20 years of resorts (1): Biggest Bet Yet

From sleepy town to world- class tourist destination in 20 years, Macau has pulled off an unprecedented feat.

(This is the first part of a four-part special series looking back on 20 years of Macau’s development of integrated resorts.)

By Anthony Lawrance

The story of Macau since 1999 is one of the world’s most remarkable. What was once a sedate leftover of the former Portuguese empire in Asia, better known for picturesque old buildings, cobbled streets, and bacalhau, is today the world’s richest city.

With a per-capita GDP projected to reach more than US$140,000 this year, Macau will be wealthier than Qatar, the oil state.

Granted, not all of that has trickled down to the lowest rungs of society. In any territory run along capitalist, market-oriented principles, it seldom does. However, another measure of prosperity that Macau can be proud of is average employee wages, which have risen nearly fourfold over the past 20 years. And across indicators of wealth, health, life expectancy and more, the arrows have all pointed upward over the course of the past two decades. This success is due to many factors, from astute longterm planning, to specific policy making at key moments of development, to rising incomes in a feeder market of 1.4 billion people. Yet underlying the entire story is one key industry – gaming – and one key decision, taken the day after Macau’s return to Chinese control on December 20, 1999, to liberalize it. Since the former monopoly of STDM was broken, and six new licensees were brought into competition from 2002 onward, annual gross gaming revenues have soared more than seven times while annual visitation has nearly tripled.

Such growth, albeit for a small city, is unprecedented in world history.

As Macau prepares to celebrate 20 years as a Special Administrative Region of China, there are many heroes that deserve commendation for its success. And as Macau prepares for the next 20 years of its development, much attention is being paid to plans for the “moderate diversification” of the economy, which will require new heroes to step forward and carry the torch. It is only fitting now, therefore, to recognize not a person, but an industry, the development of which has put Macau on the global map for the world-class quality of its integrated resorts, the diversity of its leisure, hospitality and entertainment industries, and the upgrading of its people’s skills, incomes, and livelihoods.

Without the leadership of the governments in Macau and Beijing, of course, nothing the gaming industry could have tried to do on its own would have brought the same success. Macau’s six gaming concessionaires have undoubtedly spent their existence treasuring the gift they were granted of being able to run a gaming monopoly within China’s borders. Add in a myriad other policies put in place by the local and central governments over the past two decades and Macau’s concessionaires have had everything they needed to spur the SAR’s economic miracle.

But by the same token, the concessionaires have produced what was asked of them – and more. The latest mid-term review of the industry conducted by the Macau government, released last month, recognized this, remarking that the concessionaires had been helping the government achieve its objectives under the latest Five-Year Plan.

If anything, this is an understatement. Macau now has some of the most glamorous and acclaimed hotels found anywhere in the world; restaurants among the highest-rated; and spas, shops, shows and other leisure and entertainment options that are the envy of Macau’s regional and global competitors. Tens of billions of dollars have gone into the ground – sometimes, before the ground was there – to achieve this. And through all of this growth, 40 per cent of all gross gaming revenues have gone into
the public accounts of the Macau SAR government through direct taxation.

NOT ALL SMOOTH RUNNING

It hasn’t always been easy to look back and see the obvious justification for those investments. The concessionaires have no reason to complain today, as shareholders have been handsomely repaid. Yet not all of the past 20 years have been a joyride for Macau. Moments of euphoria, particularly around the go-go years of 2004-2007 and 2011-2014, are more fondly remembered than the nerve-wracking times in between.

This is entirely understandable. Who would want to reminisce about the effects of the SARS epidemic in 2003, just before the industry took off, when the awarding of the new licenses had seemed liked a bold gamble? Or 2005, when bird flu struck the region? Or 2008, when curbs were introduced by the Guangdong government on IVS visa permits?

That is before even thinking about the bigger impacts on Macau of forces at a global and national level, such as the 2008-2009 aftermath of the Global Financial Crisis, when many of Macau’s junket middlemen seemed on the verge of collapse; or the 2014-2016 crash of VIP demand amid the central government’s sweeping anti-corruption campaigns.

Those were hard times, when many industry executives had been privately forced to question the courage of their convictions about Macau’s gaming industry, even while putting on brave faces in public.

Fortunately, Macau had what was needed to get through the bad times as well as the good. Today, despite the rise of gaming-industry clusters in other jurisdictions, Macau is the undisputed champion of the gaming world, with revenues and profits that dwarf their nearest competitors, including those in Las Vegas.

Even after the slowdown of the past year, Macau’s gross gaming revenues are more than five times what Las Vegas takes in, on average, every month. And while many of the global industry’s leading brands are looking eagerly to Japan for their next growth story, there can be little doubt that Macau remains the best place in the world to operate an integrated resort – and
likely will be for the foreseeable future.

How did Macau get to this point? How did it build the world’s biggest gaming industry? It is a story well worth telling, beginning with the opening of the first integrated resort, up to the present day.

(Continued in Part 2)