Betting on the family
June 6, 2015
The construction of new hotel complexes is a familiar sight in Macau. But last week's inauguration of the "Galaxy Macau" marked a turning point in the city's history. It is the first new construction ordered by a casino operator in three years, costing $3 billion (2.7 billion euros). It is not the usual giant dormitory with adjacent amusement arcade. The new "Galaxy" component was designed as a holiday resort for families.
Whereas the majority of Macau's casinos have been generating a mere ten percent of their revenue outside of gaming, the Galaxy is set to increase that proportion to 50 percent, with the help of lavish restaurants, a high-class shopping mall, and an amusement park with a white water canoe course.
This would still leave room for improvement, given the 60 percent generated by restaurants, shopping, and ticket sales in Las Vegas. Other casino operators in Macau are determined to achieve similar figures, and have hung their hopes on new venues for musicals, or theme parks.
End of anti-corruption campaign not in sight
These are smart moves: Macau believes that the anti-corruption campaign launched by China's president Xi Jinping is far from over. "Power to the children," is the new motto, for the economy has gone downhill in the past eleven months due to "Uncle Xi's" anti-corruption campaign.
Only 16 years after being returned to China, the former Portuguese colony has become the world's largest gambling location. Up until a year ago, Macau's 34 casinos generated six times the revenue of the whole of Las Vegas. This was mainly due to special rights held by Macau as a special administrative region in China - it is the only Chinese city in which gambling is legal.
But now the parameters are changing. In May 2015 alone, revenues dropped by 37 percent compared to the previous year. In the first quarter of 2014 revenues amounted to almost $13 billion, and fell to a mere $8 billion a year later. The slump was so severe that Macau's GDP even declined in 2014. These, then, are the initial results of the campaign launched by President Xi Jinping and his special task force, currently keeping a sharp eye on gambling-addicted cadres.
Macau, city of crackdowns
The number of high-spending VIP gamblers decreased by 44 percent in the course of last year. They prefer countries without Chinese controls, leaving casinos in South Korea, Singapore or Vietnam to reap the benefits. By contrast, Macau is infamous for crackdowns. Since no one knows exactly when Xi's courage will run out, the six largest casino operators are set to invest about $20 billion in new portfolios and holiday resorts within the next three years. The bulk of the money is to attract family vacationers from the mainland. Only five to ten percent are to be invested in casinos, slot machines or other gambling.
Hence, Macau is now banking on the growing Chinese middle classes and setting its sights on the masses - families going on vacation with their children who, after visits to children's paradises and various sites, insert the odd coin into a slot machine. But this is a risky bet. Holiday resorts geared towards the entire family can be found aplenty on the mainland. So Macau has to rely on a variety of attractions: A Ferris wheel alongside the roulette, Donald Duck alongside Black Jack.
Frank Sieren is a DW columnist living in Beijing.