Non-gaming development facing challenges and heading off course, says expert

Niall Murray

Macau’s gaming sector continues to draw criticism for its overwhelming dominance, with Chief Executive Sam Hou Fai admitting that addressing this structural imbalance will take years.

Industry experts warn that nearly three years after the 2023 non-gaming development regulations, efforts to diversify Macau’s attractions appear to be faltering.

In reflecting on Macau’s development since the liberalization of its gaming industry, it was initially envisioned as a counterpart to Las Vegas, where non-gaming activities would comprise 75% of the market compared to 25% for gaming.

However, Niall Murray, an expert in integrated resorts (IRs), gaming and hospitality noted, “this vision has not materialized,” with the current ratio standing at “85% gaming and only 15% non-gaming.”

While there is hope that this balance will improve over time, it hinges on Macau’s ability to compete with offerings in mainland China and other regions. Currently, Macau faces significant challenges, including a shortage of hotel accommodations.

With only half the number of hotel rooms compared to Hong Kong, prices remain “prohibitively high.” 

Sharing insights on the evolving IR landscape during a British Chamber of Commerce in Macao (BritCham Macao) talk last week, the expert agreed that to attract larger events and conventions, “an increase in hotel capacity is essential.”

However, he was quick to add that many hotels are opting to consolidate their rooms, following Singapore’s Marina Bay Sands model, which caters primarily to high-net-worth individuals rather than the mass market. This shift has resulted in a growing number of day visitors – now accounting for “57% of arrivals” – who spend an average of just “MOP700 per visit,” compared to overnight guests who typically spend between “MOP3,600 and 3,700 per night.” 

Murray suggested that Macau’s tourism strategy may be “veering off course,” raising concerns about its long-term viability.

He highlighted that while some casinos in Macau are making efforts to distinguish themselves by promoting non-gaming attractions, many of these initiatives have not met expectations. Survey data reveals that only 2% of visitors come to Macau specifically for gambling, a figure that has remained largely stagnant over the past two decades.

“Many first-time visitors are solely eager to experience the casinos and show little interest in other entertainment facilities,” he noted, emphasizing that this trend has resulted in underperformance in non-gaming investments.

Despite these challenges, Murray underscored that Macau has unique opportunities for diversification.

“By effectively integrating resources and attracting external investment, sustainable development can be achieved,” he stated. Among the potential areas for future growth, he identified Hengqin as a region with significant promise for developing non-gaming facilities, which could play a crucial role in Macau’s broader economic strategy.

One proposal for Hengqin is to complete unfinished hotels and convert unused office towers into accommodations to better connect visitors to Macau.

“Hengqin is an amazing opportunity; it always has been,” Murray stated, recalling how interest in the area surged in 2004.

However, he expressed concerns about the safety of repurposing office buildings originally designed for banking. “You don’t build these things without proper refuge floors and escape accesses,” he cautioned.

Instead, he suggested focusing on sectors like IT and finance, saying, “There are wonderful opportunities out there.”

He also highlighted the potential for Hengqin to develop non-gaming amenities, such as sports facilities, once the necessary infrastructure is in place. “We could develop laws that allow for unique opportunities, such as bringing a US-licensed doctor to perform specialized surgeries without the usual licensing hurdles,” he added.

Meanwhile, as the gaming industry in Macau shifts towards non-gaming sectors, Murray predicts a decline in gaming-related employment opportunities, resulting in wage disparities.

For example, starting salaries at gaming tables can reach MOP19,000, while non-gaming restaurants offer only MOP8,500 to MOP12,500. 

“This substantial wage gap makes it challenging to find local residents willing to accept lower-paying positions within a 1.7% unemployment pool,” he said, emphasizing the need for Macau to re-examine its labor laws to develop realistic and viable solutions.