s School of Hotel Administration and has taught classes at the University of Nevada Reno’s School of Continuing Education.
www.klebanowconsulting.com
andrew@klebanowconsulting.com.
“If you compare with Las
Vegas, at one time 80 per cent of property revenues came
from the casino, now it's well below 50 per cent and more like 35 per cent. Vegas is dependent on hotel rooms getting a great average daily
rate, on filling the conventions and meeting spaces; and upon nightclubs and restaurants.
Vegas has truly diversified its product. Gaming revenues continue to grow, but non- gaming outpaces the gaming segment. I think both the Macau government and the PRC would like to see similar trends in Macau.” Andrew Klebanow
complement the gaming industry and even diminish its economic importance, but I think the strategy of diversifying the industry would be more advantageous and achievable than seeking to replace or end this business in Macau.
Ben Lee: Te bridge isn’t a Macau-centric project. It wasn’t designed to facilitate more tourism and to attract the premium mass
market. Te bridge was constructed primarily to bring Zhuhai closer to Hong Kong, just as Shenzen enjoyed the boost from Hong Kong. It was designed to enable transportation and logistics from Zhuhai to the ports of Hong Kong.
Andrew Klebanow: I believe casino gaming will always be a primary source of tax revenue for the government in Macau. If you compare with Las Vegas, at one time 80 per cent of property revenues came from the casino, now it's well below 50 per cent and more like 35 per cent. Vegas is dependent on hotel rooms getting a great average daily rate, on filling the conventions and meeting spaces; and upon nightclubs and restaurants. Vegas has truly diversified its product. Gaming revenues continue to grow, but non-gaming outpaces the gaming segment. I think both the Macau government and the PRC would like to see similar trends in Macau.
Encouraging this type of diversification is part of the process to control the market; limits on the number of table games, stipulations on the volume of currency crossing the border into Macau, and a crackdown on the role of junket promoters conduct their business in China. Tese are significant steps.
Both the PRC and the Macau government are encouraging operators to continue to diversify and create additional, more exciting entertainment experiences that are non- gaming. Consider the fact that the renovation of the Sands Cotai Central to create the Londoner Casino is a US$2bn investment. Tat’s a lot of money for what essentially isn’t a new property, it’s renovation that isn’t adding to the gaming offer.
In relation to the tourism development plan, do you think China has a firm strategy to reduce Macau’s dependency on gaming revenues?
Ben Lee: We have been listening to this rhetoric over the past 10 years and we have seen very little concrete results. I think the issue is that the rhetoric runs counter to Macau’s ability to diversify our economy, an actuality that is not seen in the lower rungs of Macau. Tere’s lots of talk about encouraging SMEs in Macau, but in fact the SMEs are dying because labour is being sucked up by the gaming industry. To this day, very few people want to work in non-gaming environments compared to the casinos, where the pay and the benefits are much higher.
In the short term, due to the contraction caused by Covid, the gaming industry has scaled back on recruitment. People are seeking work with other companies, but when things improve, they will be back to the casinos in a heartbeat. So, the gaming industry has literally sucked the lifeblood out of other areas of the economy.
If Macau really wants to diversify its economy, it needs to allow the invitation of skills and talent from outside the gaming sector. Unfortunately, there is no political will to accomplish this, and we haven’t seen change in the last decade. In fact, the situation is about to get even worse. Working visas or blue cards for foreign workers have already been withdrawn, which means the situation is going to get even more complicated in the future. How do you diversify an economy when there’s no talent to do so?
WIRE / PULSE / INSIGHT / REPORTS P197
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