HONG KONG (Reuters Breakingviews) - Macau’s plan to mimic Las Vegas is getting a reality check. Millions of Chinese visitors have swarmed the tiny territory since the opening of a new bridge connecting it to the mainland. Yet authorities don’t seem to know what to do with them, and are mulling a tourist tax to slow the flows. The city’s economic diversification strategy is due a rethink.
The $38 billion gaming hub has arguably become a victim of its own success. A 55-km mega bridge from Guangdong province helped to deliver some 10 million visitors across the border in the first quarter of the year, a fifth more than in 2018. The unexpected influx has overwhelmed the city, according to its tourism board. But the crowds didn’t appear to spend much. Gaming revenues look relatively modest this year: combined takings for the six concessionaires – Galaxy Entertainment, Sands China, SJM Holdings, Melco Resorts and Entertainment, MGM China, and Wynn Macau – shrunk by 0.5% in January to March.
Most of the newcomers are day trippers, not gamblers. That seems like something the government would welcome, given its goal to reduce reliance on games of fortune by earning more from entertainment and events. But reality is more complicated. At the G2E industry conference last week, authorities announced a consultation on levies to stem the tide of tourists. Flanked by a banner bearing the keynote’s theme, “From gaming to beyond gaming”, the director of the Macao Government Tourist Office conceded that the economic benefits of other offerings remain difficult to quantify.
Many initiatives – art shows, food festivals, and the like – are not money-spinners. Dice, cards and slot machines still account for the vast majority of sales at the cities’ resorts. So some eschew diversification in favour of alternative hedges against a gaming downturn. Last month local media reported plans to experiment with a sovereign wealth fund.
Still, it’s too early to give up on the tried-and-tested Las Vegas model. The Cotai Strip might never become a carbon copy of the Sin City original, but driving away eager visitors is squandering an opportunity for growth. In Nevada casinos, hotels, fancy food and the like accounted for two thirds of the top line last year; in Macau, analysts estimate the figure is closer to 10%. There’s much to play for.
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