20 years of resorts (4): AS CHINA CHANGES, MACAU EVOLVES

(part 4 of a four-part series): 1 2 3 4

The latter part of the past decade has provided lessons, wellheeded, for the concessionaires (and others) in how to be better corporate citizens. And in the meanwhile, some spectacular new resorts have been opened.

Looking back, by mid-2012, it had started to become clearer to analysts that China was not going to keep the stimulus taps wide open forever. The country’s economy had become too dependent on credit, and too much of the excess liquidity had been flowing into Macau through the junkets, which had seen their share of gaming revenues soar to nearly 70% of the total.

Ahead of the all-important 18th Party Congress, which installed a new generation of leadership in October, 2012, the country’s central bank starting reining in credit growth and cracking down on the proliferation of non-banking financial institutions. It came as a shock bigger than the 2008-2009 financial crisis to the junkets. The tightening hit their end-customer base and created solvency challenges, rather than mere liquidity challenges. Clients started defaulting on credit lines, which was something the junkets were not accustomed to. Revenues never quite went into negative territory, but the slowdown to single-digit growth spooked everyone.

It was unfortunate timing for Sands, as the long-delayed Sands Cotai Central opened into a softening market in April, 2012. Its 6,000 new hotel rooms, across three towers, were a large addition to inventory. Still, the property was well-positioned for future growth, and it further diversified the company’s offerings, with new shops, spas, restaurants and theaters.

Thankfully, the tightening was short-lived. Soon after Xi Jinping took over as General Secretary (he became President the following March), the central bank realized it had tightened too quickly, and so it loosened up again. From the middle of 2013 to the middle of 2014, growth rates on the mainland rebounded, and Macau followed suit: gaming revenues in 2013 ended up nearly 20% higher.

As it turned out, the brief downturn and subsequent recoery was just a prelude to the real crackdown to come.

In late 2013, reports started surfacing of a major anti-corruption campaign being waged across China. Officials were being rounded up by the hundreds, and then the thousands. President Xi showed that he was not kidding around in calling for the Party to clean up its act. These intensified in early 2014 as senior officials, including former security czar Zhou Yongkang, were targeted.

The crackdown had a deleterious effect on Macau, pushing gaming revenues into the red, where they stayed for the next three years: 2014 was -2.6%; 2015 was -34.3%; 2016 was -3.3%. Management at the concessionaires and investors in listed stocks were left wondering whether the party was well and truly over.

As it turned out, the party was over. But a new mission was about to begin.


President Xi had visited Macau in December 2014, for the 15th anniversary of the handover, when he exhorted the city to do better in diversifying its business model. Gaming revenues were already toe-deep in red ink by then. It took a while to sink in, but his words began to be heeded, and the future of Macau began to be shaped by a more focused commitment to diversification – by all of its participants. New projects that came online in the coming years carried higher budgets per square foot as operators hustled to improve the quality of their non-gaming offerings.

First up was Studio City, majority owned in a joint venture by Melco Resorts, which opened in October 2015. Complete with an amazing outdoor figure-of-eight ferris wheel, a Batman-themed interactive VR experience, a permanent magic show and an arena for concerts and other events, Studio City was a bold commitment to a diversified future. It complemented the incredible House of Dancing Water show at City of Dreams, launched back in 2010 and produced by Franco Dragone.

A year later, it was Wynn Macau’s turn to wow the market. The staggering US$4.2 billion price tag for Wynn Palace turned almost as many heads as did the quality of the property. Steve Wynn called it the most beautiful resort in the world when it opened in August 2016, and many commentators agreed. With 1,700 of the largest suites in the market, it seemed as if no expense had been spared in decorating the place, which also opened with award-winning spas, restaurants and shops, plus a bigger performance lake, this time with cable cars crossing it.

In its second phase, which will cost another US$2 billion, Wynn Palace is to add another hotel tower with 650 suites, a “one-of-a-kind public entertainment attraction,” including a “270-degree fully-immersive entertainment theater,” and a “destination food hall” offering a wide variety of regional Asian cuisines. Moreover, the Crystal Pavilion will also house an art museum in “partnership with a world-class art museum”.

At the time of Wynn Palace’s opening, gaming revenues were just starting to bottom out as the anti-corruption campaign in China had started to enter a “new normal” phase. This augured well for The Parisian Macao, which opened the following month, in September, 2016. And so it has proved to be, as the new mass-focused property has been a hit with visitors, especially those drawn to its iconic replica of the Eiffel Tower. Its 3,000 rooms have had high occupancy rates since opening, and its mall and restaurants have rounded out the company’s compelling list of attractions across the “Cotai Strip”.

The most recent property to open in Cotai, built by MGM, has been another stunner. In February 2018, MGM Cotai brought a new concept into the market, with a heavy focus on art and environmentally aware aesthetics. “The Spectacle”, as it is called, is a huge glass-domed courtyard at the center of the property, which allows natural light to blend with gigantic LCD screens lining the walls, flashing scenes from photo and video artists. Standing in the middle of it can be a surreal experience.

In the meantime, Melco has also added a mesmerizing new hotel tower, Morpheus, designed by the late, great Zaha Hadid. The 800-room hotel, with high-end restaurants, has been a critical and commercial success since opening in June 2018.


Taken together, all of these properties have built Macau into a world-class destination for visitors. Although, at the time of writing this celebratory issue, it had seemed like the skies were darkening again, with revenues in negative territory for most of the past year, in fact, the situation among the concessionaires is unlike it was in previous tough times.

Lessons have been learned. Heads are wiser. Eyes are more focused on the mass market. Headcounts are continuing to grow, despite the troubles affecting Hong Kong, which are keeping tour groups away from Macau, too. It is only a matter of time before gaming revenues turn positive again, and this time, it is widely believed that Macau’s future growth will be more sustainable, as it becomes less dependent on the volatile VIP segment.

There are still projects that need to open before the concessions expire in 2022. These include the Grand Lisboa Palace, SJM’s long-delayed mega-resort in Cotai, as well as extensions to existing projects, such as Galaxy’s Phase 3 and 4, and Sands China’s renovation of SCC into The Londoner. Billions of dollars more are flowing into these projects.

Including these expansions, by the time the concessions expire, and before the new concessions that should be awarded soon begin, the gaming industry will have invested a total of roughly US$50 billion.

That’s not bad a bad return for a city that in its 2001 tender had been hoping to attract US$1 billion.

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