The U.S.-based International Monetary Fund (IMF) says it is supportive of the Macau government’s push for more mass-market gaming and for more non-gaming tourism products in the city.
The comments followed a November 3 to 14 visit to Macau by an IMF team, in order to conduct a regular review of Macau’s economy.
“With respect to growth, the authorities’ five-year plan correctly identifies the importance of diversifying from VIP to mass-market gaming; from gaming to non-gaming tourism; and from tourism to financial services exports,” the head of the IMF team, Geoff Gottlieb, said in a statement included in a Tuesday press release.
The Macau government presented in September the finalised version of the city’s first Five-Year Development Plan. The document includes social and economic aspirations for the city, and covers the period 2016 to 2020.
The five-year plan has little in the way of specific policy aims for the gaming industry. It does not set goals for casino gross gaming revenue growth. “We do not aim to expand the size of the gaming industry, but target instead for it to achieve higher intrinsic quality,” states the document.
In his policy address for 2017, presented on Tuesday, the Chief Executive of the city’s government, Fernando Chui Sai On, again urged Macau’s casino operators to continue increasing their non-gaming offerings. He said the government would promote “increased cooperation” between the city’s casino operators and local food and drink outlets as well as local creative industries.
“The gaming operators’ ability to cut non-gaming prices, as seen recently in the hotel sector, illustrates an important flexibility for maintaining competitiveness,” the IMF’s Mr Gottlieb said in Tuesday’s statement.
Mass: more sustainable
“Developments in mainland China have triggered a large and likely permanent reduction in external demand from high-net-worth visitors,” Mr Gottlieb added. “In response, the [Macau] authorities have embraced the opportunity to move toward an economic model with less volatile and more sustainable sources of income.”
Mainland China’s ongoing anti-corruption campaign under President Xi Jinping has already seen a dramatic slowing in the amount of cash flowing through Macau VIP casino operations.
Mr Gottlieb noted: “Though the [Macau] economy will contract for a third consecutive year in 2016, external demand has begun to recover, with three consecutive months of positive gaming revenue growth.”
The IMF expert noted that Macau enjoyed a “highly valuable gaming monopoly within China”. He stated that the Macau government’s “single biggest priority” should be ensuring that public sector infrastructure investment “is adequate in both quality and quantity” to accommodate further increases in mass-market demand.
“The move from VIP to mass-market tourists inevitably requires additional capacity to achieve the same amount of [economic] growth,” Mr Gottlieb said.
A light rail transit system under construction in Macau, known as the LRT and designed to move visitors and locals around the city, is likely to be operational by 2019 – but only in relation to the Taipa-Cotai section. The bulk of construction on that stretch of the system began in 2012.
Macau’s new Pac On ferry terminal – near the city’s airport on Taipa island, and designed to bring mass-market tourists to the the large Cotai casino resorts nearby – should be ready to start operations in the first half of next year. The project has been marred by reported delays and controversy, mainly as the result of changes in the design of the terminal, including enlargement of the complex.
A number of investment analysts have expressed concerns that with the Macau gaming market increasingly focusing on mass-market customers, delays regarding public infrastructure projects could be a short- to medium-term negative for the new Cotai resorts.
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"The demographics of Tokyo, Yokohama, and Osaka (possible Japanese urban gaming resort locations) warrant larger gaming floors [than 15,000 square metres]"
Analyst at investment research firm Morningstar