Macau’s Non-Gaming Initiatives Are Making Little Headway

Plans to lessen the special administrative region’s (SAR) reliance on gambling for economic growth are a key component of Macau’s recently approved gaming rules and the 10-year concessions awarded to casino operators there. It seems that attempts won’t be successful for some time.

In a study released earlier today, Fitch Ratings confirmed the SAR’s credit grade at “AA,” noting that while Macau’s economy is expected to recover strongly this year, it would primarily be driven by the casino sector with just a little contribution from other industries.

Human capital constraints and skill gaps present a major obstacle for Macao to significantly reduce its high dependence on the gaming industry, according to the ratings agency. “The authorities will seek to further leverage infrastructure and financial integration with the Greater Bay Area and closer collaboration with mainland partners,” it added.The six license holders in the SAR are Galaxy Entertainment, Melco Resorts & Entertainment, MGM China, Sands China, SJM Holdings, and Wynn Macau, and are expected to be obliged to invest a total of $15 billion on non-gaming projects over the following ten years.

The Long-Term Development of Macau Requires Non-Gaming Investments
Despite the fact that Macau is in the midst of a vigorous gaming recovery after nearly three years of strict coronavirus restrictions, local authorities there view efforts like providing nongaming amenities and luring tourists from other Asia-Pacific countries beyond China to the casino hub favorably.

The two biggest operators on the peninsula, Sands China and Galaxy Entertainment, are anticipated to receive the majority of the aforementioned spending during the next ten years. According to analysts, Las Vegas Sands’ subsidiary Sands China has a long history of funding non-gaming ventures.

Improving services like cultural exhibitions, kid-friendly cuisine, and meetings, incentives, convention, and exhibition (MICE) inventory is viewed as crucial to Macau’s long-term efforts to fend off competition from other Asia-Pacific gambling markets, such as Singapore and possibly Japan in the future. Yet, for the time being, casino gambling will be the main component of Macau’s economic engine.

Given its status as the only legal casino tourism destination in Greater China and its proximity to the mainland, Macao is in a good position to take advantage of the considerable pent-up demand from mainland visitors, said Fitch. “The recovery prognosis is subject to an upside risk from a quicker-than-anticipated return of visitors.”

Present-day Macau Land Situation
Beginning in 2023, mass and premium mass gamblers will drive a rise in Macau’s gross gaming revenue (GGR), and operators like MGM China, Sands China, and Wynn Macau will gain market share.

When considering the SAR’s overall economic prospects, elements like strong fiscal reserves and enviable external positioning may prove beneficial as 2023 progresses.

According to our predictions, Macao will continue to have a significant net foreign creditor position, which will be 262% of GDP in 2023, which is significantly stronger than the ‘AA’ median of 18.9%. We anticipate that the territory’s sovereign net foreign assets will continue to be significantly higher than the peer median, at about 297% of GDP, added Fitch.