“While nowhere in the world has escaped the economic fallout from the Covid-19 crisis, Macau has been hit harder than most, with forecasts for gross domestic product to shrink more than 50 percent this year.” Thus runs the opening paragraph of the AGB Editorial – November 10, 2020, Focusing on Diversification.
It will come as no surprise that when new contracts are issued to the six Macao casino operators that have benefitted immensely from 2002 onwards, when China opened up the province for investment by foreign casino companies, the government will step up its efforts to promote diversification.
With the current concessions expiring in 2022, it is widely anticipated that concession renewals will involve investment in non-gaming amenities. This practise has already happened in Singapore where Genting and Sands, the only two licensed operators in the country, cannot expand on gaming offerings but must invest on non-gaming amenities.
“What a future Macau might look like and its place in China’s Greater Bay Area mega project. The stated objectives of the GBA plan are to further deepen cooperation amongst Guangdong, Hong Kong and Macao, fully leverage the composite advantages of the three places, facilitate in-depth integration within the region, and promote coordinated regional economic development,” adds AGB.
The Greater Bay Area plan, unveiled in 2019, would link Hong Kong, Macau and nine other cities in southern China. The project aims to foster growth in the world’s second largest economy by developing technology and innovation, boosting infrastructure and increasing financial links between the cities
The scope is enormous, encompassing a total population of more than 72 million, with GDP of US$1.67 trillion, and although investing in a buzzing pre-pandemic economy looked appetizing, the question for casino operators is whether diversification would suit both their expertise and business plans. It can be said that the new normal is imposing changes on everyone, but casino companies are somehow a different type of operating animal.
As such, casino companies that want to diversify away from gambling markets must prepare totally new operating structures to delve into other fields whether health and wellness or financial services, and always remembering that investors and companies in those fields with vast expertise in them will be prime competitors to the casino operators.
Casino operators from Las Vegas, London or Buenos Aires, do not have as sure a footing going into the uncharted waters of other business or industry fields, and Macao operators are likely to have similar tendencies.
The grass sometimes looks greener on the other business side and diversification may look like an option just now. However, retrenchment and redirection is likely to be a safer option, with sports betting, online casinos and eSports, as new industries where casino operators might find business and investment more akin in baize-green surroundings than locking horns with bigger fish in unknown and probably turbulent waters.