Macau casinos to shift focus from capital to operating expenditure – analysts

Macau authorities want to reduce their reliance on mainland China’s tourism and bring in more overseas visitors.

Macau.- Credit Suisse AG has predicted that Macau’s casino operators might have to spend between HKD10bn (US$1.27bn) and HKD20bn (US$2.54bn) on non-gaming activities over the next 10 years in exchange for gaming rights.

According to analysts, Macau’s industry is being urged to shift its focus from capital expenditure, such as the large-scale developments in Cotai, to operating expenditure. This includes a focus on event-driven strategies.

It was previously reported that Macau wants to reduce its reliance on mainland Chinese tourism and attract more overseas tourists. Credit Suisse said the Macau government has asked several operators to prepare for non-gaming events or activities starting in 2023, which “shows that the government is keen to complete the process.”

Analysts said: “On a very conservative basis by assuming an operator could only recoup 90 per cent of operating expenditure, on such non-gaming activity, the annual net spending would be a contained HKD100m to HKD200m per operator, or approximately 1 per cent to 2 per cent of industry earnings before interest, taxation, depreciation and amortisation.”

The financial institution also predicted there would be one more meeting between authorities and casino bidders before the results of the retender process are announced. Macau intends to issue new licences by the end of the year.

A few weeks ago,  Angela Leong On Kei, co-chairman and executive director of SJM Holdings, said that the company is committed to fulfilling the Macau government’s demand for more investment in non-gaming projects from casino operators.

Speaking at a company event, Leong On Kei said the company supports the city government’s aims to increase non–gaming in Macau’s tourism sector. She said that the gaming sector is going through reform after 20 years of development.

According to the commission overseeing the gaming concession tender, bidders were required to describe their plans for promotional and marketing activities to raise awareness of Macau among international customers. They were also requested to submit plans for film festivals, cultural performances and carnivals while strengthening relationships with local small and medium enterprises (SMEs).