Macau’s Progress With Non-Gambling Activities Sluggish

As a cornerstone of Macau’s recently approved gaming regulations and ten-year concessions awarded to casino operators, plans are underway to reduce the Special Administrative Region’s (SAR) reliance on gambling. Nevertheless, the results of these efforts will take some time to become apparent.

In a report earlier today that affirmed Macau’s credit rating at ‘AA’, Fitch Ratings noted that while Macau’s economy is anticipated to rebound sharply this year, it will be driven largely by gaming, with limited contributions from other sources.

The ratings agency added that “Human capital constraints and skill gaps pose a key challenge for Macau to significantly reduce its high dependency on the gaming industry.” Furthermore, they said “The authorities will seek to further leverage infrastructure and financial integration with the Greater Bay Area and closer collaboration with mainland partners.”

Approximately $15 billion is anticipated to be spent by Macau concessionaires on non-gaming projects over the coming decade. The six license holders are Galaxy Entertainment, Melco Resorts & Entertainment, MGM China, Sands China, SJM Holdings, and Wynn Macau.

Enhancing offerings such as cultural exhibits, family-friendly activities, and meetings, incentives, convention and exhibition (MICE) opportunities are seen as essential for Macau’s long-term plan to combat competition from other Asia-Pacific gaming markets, such as Singapore and potentially Japan in the future.

At present, casino-gaming is the primary power behind Macau’s economic growth. Analysts say Sands China – a branch of Las Vegas Sands – has a long history of investing in non-gaming projects.

In the early months of 2023, mass and premium mass bettors have been driving the gross gaming revenue (GGR) resurgence in Macau and operators such as MGM China, Sands China and Wynn Macau are increasing their market share.

Macau’s broader economic outlook is expected to be supported by strong fiscal reserves and a favorable external position as the year progresses. Fitch concluded that the territory will maintain a large net external creditor position of 262% of GDP in 2023, which is significantly higher than the ‘AA’ median of 18.9%. Macau’s sovereign net foreign assets are also expected to remain well above the peer median at roughly 297% of GDP.