Macau casinos will invest $15 billion mostly towards non-gambling interests over the next decade. [Image: Shutterstock.com]
Building a non-gambling sector in Macau
Six casinos in Macau will invest $15 billion mostly towards non-gambling-related activities over the next 10 years as part of their new licensing agreements.
Part of the new licensing agreements the casinos signed last month
Non-gaming expenses will be more than ten times more than gaming-related expenses. The base comes as part of new licensing agreements that casinos signed last month with a region considered the most luxurious gambling destination in the world.
The signing of the agreement ends a period of tension between casinos and interested individuals including investors, regulators and casino owners. Real estate will now spend the next decade pursuing outward growth rather than investing solely in game shows.
Macau Chief Executive Ho Lat Seng, Minister of Economy and Finance Lionel Leong Leong Fai Tak, and other officials presided over the signing of the agreements. Existing Wynn, MGM, Sands China, Galaxy Entertainment, Melco Resorts and MJM Holdings were all in attendance after successfully turning down a surprise bid from Malaysia-based Genting Group.
The heads of each company sat next to government officials as the deals were signed. Each deal will be activated on January 1, 2023, paving a clear path into the future.
The focal point of the new agreements includes finding ways to attract more foreign tourists. This reflects the wishes of the Chinese government, which feels the area needs to become more than just a hub for the wealthy travelers who frequent the area.
Investment towards non-gaming interests is expected to reach $13.57 billion
Total investment towards non-gaming interests is expected to reach $13.57 billion, compared to just $1.26 billion for game development. The new plan is a clear focus of past strategy and is being implemented after the pandemic caused casinos to lose billions of dollars during periods of inoperability and subsequent boom.
“The development of the gaming industry and tourism in Macau will enter a new stage,” said an official announcement issued by the region.
Follow the money
Macau, a region in the southeast near the bottom of mainland China, has been a world leader in gambling and other high-rolling activities for decades. Macau also has gambling in its DNA as the Portuguese previously claimed the region legislated and implemented legislation taxing gambling proceeds in 1847.
It is impossible for casinos to survive without any ill effects.
However, China’s strict coronavirus policies have made it impossible for casinos to survive without any ill effects. Travel restrictions, frequent closures and capacity constraints have been felt across the region as part of a “zero COVID” policy aimed at completely eliminating the virus from the region at the expense – and risk – of local businesses.
The Chinese government has also become increasingly interested in cracking down on illegal operations in the region that have helped attract various big players, prompting Macau to diversify its income stream. As it stands, more than 80% of the district’s cash flow comes from gambling and related activities.
Companies will raise money to invest in areas such as conference hosting and medicine. They will also need to stabilize local employment and will face greater government oversight than in the past.
“These projects will bring new players and tourists to the city, who will in turn spend big dollars on gambling,” said DS Kim, an analyst at JPMorgan Hong Kong.