It would appear that the lights are about to be turned up on Macau’s casinos. With 20-year concessions expiring next year, the government has released a list of changes it would like to implement, several of which appear similar to those launched recently under Beijing’s “Common Prosperity” drive. The way these were unveiled and the perceived lack of detailed explanation by the government has sent stocks tumbling.
Are investors over-reacting? It might depend on ROI time horizons. A big shift is under way, but it has been years in the making and will take decades to play out. Now is a good time to be considering the long-term opportunity, remembering what makes Macau special. This is especially when looking more closely at the development of neighboring Hengqin, a special zone on an island next door to Macau’s Cotai district, which is more than three times the size of the whole of Macau.
With this in mind, GBI has prepared a report looking ahead to beyond the awarding of new gaming concessions, which should happen sometime before the old ones expire in June next year (2022). Under this 10-year outlook, it is likely that strong growth will resume as the Hengqin Port becomes the main entry point to Macau and Beijing works with Macau to make the pioneering integration project a success. It is envisaged that GGR could double from pre-pandemic levels by 2031 as Macau’s merger with Hengqin drives mass visitation.
The main risks are macro: Disease containment and socio-economic stability in the hinterland.
Please get in touch for a copy of the report, which is only available to clients of GBI’s consulting service.
Hengqin, the special economic zone opposite Macau’s Cotai casino district, has been turned into a bold new experiment. Macau will essentially take over the daily management of the zone from Zhuhai, but will have to consult the provincial government on major policies.
The zone will be jointly managed by a committee, but Macau will be in the driver’s seat: This is clear from the fact that Macau will appoint the Executive Deputy Director of the zone’s management committee. Although Macau’s CE and Guangdong’s governor will be co-heads, the EDD will run the show on a daily basis. The language of the announcement makes it seem like this is a JV, but really this is Macau’s project.
There is much talk about diversification, with hi-tech industries, including manufacturing, and financial services being given lots of ink. But tourism is still the key. The plan makes no mention of the gaming concessionaires, and the tourism section calls it “cultural tourism”. But make no mistake, what this means in practice is that SMEs will get subsidies to pursue tech ideas, most of which will flop, and the banks will be able to build up some wealth management products in Hengqin, but the only projects that will actually make money will be in tourism, and so they will get the lion’s share of attention and resources.
This will take time, however: No one should expect a press release on the casinos being given a role in Hengqin before the concessions are renewed next year. The deadline for getting the management committee fully functional is only 2024. The goal for integration to be fully realised is only 2035.
Continue reading Hengqin plan is game-changer for Macau
Is Brazil about to open up to casinos? The idea was raised in a more than casual way at a forum being held in Macau this week.
As reported by Macau Daily Times, Marcelo Álvaro Antônio, Brazil’s Minister of Tourism, asked for feedback at the Global Tourism Economy Forum on his country’s plans to invite investors to open resorts and theme parks. In response, MGM China’s chairperson, Pansy Ho, said that from a gaming operator’s perspective, Brazil has all the basic requirements to open an integrated resort industry.
Ho, who is one of the chief organizers of the conference, made the comments during a press conference on Tuesday. According to Ho, Brazil should be able to develop similar types of integrated resorts to those built in Macau.
“I’m quite sure there will be some of the existing gaming operators that would be clearly interested [in investing],” she said.
That is possibly the understatement of the year. Although a staunchly Catholic country like, er, the Philippines, Brazil would be lucrative for Macau’s casinos, who are currently having to wait around for what seems like forever while Japan figures out what it wants them to do.
Read more details on MDT.
Ho Iat Seng, Macau’s new Chief Executive-designate, has made his first remarks on the issue of the gaming concessions, telling reporters that he is keen to resolve their “historical problems”.
Speaking to the media after getting a warm pat on the back by President Xi Jinping, who appointed him the third CE of Macau since the 1999 handover, Ho said he was keen to see the law take the lead in dealing with the imminent expiry and retendering process of the concessions, rather than using executive orders.
Continue reading New Macau chief sees ‘historical problems’ with casinos