With its huge golden lotus skyscraper towering above its egg-shaped dome, the Grand Lisboa Casino Resort has long been a landmark and symbol of Chinese Macau’s prosperity and fortune.

But as the city’s stringent coronavirus-free restrictions ended last month, dozens of patrons have been left on the main gaming floor of the 14-year-old facility owned by gambling mogul Stanley Ho’s SJM Holdings. There was only one. The lifting of restrictions contributed to high Covid infection rates among staff at Macau’s tallest building, and tourists were slow to return.

Nearly half of the Baccarat betting tables were abandoned or unused. The high-stakes betting area was closed and six restaurants, including the 3-Michelin-star Robuchon au Dome, were completely closed.

Prolonged pandemic border controls that banned high-rollers from mainland China have crushed the Asian gaming mecca, the only place where casino gambling is legal in China. I returned it. macauWorst year ever.

In addition to trying to revive their core business, the six major gambling operators now have the additional burden of trying to build and expand their non-gaming ventures. It was a requirement that came with license update On January 1, local governments are looking to diversify their gambling-dependent economies. Beijing is behind the move, said a senior casino executive.

“Macau has hit rock bottom,” said David Green, a gaming and governance consultant and former adviser to the Macau government on casino bids. “[But it] The new concession deal includes a tough commitment to non-gaming investments, so there’s room for a breather. ”

Line chart of monthly gaming revenue ($bn) showing Las Vegas reclaiming the gambling throne from Macau

As part of the 10-year franchise (shortened commitment compared to the previous 20-year deal), the six incumbents – SJM Holdings, MGM China, Galaxy Entertainment, Melco Resorts, Sands China and Wynn Macau – have combined at $14.9 billion.

Sands and Galaxy invested the most, spending $3.8 billion and $3.5 billion respectively. The rest will be spent between $1.5 billion and $2.2 billion for him. More than 90% will be involved in non-game development, such as theme parks, conventions, exhibition halls, and overseas market development.

For example, SJM said it would upgrade its convention and exhibition facilities and create garden-themed venues to accommodate small and medium-sized events. Sands, meanwhile, plans to add a glass conservatory to his 538,000-square-foot garden at London’s landmark casino.A resort modeled after Singapore Gardens by the Bay.

Italian-style gondola at Sands-owned Venetian Macau Resort
In late December, Sands’ Venetian Macao Resort and Casino saw few tourists or gamblers, and even canceled gondola rides due to staff shortages, according to staff. © Chan Ho-Him/FT

Macau “ostensibly seeks diversification away from gaming, but faces a dilemma,” according to gaming consultant Green. Territories collect taxes at a rate of approximately 40% on total game income. . . the government would get much less income. ”

of game department While accounting for more than 80% of government revenue, non-gaming activities provided an average of less than 15% of overall casino revenue in 2019.

Eilo Yu, an associate professor of government and public administration at the University of Macau, said it remains to be seen whether non-game investments, such as upgrading the infrastructure of conventions and exhibitions, “can generate returns that sustain market mechanisms.” I said I don’t know.

The Casino Group’s experience over the past decade, like Sands’ investments in these areas, “proves that the market may not find Mice. [meetings, incentives, conferences, exhibitions] The market is attractive,” he said.

Colin Mansfield, senior director of rating agency Fitch, said the Chinese city is trying to match Las Vegas’ success in attracting international audiences by turning Macau into a global tourist destination. Nevertheless, “gaming will continue to be a meaningful driver for the business of concessionaires,” he said.

Diversification is questionable, but investors remained confident in gambling success even after announcement of contract renewal. Shares of the Big 6 casinos have risen between 2% and 36% over the past month.

Renewal of licenses for US-owned casinos, in particular, as the US group relies heavily on Asian assets to fuel its growth amid accelerating US-China decoupling and deteriorating relations. “The Macau government has managed to maintain the status quo to minimize disruption to the severely hit economy,” said Asian gaming expert IGaX Management and Ben Lee, Managing Partner of Consulting, said.

Analysts expect a pessimistic first half of 2023, but a gradual recovery. Fitch predicts that Macau’s gaming revenue this year could reach 50% of his 2019 levels, but a full recovery will take him at least two more years.

New law cracks down on VIP junket business where middlemen introduce high rollers to casinos, arrests and ongoing trials Alvin Chowwas accused of cross-border gaming crimes and ran the city’s largest junket group, but it also helped keep high-paying gamblers away.

People walking through Macau with the Grand Lisboa Casino in the distance
Gamblers have yet to return to Grand Lisboa and Macau’s other casino resorts. ©Eduardo Lille/Bloomberg

Macau records total gaming revenue of just $5.3 billion in 2022. That’s a 51% year-over-year decline for him, well below his $35 billion in 2019. Las Vegas records her $7.5 billion in the first 11 months of 2022.

A “permanent” loss for mainland China high rollers would mean a significant reduction in revenue as the mass market player-to-VIP ratio shifts from perhaps 50:50 to as high as 90:10 in the post-corona era. could mean. Hoffman Ma, executive of Success Universe, which invested in SJM’s Ponte 16 Resort, said:

That said, Ma is confident Macau will overtake Vegas again in the next few years. “If the Macau mass market can recover 100% of his, that means he’s already marginally outperforming Las Vegas’ earnings…even if the VIP market doesn’t come back,” he said.

Jorge Costa Oliveira, former legal commissioner of the Macau Gambling Commission, said investors should be confident that the Chinese government wanted to restore Macau’s wealth despite tightening rules. said.

“China needs Macau to demonstrate success stories to Taiwan and abroad,” he said.

Macau remains a desirable destination for the first visitors returning from mainland China after quarantine-free travel resumes, retaining its glitz and glamour.

Sichuan tourists Xiang and his wife spend an average of 20,000 RMB ($2,872) a day on a week-long trip and don’t feel down when they lose at a table in Grand Lisboa was.

“I just want to look around a little, gamble a little, have a little fun,” he said, posing outside with his wife against the background of the city center, which is still almost empty due to the COVID-19 pandemic. I took it.