would truly have a mass market in Macau. At the moment, we don't have a true mass market because every one of our visitors and gamblers is an international traveller subject to outbound and inbound visas, which in turn are subject to currency controls. If Macau becomes a single currency jurisdiction with China, we’d no longer have the capital constraints China imposes on Macau, due the casinos trying to repatriate profits overseas, that's why a single currency would make it easier for China to control the leakage.
Wilfred Wong, President and Executive Director of Sands China, recently said whilst awaiting government direction that he does not see a future in which Chinese companies operate within the gaming industry - thoughts reinforced by Chairman and CEO Rob Goldstein. However, Priscilla Roberts, Associate Professor at the City University of Macau, believes: “it’s very possible that American casinos will no longer be as welcome in Macau and there may be some pressure for the casinos to be more China operated.” Where do you stand on this subject?
Rui Pinto Proença: Well, there’s a line of thought that says American operators will ultimately
concession, I would expect that the promises by the new proposers will be highly detailed and specific this time around, and there will be penalties involved should the promises not be met.
Andrew Klebanow: I believe the licensee renewal process will demand that each concessionaire commits to massive amounts of investment in non-gaming components. Each 10-year concession will come with a stipulation that the concessionaire must, for example, commit $10bn in non-gaming facilities.
Every concessionaire will step up to the plate. Te casino prize is huge, but there's also money to be made in retail, commerce, amusement and theme parks.
I think, with the changing political scene in the United States; the recent election; the passing of a Sheldon Adelson; the resignation of Steve Wynn, has seen the removal of the major political lightning rods. Te next phase will see President Biden increase efforts to move towards normalised relations with the PRC and away from the sabre rattling. I think the PRC and Macau government are, therefore, more amenable to working with the existing
“If Beijing decides that it’s politically convenient to check the Americans, it will be done. Without blinking an eye. And there’s clear precedence. When Macau’s public bus network held an open tender, a French consortium won a major part of the tender. However, what followed is that the French consortium was not paid by the Macau government, they declared bankruptcy hoping to force the local authorities to the table and the Macau Government immediately announced that they would take over the running of the buses.” Ben Lee
become the victims of the geopolitical tensions that exist between China and the US, reinforced during the era of the Trump administration, but which has long been part of the narrative in this part of the world.
First of all, I think the geopolitical context is both complex and ever changing. Tat said, it’s definitely a risk and something that the operators need to bear in mind and consider in their approach to the concession retendering. I also think it’s important to understand the declaration that there will be no Chinese capital in the gaming sector and where it comes from, as there are a lot of difficulties associated with that assumption. If you asked me, will the companies investing in gaming be state-owned enterprises? I find that unlikely.
Do you believe that the upcoming licence renewal process will be used as a stick to impose greater control?
Ben Lee: Yes. Te problem with the first concession is that there was no ‘stick’ in terms of what the concessionaires had to accomplish. It was basically open ended and allowed operators to play ‘bait and switch.’ Each promised the moon and the stars and delivered, well, significantly less. Now, with the new
concessionaires. I don't think they'll chase them out as I don't think denying a renewal to any of the US based operators is in Macau’s best interests.
What do you think those licence stipulations might be?
Ben Lee: It’s likely we’ll see increases in the ratio of entertainment, MICE and retail within the gaming concession, despite the fact that Macau already offers too much retail; MICE has never realised its potential and entertainment has died on its feet. I’d also expect the government to compile a list of non-gaming amenities and request concession proposers to submit their plans before selecting the best proposals.
Contemplating the nuclear licensing option, could the state nationalise the industry in Macau and make gambling a state-run business?
Rui Pinto Proença: I would say that’s entirely unforeseeable. However, the gaming concession in Macau has always been in the hands of a private operator – it has never been government operated. Te company running the business during the monopoly, STDM, the predecessor of SJM, was fully private. So, I don't think you can
find a parallel with that possibility. I also think that such an assumption wrongly evaluates the situation.
Looking at the industry going forward, the integration and increased focus upon tourism and the entertainment industry is the ultimate goal for Macau. Tis leaves open the door for Chinese investment in what are desirable businesses and infrastructure in Macau.
No matter how much the enclave seeks to attract international visitors, the fact is that the majority of visitors to Macau hail from China, and to that extent I think some of these companies would benefit from having Chinese partners, people that know the market and what Chinese customers want. Tere would be many benefits from this type of cooperation.
One example of this is when you arrive at a casino in Macau. If you wish to play on the casino floor you must withdraw cash, and to do this you must visit a counter and purchase your chips with cash. When you’ve finished playing, you redeem your chips back into cash. Cash is the currency of choice in Macau, but in China, if you try to pay with cash anywhere – you’re a caveman. People don't use cash in China anymore. It’s absolutely a cashless society, and so there is a mismatch between how the Macau gaming sector is operating and the reality of Chinese consumer spending habits. I think that mismatch could be addressed by the involvement of Chinese companies from different sectors; technology, retail, fintech, in the Macau market.
I think that there's definitely space for cooperation with Chinese businesses, but that does not necessarily mean an exit of US market capital. However, I do think it would be beneficial from a business standpoint at the point at which the spheres of gaming, tourism, hospitality and entertainment meet.
Ben Lee: Each operator has sought to ingratiate themselves into the economy with varying levels of success. Te issue for foreign operators is one of cultural norms and differences, which contrasts with their fellow competitors, particularly the local and the Hong Kong operators who are more or less considered locals. We're talking about cultural norms, corporate cultures practices, HR, legal, basically a conflict driven approach versus a compromise/harmony-oriented attitude adopted by the locals. We see major differences arise between the US-based operators and the local operators. Some have attempted more successfully to adopt local practices, but each have acquitted themselves with differing levels of success in their ability to do so.
Having said all that, when push comes to shove, if Beijing decides that it’s politically convenient to check the Americans, it will be done. Without blinking an eye. And there’s clear precedence. When Macau’s public bus network held, for the first time, an open tender to take over the existing duopoly, a French consortium won a major part of the tender. However, what followed is that the French consortium was not paid by the Macau government, they declared bankruptcy hoping to force the local authorities to the table and the Macau Government immediately announced that they would take
WIRE / PULSE / INSIGHT / REPORTS P201
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