In Macau, 1844, now in her late-60s, Zheng Yi Sao dies. This woman spent much of her life known as the infamous and legendary ‘Pirate Queen,’ plundering in the waters of the South China Sea; however, in April 1810 she officially surrendered to the Qing authorities and was pardoned for her piracy.
What does this have to do with gaming or Macau? Well, as it turns out, in Zheng Yi Sao’s retirement, she headed to the Guangdong region (which houses Macau) and started a gambling house. This is one of the first (and most famous) examples of gambling taking place in a region that would later become the worldwide hub of the practice and is a marker in the rise of modern-day Macau.
Then, just three years after Zheng Yi Sao passed away, in 1847, the Portuguese Government (which ruled Macau at the time) legalised gambling so it could tax the revenue made in the gambling houses that had sprang up in recent years.
Those in charge have watched Macau suffer through the pandemic and want a more wide-reaching source of income in the future, instead of relying solely on the gambling industry to prop it up
It wasn’t until 1999 that Portugal gave Macau back to the Chinese (after 442 years of rule), who then opened up Macau to international companies, which then saw MGM China, Las Vegas Sands and Wynn Resorts all arrive in the region.
By the mid-2000’s, Macau had become the biggest gambling province in the world, as people from across the globe flooded into the casinos to enjoy themselves. But, despite the money pouring in, the idea of changes to Macau’s heavy reliance on gambling had begun to take root in both the Macanese and Chinese Governments – the latter of which wanted the region it inherited to expand its offering by diversifying its economy so that it would not rely so much on the gambling market.
Of course, gambling has been illegal in mainland China since 1949, but Macau is the exception – owing to the fact that the Chinese was given control of the province from the Portuguese 24 years ago. However, the calls for changes to Macau’s reliance on gambling (a practice that started over 170 years ago in the time of the ‘Pirate ‘Queen’) are only getting louder.
The Las Vegas of Asia?
Many officials and CEOs have stated in recent times that Macau needs to move towards offering a wider tourism trade than just gambling. It is a policy which the incumbent Government of Macau is intent on pushing the resorts into doing, after it was given a mandate from the Chinese Government – in effect, trying to make Macau into a kind of Las Vegas of Asia.
Speaking exclusively to Gambling Insider, Ben Lee – Managing Partner of Gaming Developments and Marketing at IGamiX – gave a candid response to the question of how committed the Macau Government is to expanding the region’s tourism, by saying: “It appears to be the overriding focus of the current administration." This principle of economic diversification had been slowlygaining traction for a while in Macau, but while the money rolled in from the tables, it wasn’t so much of a priority for the operators.
Then, in late 2019, as if by grave fortune, the reliance that many had wanted to change over time was brutally exposed by the Covid-19 pandemic. All the casinos closed and the footfall dried up, almost as if it was a punishment by the almighty. In short, the money tap was – for the first time in living memory – switched off.
Ho Iat Seng, the Chief Executive of Macau, was scathing in his comments about the state of the region, stating: “We should be soberly aware of the problems and challenges facing the development of Macau. [Covid-19 has] fully exposed the vulnerability and huge risks of the Macau economy’s over-reliance on gaming tourism. This epidemic has once again exposed the problems and risks of Macau’s economic structure.”
Ho’s comments were echoed by Wilfred Wong, when the Sands China President and Executive Director added during a speech to the British Chamber of Commerce in Macau that the region and its operators, 'cannot just rely on gaming, because this is not healthy.'
Lessons learned
Cut to late 2022 and in the last two-and-a-half years, the region has taken a financial pounding as Covid-19 tore a hole through the local economy, devastating the gambling industry that thrives there more than in any other part of the world.
After the virus made its rapid journey across the globe, before being dragged down by the scientific community that worked tirelessly to ensure the virus would no longer pose a risk en masse, the Chinese Government decided to implement its zero-Covid policy – which was aimed at controlling the virus with lockdowns and suppression.
So, while Macau mired with continued Covid-19 outbreaks and lockdowns, parts of Asia got busy bringing Macau’s gambling community to new shores, with Singapore and the Philippines gladly accepting the newfound footfall. However, watching other parts of the world open up caused multiple protests across China – a rare sight in a country where protesting against the Government can be tricky for obvious reasons.
On this occasion, though, the protests against the policy prompted change from Xi Jinping’s administration, as it abandoned the policy and steadily re-opened the borders.
In the present day, it is becoming clear that the focus of Macau’s Government and the Chinese officials that govern its policy is hell-bent on making Macau more economically diverse, Las Vegas-esque even, a place where the biggest bands play, the best restaurants exist and the gambling flows.
The challenges of making Macau more of a diverse destination come not only from trying to manufacture a kind of Asian Las Vegas – but also from the tastes and differences in culture seen across Asia
Those in charge have watched Macau suffer through the pandemic and want a more wide-reaching source of income in the future, instead of relying solely on the gambling industry to prop it up. However, going about this is more difficult than it seems – and it already seemed like a Sisyphean struggle to begin with.
Challenges
In getting Macau to be a one-size-fits-all destination, the Chinese Government has earmarked a place called Hengqin Island– which exists on the banks opposite Macau’s island – to become the (kind of) expansion that would be needed to diversify the region.
That said, it comes with the notable caveat that gaming companies would not be allowed to be present across the bay. The Chinese hope that investment will be made from other companies, which would see a general of expansion of the region – minus the gambling.
Then there is a question of time, just how long could it take to start really diversifying Macau? When asked if Macau could be made more like Las Vegas, Lee answered this question by stating: “Las Vegas is a unique construct that has not been successfully replicated anywhere, not even elsewhere in the US. Macau first, then Singapore, followed by Manila have all been touted as the next potential Las Vegas of the East and two decades later, none of these cities are even anywhere close. Thailand will probably be the next target for this mantra and perhaps the Vegas gurus may have better luck there. The underlying key differential between Asia and Vegas is that Asians in general have very different priorities when it comes to their wallets.”
The challenge of making Macau moreof a diverse destination come not only from trying to manufacture a kind of Asian Las Vegas – but also from the tastes and differences in culture seen across Asia. It is in changing said culture that any shift towards a more touristy destination will see its most formidable opponent.
Why now?
Since the mid-1800s, Macau has been a gambling destination and since 1999 it has been under Chinese rule – so it makes sense that the Chinese, after allowing the big US operators to go there, would want to continue expanding the province. Furthermore, the idea to diversify its economy didn’t come around as a result of Covid-19, but the push to change it became a sobering reality after the impact of the pandemic.
As Lee explains: “Macau was told to diversify its economy away from gambling as well as its reliance on the mainland China market back around 2012-13 and it’s not remiss to say we failed. This time around, the instructions are very clearly spelled out to make sure there are no workarounds or bait n’ switch tactics being employed.”
Additionally, Lee also highlights that the market coming to Macau has been naturally changing in recent years: “The demographics of our visitors have already changed since mid-2012 and it will continue to change. We have been seeing younger visitors and more women, while the amount and type of spend per visitor reflects that.”
That said, it comes with the notable caveat that gaming companies would not be allowed to be present across the bay. The Chinese hope that investment will be made from other companies, which would see a general of expansion of the region – minus the gambling
Finally, when asked if there is a hunger from operators to change business operations in Macau, to diversify further, Lee mused: “Let’s just say it’s part of the cost of doing business in Macau.”
Interestingly, Hubert Wang – President & COO of MGM China – when speaking about the growth of Macau – highlighted the evolving regulatory rules in the region, stating: “In Macau, regulatory rules have evolved to keep up with market growth. As the market matures, regulations need to adapt to ensure the market remains healthy and sustainable.”
The adaptation of the regulations may now be necessary to allow Macau to grow in new directions, though it remains highly doubtful that the Chinese will allow gambling to cross the bay and set itself on the mainland.
Las Macau?
Going by what the industry demands and the cultural tastes of Macau, it seems unlikely that the region will become a new kind of Las Vegas in Asia, as places such as Singapore already exist to hog that market. However, there is a genuine willingness to ensure that Macau has more than one way of drawing people to its bright lights.
It is being mandated from the local and national Governments and the impact of Covid-19 created an urgency to see it happen. The billions lost during the relentless lockdowns and border restrictions hurt (badly) and few want to see it repeated in their lifetimes.
The question this all boils down to is: ‘Will the economic diversification of Macau happen quickly?’ Well, that doesn’t seem likely, as any sudden changes may have an unwanted impact on an economy that is only now recovering from a near-three-year hell.
But could Macau’s next phase of being see it shift away from gaming and more towards entertaining the masses, without damaging the local economy? It is as Lee states: “If the changes are carefully curated – as Singapore did with the design and entry of their integrated resorts – then possibly, but that remains to be seen.”
