Ticking the boxes

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Despite being called “benign” and “primarily backward-looking” according to analysts at Union Gaming, the interim review on the gaming sectors and its impact upon the economy, society, quality of life and examination of the concessionaires and sub-concessionaires in the territory seems to ‘reflect the government’s recognition’ of many issues relating to the gaming sector, and ‘may be indicative of forthcoming policy direction,’ note analysts at Bernstein.
The report, published on Wednesday focuses strongly on the developmental impact of the casinos in the territory and growth opportunities from rising purchasing power for those employed in the sector, to SMEs (small and medium enterprises) growth and working relationships with integrated resorts and MICE (meetings, incentives, conventions and exhibitions), with a strong nod to junket operations.
Director of the Gaming Inspection and Co-ordination Bureau (DICJ), Paulo Martins Chan, aside from noting the previously stated points to increase scrutiny on those entering the gaming promotion sector stressed the lack of manpower the Bureau has despite his reassurance that “we have inspectors 24 hours a day, 365 days a year to patrol the casinos”.
The stated need for growth in staff is to accompany the growing industry and a push to conduct more fieldwork – especially for ‘gambling under the table’ – with Bernstein noting that ‘further regulating junket promoters is one of the top priorities for Chan.
‘This represents incremental risk for the junket VIP segment,’ note analysts at Union Gaming, and given the wording on the new proxy-betting ban – leaving integrated resorts to police themselves and report misconduct to the authorities – if Chan gets his way, means increased fieldwork could allow the DICJ to “crack down on those crimes efficiently,” the director said.
Further VIP contraction
Currently, the problem, the director notes, is not legislative, as: “We do have the relevant laws that allow us to prosecute,” but that “it’s difficult to gather evidence as it mostly comes from victims”. The solution: “We need new methods to collect evidence,” notes the DICJ head.
Aside from phone betting one of the primary methods noticed in the report that ‘gravely damages the social order’, is that of ‘parallel betting’ – when a multiplying effect is applied to bets at VIP casino tables, which is ‘destructive’ for casinos and the government and the ‘obligations arising’ from the collection of these can generate conflicts between interest groups or situations of ‘thief steals from thief’ which could result in the ‘sudden failure of a VIP room or of a player’. This, added to the gray zones of legislation’ involving debt collection, motivate the director’s request for additional staff and “an upgrade to our system – including our computer system.” The director noted, however, that all actions the group undergoes must be legal and that “in the end, the power is with the legislators,” some of whom operate casinos. Bernstein notes that none of these issues is new to the market but that the ‘VIP segment may face further contraction and headwinds in the coming quarters.’ Rating
“In the face of international competition we need to discover new customers, new growth points,” noted Secretary for Economy and Finance Lionel Leong Vai Tac at the press conference for the interim report.
Receiving 75 per cent of the visitors that Las Vegas received in 2014, the SAR was able to generate around US$7.7 billion in non-gaming revenue, compared to Vegas’ US$10.3 billion, making them ‘comparable to Las Vegas’, states the report.
However, according to a report by Dr. Bo Bernhard, quoted by the interim report, a 31 per cent annual growth rate in non-gaming revenue was registered between 2007 and 2014, compared to a 23 per cent annual growth rate for the gross gaming revenues. For ten ‘principal tourist complexes of five-stars’ in the SAR the ‘average revenue’ of these generated US$250 million, whereas that of Vegas was only ‘US$230 million’ but that of the ’25 top integrated resorts’ in Vegas was US$380 million, notes the report.
Melco Crown and The Venetian led the way on non-gaming in the report with their 93 per cent and 92 per cent respective ratios. In an emailed statement to Business Daily, Melco Crown stated that ‘We take pride in the fact that Melco Crown Entertainment’s investment in local employee training, percentage of salary increment, and staff promotion are all above industry average, which is pointed out in the report.’
‘The acknowledgement is a demonstration of MCE’s thought leadership and commitment in the whole person development of our employees and local talent. We will continue to support the Government’s direction of diversifying the economy in Macau, and contribute in building Macau into a World Centre of Tourism and Leisure,’ reads Melco Crown’s statement.
Sands China, through a press release, also noted that it was ‘pleased to hear’ of the results, further stating it is ‘committed to contributing to the development of Macau into a World Centre of Tourism and Leisure and to contributing to the successful diversification of Macau.’ The resort states that it will ‘continuously adopt appropriate measures to devote resources to social development.’ MICE
The report notes that ‘there’s a certain preoccupation by the government relative to’ the MICE (meetings, incentives, conferences and exhibitions) sector, with ‘the number of expositions in the last years not increasing significantly’. Despite drawing nearly 786,000 participants in the last quarter of 2015, according to data by the Statistics and Census Bureau, the sector is suffering due to the fact that: ‘the majority of the companies linked to the sector of expositions of the MSAR are SMEs, who suffer from limitations relating to a shortage of funding and of human resources, which takes away their capacity for negotiation’.
Aside from these factors, the report notes ‘structural problems’ such as ‘elevated rent of exposition space, lack of flexibility in its function,’ and ‘insufficient amount of transport to the exterior (internationally)’. To combat this, the ‘development of infrastructure, such as the interurban transport network,’ and ‘Hong Kong-Macau-Zhuhai Bridge will ‘significantly resolve’ the problems ‘permitting the MICE sector to be more competitive and organize events and conventions of larger scale (of 5,000 to 10,000 people),’ notes the report. This would also cause ‘tourism to benefit indirectly.
Bernstein notes that: ‘the paradigm shift in Macau’s market towards Mass also incentivises casino operators to add non-gaming elements in their new casino projects.’ Non-residents
The report notes that ‘an escalation of the conflicts and indignations existent in society is predicted, resulting from the opposition to the import of non-resident labour if mechanisms of layoffs occur’, due to the fall in gaming revenue seen since 2014 and subsequent cuts in spending and hiring. The report states that the rise in non-resident workers and their ‘habits and customs’ which ‘bother local residents’ combined with the ‘high procurement of housing, transportation, health services, education’ and resulting ‘elevated inflation rate and increase in rent costs’ will make it ‘easy for negative emotions of local residents against those from outside to intensify’ leading to an ‘even larger dispute between them […] over resources necessary for daily life.’ At the time Business Daily went to press four of the six operators mentioned in the interim report were unavailable for comment on the results.