Gambling establishments who were expecting better things from the Macau government in 2016 had their hopes doused yet again as Macau’s Chief Executive Fernando Chui Sai made it clear in a speech at the 16th anniversary of Macau’s return to China that his government would continue to focus on diversifying its economy and no longer remain dependant on the casino industry.
Macau’s casino industry once generated more than 80 percent of the government budget but after the launch of the anti-corruption crackdown in 2014, gambling revenue has fallen with every passing month and gross gaming revenues (GGR) recorded in November 2015 confirm a decline by 32 percent when compared to the same period in 2014.
Gambling establishments were hoping that 2016 would be the year when Macau slowly starts to relax its strict gambling policies and help the industry recover. There are a number of new casinos expected to open on the Cotai strip in the coming years and while these newer establishments are looking to comply with the government’s new diversification policy, they are aware that they cannot generate the same amount of revenue that Macau’s VIP players once provided.
In a statement, Fernando Chui Sai, Macau Chief Executive said “In the coming year, the development of Macau will still be affected by the complicated and ever-changing external environment. We believe opportunities always come with challenges. “We are pleased that China’s Thirteenth Five-Year Plan clearly states the aim of fully leveraging Macau’s unique advantages, coupled with elevating Macau’s position and functions in national economic development, and opening up policy.”
The Macau government at the behest of Beijing has encouraged casino operators to shift their services from catering to VIP gamblers to a serving a more family oriented audience. Most of the new casinos scheduled to open will be been given a restricted amount of gambling floor area as the government is more inclined to approve proposals that provide entertainment apart from gambling. Studio City, the $3.2 billion casino venture launched by Melco Crown Entertainment Ltd in October 2015 has done exactly this and offered visitors a number of non-gaming services.
Fitch Ratings Inc released a report in August highlighting the fact that non-gaming services generated only 10 percent of a casino’s gross revenue. While casinos will be forced to comply with Macau’s request for non-gaming services, they will be under tremendous pressure to generate revenue to meet their targets.
The chief executive appears to be prepared for the continuous decline of the gambling industry and stated that the 2016 GGR for Macau was set at MOP 200 billion which is another drop from GGR expectations in 2015.