The Las Vegas Of Asia Tells Casinos To Grow Beyond Gambling

BEIJING (AP) — Losing money because of COVID, the U.S. casino giants that helped make Macau the “Las Vegas of Asia” face a new challenge: The tiny Chinese territory wants to reduce its reliance on gambling by paying for construction of theme parks and other attractions.
The former Portuguese colony has been left out of business decisions for decades and is now aligned with the official strategy in mainland China, where foreign companies are called upon to help pay for the ruling Communist Party’s development ambitions, profitable or not.
The licenses of MGM Resorts, Las Vegas Sands, Wynn Resorts and three Chinese competitors that have invested billions of dollars in Macau expire in December.  The rules, released in early July, say anyone looking to operate over the next 10-year period faces an additional requirement to invest in “non-gaming projects.”
Casinos face even more financial pressure after being ordered to close this week, along with most other businesses, as Macau tries to control a renewed coronavirus outbreak.  They were already operating under rules imposed at the end of June that limited their number of workers to 10% of normal.
Economic analysts expect Americans to get permits, but the government says bidding is open to anyone.
The region of 700,000 people crammed into a 30-square-kilometer (12-square-mile) peninsula jutting into the South China Sea near Hong Kong is the world’s largest gambling hub, but is under pressure from Chinese President Xi Jinping’s government to rely less in its dominant industry.
Beijing wants theme parks, entertainment and conventions to attract more non-Chinese visitors.  Even before tourist travel was shut down to combat COVID in 2020, the mainland was trying to limit the flow of gamblers across the fenced border that separates Macau from Guangdong province.
Macau is “committed to steering the composition of industries towards sufficient diversification,” its economic secretary, Lei Wai Nong, said at a cabinet meeting on May 31.
An added complication for Americans: Relations between Xi’s administration and Washington are strained by disagreements over trade, technology, human rights and other irritants.  Other companies have been hit by retaliation over US tariff hikes, but Macau’s casinos have not been targeted.
“There is a big risk that at least one, if not two, won’t get a new concession,” said Ben Lee, managing partner of IGamiX, ​​a gaming industry consultancy in Macau.  “Why would 50% of such a dominant industry in Macau be given to foreigners, especially Americans?”
The push for change comes as Macau faces increasing competition for potential non-Chinese players from casinos in Singapore, Malaysia and Cambodia.
Financial analysts expect MGM, Sands and Wynn to be approved for permits because of the jobs and tax revenue they generate.  Their casino hotels with thousands of employees fly over the narrow streets of Macau’s century-old downtown and Cotai, a strip of land reclaimed from the sea.
However, the risk that an established operator may not be licensed “should not be ignored,” Fitch Ratings said in a June 16 report.
Chinese competitors include SJM Holding, part of the empire of the late Stanley Ho, a competitive ballroom dancer and Macau’s “King of Gambling,” who had a four-decade government-granted casino monopoly until 2001. SJM is run by Ho’s daughter Pansy.
The others are Melco International, run by Ho’s son Lawrence, and Galaxy Entertainment Group.
The decision to allow foreign casinos in 2002 brought a flood of money to Macau, once best known in China for Portuguese-style egg tarts, and billions of dollars in profits to their operators.  In total, the six licensees operate 41 casinos.
Annual revenue from slot machines, craps tables and other games peaked at $45 billion in 2013. That was equal to $65,000 for every man, woman and child in Macau and more than three times Nevada’s 2021 revenue of $13.5 billion.
But revenue was falling even before COVID hit in 2020. Beijing was tightening controls on how often mainland players could visit.  Restrictions were imposed on financial transfers to Macau in a crackdown on money laundering and tax evasion.
By 2019, before the pandemic, gambling revenue had fallen 19% from 2013 levels to $36.4 billion.  In 2020, it collapsed a further 80% to just $7.6 billion.  Last year, revenue rose to $10.8 billion, but that’s down 75 percent from 2013.
Macau’s economy, possibly the world’s most dependent on tourism, has shrunk by half since 2019, according to government figures.
The government has appealed to casino operators to avoid redundancies.
Macau’s appeal is so strong that Las Vegas Sands Corp., traditionally the world’s biggest casino operator by revenue, sold its namesake Las Vegas hotel in 2021 to go all in on its six Macau properties and one in Singapore .
The company has invested about $13 billion in Macau.  It is in the midst of a $2.2 billion overhaul of one of its hotels.
Betting so heavily on Asia, however, meant Sands took the biggest hit from COVID.  The company reported a first-quarter loss of $478 million.  Revenue fell 21% from a year earlier to $943 million.
Wynn Resorts Ltd.  said revenue from its two Macau casinos fell, but its Las Vegas properties helped limit the overall loss to $183.3 million on revenue of $953.3 million, temporarily putting it ahead of Sands.
MGM Resorts said first-quarter revenue of $268 million in Macau was down 76 percent from a pre-boom level of $734 million in the first quarter of 2019.
Adding non-gaming assets would make Macau more like Las Vegas, where casinos try to attract families and non-gamers with roller coasters, music, shopping malls, art exhibitions and water parks.
SJM operates zip lines and indoor skydiving attractions.  He dropped a previous proposal for a Hello Kitty theme park.  The mogul behind Galaxy talked about a possible theme park similar to the movie “Avatar,” but it never went ahead.
“Amusement and theme parks are expensive to operate, with dubious returns,” Lee said.
Regulators need to craft investment requirements “very carefully,” Lee said.  “You can’t force concessionaires to invest in theme parks and entertainment without a return unless it’s black and white.”

title: “The Las Vegas Of Asia Tells Casinos To Grow Beyond Gambling " ShowToc: true date: “2022-11-20” author: “Natalie Blankenship”

BEIJING (AP) — Losing money because of COVID, the U.S. casino giants that helped make Macau the “Las Vegas of Asia” face a new challenge: The tiny Chinese territory wants to reduce its reliance on gambling by paying for construction of theme parks and other attractions.
The former Portuguese colony has been left out of business decisions for decades and is now aligned with the official strategy in mainland China, where foreign companies are called upon to help pay for the ruling Communist Party’s development ambitions, profitable or not.
The licenses of MGM Resorts, Las Vegas Sands, Wynn Resorts and three Chinese rivals that have invested billions of dollars in Macau expire in December.  The rules, released in early July, say anyone looking to operate over the next 10-year period faces an additional requirement to invest in “non-gaming projects.”
Casinos face even more financial pressure after being ordered to close this week, along with most other businesses, as Macau tries to control a renewed coronavirus outbreak.  They were already operating under rules imposed at the end of June that limited their number of workers to 10% of normal.
Economic analysts expect Americans to take permits, but the government says bidding is open to anyone.
The region of 700,000 people crammed into a 30-square-kilometer (12-square-mile) peninsula jutting into the South China Sea near Hong Kong is the world’s largest gambling hub, but is under pressure from Chinese President Xi Jinping’s government to rely less in its dominant industry.
Beijing wants theme parks, entertainment and conventions to attract more non-Chinese visitors.  Even before tourist travel was shut down to combat COVID in 2020, the mainland was trying to limit the flow of gamblers across the fenced border that separates Macau from Guangdong province.
Macau is “committed to steering the composition of industries towards sufficient diversification,” its economic secretary, Lei Wai Nong, said at a cabinet meeting on May 31.
An added complication for Americans: Relations between Xi’s administration and Washington are strained by disagreements over trade, technology, human rights and other irritants.  Other companies have been hit by retaliation over US tariff hikes, but Macau’s casinos have not been targeted.
“There is a big risk that at least one, if not two, won’t get a new concession,” said Ben Lee, managing partner of IGamiX, ​​a gaming industry consultancy in Macau.  “Why would 50% of such a dominant industry in Macau be given to foreigners, especially Americans?”
The push for change comes as Macau faces increasing competition for potential non-Chinese players from casinos in Singapore, Malaysia and Cambodia.
Financial analysts expect MGM, Sands and Wynn to be approved for permits because of the jobs and tax revenue they generate.  Their casino hotels with thousands of employees fly over the narrow streets of Macau’s century-old downtown and Cotai, a strip of land reclaimed from the sea.
However, the risk that an established operator may not be licensed “should not be ignored,” Fitch Ratings said in a June 16 report.
Chinese competitors include SJM Holding, part of the empire of the late Stanley Ho, a competitive ballroom dancer and Macau’s “King of Gambling,” who had a four-decade government-granted casino monopoly until 2001. SJM is run by Ho’s daughter Pansy.
The others are Melco International, run by Ho’s son Lawrence, and Galaxy Entertainment Group.
The decision to allow foreign casinos in 2002 brought a flood of money to Macau, once best known in China for Portuguese-style egg tarts, and billions of dollars in profits to their operators.  In total, the six licensees operate 41 casinos.
Annual revenue from slot machines, craps tables and other games peaked at $45 billion in 2013. That was equal to $65,000 for every man, woman and child in Macau and more than three times Nevada’s 2021 revenue of $13.5 billion.
But revenue was falling even before COVID hit in 2020. Beijing was tightening controls on how often mainland players could visit.  Restrictions were imposed on financial transfers to Macau in a crackdown on money laundering and tax evasion.
By 2019, before the pandemic, gambling revenue had fallen 19% from 2013 levels to $36.4 billion.  In 2020, it collapsed a further 80% to just $7.6 billion.  Last year, revenue rose to $10.8 billion, but that’s down 75 percent from 2013.
Macau’s economy, possibly the world’s most dependent on tourism, has shrunk by half since 2019, according to government figures.
The government has appealed to casino operators to avoid redundancies.
Macau’s appeal is so strong that Las Vegas Sands Corp., traditionally the world’s biggest casino operator by revenue, sold its namesake Las Vegas hotel in 2021 to go all in on its six Macau properties and one in Singapore .
The company has invested about $13 billion in Macau.  It is in the midst of a $2.2 billion overhaul of one of its hotels.
Betting so heavily on Asia, however, meant Sands took the biggest hit from COVID.  The company reported a first-quarter loss of $478 million.  Revenue fell 21% from a year earlier to $943 million.
Wynn Resorts Ltd.  said revenue from its two Macau casinos fell, but its Las Vegas properties helped limit the overall loss to $183.3 million on revenue of $953.3 million, temporarily putting it ahead of Sands.
MGM Resorts said first-quarter revenue of $268 million in Macau was down 76 percent from a pre-boom level of $734 million in the first quarter of 2019.
Adding non-gaming assets would make Macau more like Las Vegas, where casinos try to attract families and non-gamers with roller coasters, music, shopping malls, art exhibitions and water parks.
SJM operates zip lines and indoor skydiving attractions.  He dropped a previous proposal for a Hello Kitty theme park.  The mogul behind Galaxy talked about a possible theme park similar to the movie “Avatar,” but it never went ahead.
“Amusement and theme parks are expensive to operate, with dubious returns,” Lee said.
Regulators need to craft investment requirements “very carefully,” Lee said.  “You can’t force concessionaires to invest in theme parks and entertainment without a return unless it’s black and white.”