begin new licenses to operate in the world’s biggest gambling hub on Sunday, January 1, the stakes are high on whether they will be able to successfully deliver on a government mandate to diversify away from their cash cow: gambling., MGM China, Galaxy Entertainment, Melco Resorts & Entertainment, and SJM Holdings have raked in billions of dollars from their casinos in the Chinese special administrative region, turning the once sleepy fishing village into a glitzy boomtown.
But operators will find it hard to monetize their non-gaming ventures given their poor track record since 2001, when the former Portuguese colony first liberalized the industry, executives and analysts said. “Contrary to the vaunted Las Vegas model, non-gaming in Asia does not carry the same profit margin as spending behavior is quite different over here,” Lee said, while adding that Galaxy, Melco, and Sands were likely to fare better at diversifying based on their track record and management team.
In December, following the formal awarding of their contracts, casinos unveiled non-gaming plans including indoor waterparks, health and wellness centers, art exhibitions, and a large garden attraction by Sands, similar to Singapore’s Gardens by the Bay.Macau’s current non-gaming attractions have focused on retail and dining, with some entertainment offerings such as Melco’s nightclubs, Galaxy’s cinema, Sands’ themed Venetian and Parisian properties and its exhibition arena.
Increased regulatory oversight comes as Macau casinos face much higher debt levels versus 2019. Net debt increased fourfold to $23 billion in 2022 and it may only peak by end-2023 at $24 billion, Morgan Stanley said in a December note. “There is no indication that I have seen that the government is, or intends to address these weaknesses. Given the serial mismanagement of public works…it leaves concessionaires with a less than optimal host attraction proposition.”