Macau, the world’s largest gambling hub has experienced economic decline due to Chinese president Xi Jingping’s anti-corruption campaign, which has hurt casinos in Macau in terms of revenue, turnover, and visitor numbers, especially in the VIP segment. However, despite the downturn, opportunities are everywhere as projects continue to roll out, facilitating security demands.
Since June last year, in an effort to crack down on corruption in Macau, casinos are required by the Gaming Inspection and Coordination Bureau (DICJ) to maintain a high level of surveillance coverage for all their gaming-related areas and activities. The drop in tourists and gamblers has affected the special administrative region’s (SAR) economy as gaming and tourism revenue contribute to a major part of Macau’s GDP growth. According to Macau’s Statistics and Census Service, GDP growth for the first quarter of 2015 shrank by 24.5 percent year-on-year. Moreover, the SAR saw its 14th consecutive month of downturn in gaming revenue, falling to 34.5 percent in July.
“There is no doubt that China’s clamp down on corruption has contributed to the reduction in the number of high rollers that visited Macau to enjoy and/or disburse ill-gotten gains,” said Charles Cousins, MD of APAC and Japan at
Genetec.
Confidence in Security
The anti-corruption crackdown has impacted the expansion plans of several gaming operators to build additional VIP rooms for high-value players; furthermore, operators have stopped purchasing equipment for these rooms. However, according to Bob Ruggles, Business Development Manager of APAC at
Pelco, a Schneider Electric Company, “There are still opportunities in the Macau market for surveillance and security system sales with the new casino properties being built in Cotai, and operators wanting to upgrade their existing systems to take advantage of new cameras and recording technologies. Pelco maintains a positive outlook towards Macau and gaming, government, and infrastructure security projects.” He particularly pointed out how the migration to IP systems with better image quality, features, and integration capabilities is beneficial to gaming operators’ internal surveillance and security operations.
Macau remains an invested market as players adjust their strategies as the economy goes on the road of recovery. According to Sunny Kong, Director of Sales in Asia at
Milestone Systems, casinos is still a lucrative market for vendors to aim for, as project sizes are often massive. “Like any other market, Macau has its own unique culture and characteristic, different to Hong Kong or China. We didn’t lower our expectations for Macau but amended our plan to reflect these changes,” said Tamir Ginat, Senior VP for APAC at
IndigoVision.
Focusing on the Mass Market
VIP baccarat once accounted for close to 70 percent of overall gaming revenue; however, the latest figures from the DICJ show that VIP baccarat revenue fell 42.2 percent year-on-year to just under $4 billion in the quarter ending June 30. Thus, in an effort to improve the current situation of the gaming industry, casinos have switched their focus from high rollers to the mass market. “There are several big casino projects going on, and I believe they will change their business model from focusing on high rollers to the mass market. There will be more gaming machines for lower bets, and then they are doing more entertainment shows to attract families,” explained Gregory Ku, MD of Macau at Jones Lang LaSalle. “Before, high rollers were well served by one-on-one PR, and have private jets to fly them from different parts of China to Macau. It is a totally different market now.”
Casinos are also working hard through marketing to attract more tourists to their casinos. According to Ruggles, casinos all have strong marketing departments that typical have promotional budgets ranging from 10 to 14 percent of mass gaming revenues. “I often see the Macau gaming operators advertising in overseas magazines and online publications, attracting customers to Macau as a gaming and tourist destination. As Macau evolves into a tourist destination, I believe that the current slowdown in the gaming segment will bounce back and with it so will the surveillance and security industry,” he explained.
Another way casinos are looking to increase revenue is by providing event space for trade shows, exhibitions, and special events. Also, some casino operators are maximizing facility usage to increase room occupancy and gaming, while other operators are developing attractions on their properties and increasing their retail offerings.
Kickstarting Tourism
In the tourism sector, visitor arrivals decreased by 7.6 percent in June year-on-year, with same-day visitors and overnight visitors dropping by 9.7 percent and 5.2 percent, respectively, according to the Macau Government Tourist Office. Moreover, visitors from mainland China decreased by 10.1 percent in June year-on-year.
In an effort to promote tourism and kick start the economy, China has relaxed visa rules for its citizens, allowing travelers to stay seven days in Macau, up from the previous five days, starting from July this year. The incentive eased the revenue slump, and shares in Macau’s casino companies jumped more than 10 percent. Moreover, a Macau travel agency is cooperating with two Vietnamese companies to offer charter flights between Ho Chi Minh City and Macau starting in September, which is aimed to further boost visitor arrivals.
From Gloom to Boom
Despite the plummeting growth numbers in Macau over the past year, security players are still optimistic that new projects, both inside and outside of gaming, will continue to provide opportunities for the security industry. Additionally, with both the Chinese and Macanese governments working to increase visitor numbers through incentives and promotions, tourism will hopefully rebound and give new life to the gaming capital of the world. How long will it take to get Macau back on its feet? All we can do now is wait and see.