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Macau's non-gaming efforts progress slowly

Plans to lessen the special administrative region's (SAR) reliance on the gaming industry are central to the recently enacted gaming rules and the 10-year concessions offered to casino operators. It appears that it will take some time for their efforts to produce fruit.

In a report released earlier today, Fitch Ratings reaffirms the SAR's AA credit rating, stating that while Macau's economy is expected to revive quickly this year, the casino industry will play a disproportionate role in the recovery.

We anticipate a moderate rate of diversification into non-gaming businesses. Human capital limitations and skill shortages constitute a significant obstacle for Macao to significantly lessen its reliance 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 is predicted that Macau concessionaires will be obliged to spend around $15 billion on non-gaming initiatives over the next decade. Galaxy Entertainment, Melco Resorts & Entertainment, MGM China, Sands China, SJM Holdings, and Wynn Macau are the six licence holders in the SAR.

Non-Gaming Investments Are Crucial for Macau's Long-Term Development

While Macau is in the midst of a vigorous gaming rebound following nearly three years of stringent coronavirus restrictions, authorities there are focusing on nongaming services and attracting visitors from Asia-Pacific countries other than China.

Sands China and Galaxy Entertainment, the two largest operators on the peninsula, are anticipated to account for the majority of the aforementioned expenditures over the course of the next decade. Experts assert that Sands China, a subsidiary of Las Vegas Sands, has an extensive history of investing in non-gaming businesses.

Enhancing offerings such as cultural exhibits, family-friendly cuisine, and meetings, incentives, convention and exhibition (MICE) inventory is deemed essential to Macau's long-term plans to fend off competition from other Asia-Pacific gaming markets, such as Singapore and possibly Japan in the future. Yet, casino gambling will be the dominant economic engine of Macau for the time being.

“Macao is well placed to capture strong pent-up demand from mainland tourists, given its status as the sole legal gaming tourism destination across Greater China and its geographic proximity to the mainland,” added Fitch. “A faster-than-expected revival of visitors poses an upside risk to the recovery outlook.”

Present Topography of Macau

Mass and premium mass bettors are reviving gross gaming revenue (GGR) in Macau at the start of 2023, and operators like MGM China, Sands China, and Wynn Macau are gaining market share.

In terms of the overall economic picture for the SAR in 2023, factors such as healthy fiscal buffers and enviable external posture could prove beneficial.

“Under our projections, Macao will maintain its large net external creditor position, at 262% of GDP in 2023, a significant strength compared with the ‘AA’ median of 18.9%. We expect the territory’s sovereign net foreign assets to remain well above the peer median at roughly 297% of GDP,” concluded Fitch.


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