Gaming Industry in Macao - Essay Example

?Gaming Industry in Macao Table of Contents Gaming Industry in Macao Table of Contents 2 Introduction 3 The Gaming Industry in Macao 3 Monopoly to Liberalisation 4 The Gaming Industry: New Pattern 4 The Industry: Timely Control of the Scale 6 The Challenges in the Post-Liberalisation era 7 The Industry: Arising Opportunities 8 Certain Facts and Figures about the Industry 8 The Impact of Macao Gaming Industry 11 Conclusion 13 Reference 14 Bibliography 16 Introduction Gaming industry has a long history in Macao and it was first legalised in mid 19th century. Entering the 21st century, the gaming industry has developed a very close relation with the tourism industry and become a pillar of Macao's economy” (Government Information Bureau, n.d., p.1). “Macao is known as the Monte Carlo of the Orient. Casino business has a long history in Macao. The gaming industry generates 64% of the SAR's revenue. Today, there are 10 casinos in Macao, and they bring in huge numbers of tourists” (Kan, n.d.). “Macao was once famous for being an area thick with counterfeiters, spies and drug runners. Ironically today Macao has legalized casinos and gambling -- and in fact Macao is Las Vegas, Nevada's biggest casino destination rival with experts saying Macao "Cotai Strip" could overshadow the Las Vegas Strip” (World Casino Directory Staff, 2011). This report is an effort to have an insight into the gaming industry in Macao. The development of the industry as well as its impact would be discussed taking reference from various journals, books, online articles and research reports. A conclusion has been inferred from the entire analysis and discussion part. The Gaming Industry in Macao The gaming industry in Macao started back in the year 1934, when for the first time the government in there granted monopoly rights for casino operation. The first monopoly right or exclusive franchise went to Tai Hing Company. At the very first stage, Chinese games were played in Macao. The most ancient game played in the region was believed to be Fantan. The game was supposed to be played with buttons. In this game, the players are required to guess the number of remaining buttons in a cup of buttons with the total number of buttons being divided by four. Another Chinese domino game named as Pai Kao was also considerably popular (Koo, n.d.). Monopoly to Liberalisation In the year 1961, the monopoly offered to Tai Hing Company expired. As a consequence, new tenders were invited for the casino operation in Macao. In the year 1962, the Sociedade de Turismo e Diversoes de Macao (STDM) was allowed to have casino concession. On the first January of the same year, STDM was able to successfully take over the gambling franchise. Since the time, gambling has established its own industry. In the process, western games like roulette, blackjack, and craps were introduced as significant games. Undoubtedly, with the passing time, Sociedade de Turismo e Diversoes de Macao (STDM) has emerged as the best known and largest business group in Macao and at the same time it has played a significant role in the territory’s development. The group was established as well as managed by Stanley Ho, who put his effort to introduce it as a mere gambling character, rather as an entity to develop tourism and the entertainment business encouraging new prosperity for Macao by enhancement of the welfare and living standard of the common citizen of Macao (World Casino Directory Staff, 2011). The Gaming Industry: New Pattern In the month of August, 2001, the Legislative Assembly had officially established Gaming Industry Regulatory Framework. The framework had given an appropriate meaning to the ‘casino’ and ‘ gaming’. The framework had also laid out regulations for concessions system as well as introduced conditions and process for bidding. At the same time, the Casino Concessions Committee was established to be responsible for the works which are responsible to tender invitation and bidding. After a series of tender invitation and evaluation across the globe, the Chief Executive of the Committee issued an Executive Order to grant provisional casino concessions to few players in the industry ((Kan, n.d.). The past decade can be seen as the golden age of Macao’s economic growth. The gaming industry in Macao was liberalised in the year 2002. The concession was signed with Galaxy-Las Vegas Sands, Wynn Resorts, and Sociedade de Jogos de Macao S.A. (SJM) respectively. After offering concession to the three operators, the MSAR government allowed each of the operators to grant gaming sub-concession to other operator (Government Information Bureau, n.d). In the month of December, 2002 both the MSAR Government and Galaxy agreed to revise the concession contract. As per a sub-concession, the Venetian Group was allowed to operate casino gaming in Macao. With the authorisation of the MSAR Government, in the month of April 2005 SJM signed a sub-concession contract with MGM Grand Paradise. After one year, in September 2006, Wynn signed a sub-concession with Melco PBL Gaming (Macao). SJM is a subsidiary wholly owned by STDM. Since the last few decades, gambling has also been legalised in the countries like Australia, Vietnam, Philippines, Malaysia, North Korea, and Indonesia. With the entry of Singapore into the gaming business arena, regional competition among the players is expected to get intensified. All casino operators would require responding appropriately to the changes in the business as well as operational environment. To sustain the success, it is pretty important for the gaming operators to strive for excellence. In this process, individual employee and business performance both are required to be constantly monitored and enhanced (Government Information Bureau, n.d). Till date, SJM operates 15 casinos, namely, Casino Jai Alai, Casino Oriental, Casino Lisboa,(Crystal Palace, Mono Lisa), Casino Diamond, Casino, Casino Kingsway, Taipa, Casino Macao Palace, Casino New Century, Casino Marina, Casino Kam Pek, Pharaoh’s Palace, Macao Jockey Club Casino, Casa Real, Casino Fortuna and Casino Golden Dragon. The casinos in Macao are operated with various themes to attract a wide range of customers. The gaming choices in the various places include Baccarat, Fish prawn crab Cussec, Cussec, Blackjack, Boule, Fantan, Roulette, Slot machine, Stud Poker, Lucky Wheel, Mahjong Pai Kao, Pai Kao, 3-Card Baccarat, 3-Card Poker etc. Adding to all these, the players in Macao can try their luck in Greyhound racing, Horse racing, Pacapio, Football & basketball lotteries and Tombola (Bingo) (World Casino Directory Staff, 2011). The Industry: Timely Control of the Scale There is no iota of doubt that in the recent times, the gaming industry has experienced a rapid development. The MSAR government has found that it was high time for a review and evaluation of present and future development in the gaming industry. In the year 2008, it was announced that the government must not grant any new gaming licence in the near future. This was done to regulate the operations in the industry. In the month of February, 2010, the Government restructured the Gaming Committee. The committee is responsible for establishing the policies in the gaming related issues. The committee is also significant to have an oversight of the gaming industry and to formulate the related regulations and guidelines. The Challenges in the Post-Liberalisation era As the gaming industry in Macao has been liberalised, the volume of the gaming business has been growing at a spectacular pace. In the year 2004, the gaming revenue in the region has reached a high figure of 15.4 billion MOP. This amount also includes considerable government income. During the four decades’ operation of STDM, the total number of gaming tables summed to less than 400. However, in the later years, the number of gaming tables has seen a spectacular growth, increasing from less than 400 to a higher figure of 1235. The number of slot machines also grew from around 900 to some 3868. In the Macao economy, the gaming industry has been one of the leading industries to contribute to the economic growth in the region. The growth of gaming business has introduced some significant rippling effects across a number of business factors. One of the major challenges faced by the gaming operators is the shortage of qualified labour. At the beginning of 2005, the casino industry was in need of 7104 jobs. It was estimated that the entire gaming industry would need some 15,000 new employees in the coming future. The labour shortage problem and trend has resulted in the worsening of the quality of the new recruits. Adding to it, Macao is a region with an area of 27.3 sq km with a population base of 448,500 residents (Kan, n.d.). Undoubtedly, the gaming industry would be benefitted by an increasing number of potential players. At the same time, it suffers from severe shortage of land supply. With the projected growth of the gaming industry, it would be tough for the industry to cope with the shortage of land supply. As geographically the city is quite small, it would also lacks the attraction to make the tourists stay for a long period. In the year 2004, it was noticed that the average stay of tourists in Macao is of around 1.22 nights. The short average duration of stay in this region is a multi-facet phenomenon and it can be anticipated that the situation would not change in the near future. A number of challenges have given rise to intensified competition in Macao as well as in the neighbouring countries. As the companies have tried to cope with all these changes, the operation costs in the casinos have increased at a sharp pace (World Casino Directory Staff, 2011). The Industry: Arising Opportunities It cannot be denied that there are a number of threats for the gaming industry in Macao. However, in the near future, there are a number of opportunities seem to be arising. Certain significant opportunities include a rapid increase in the number of visitors coming from stronger and wealthier China. Even the analysts are optimistic about the economic prosperity in there. As a consequence, the region can expect a considerable amount of investment in this. Economic recovery in the region would include Hong Kong, the neighbouring region of Macao. The country is blessed with stable political environment and safe law and order in the society. The industry has a diligent and obedient workforce. The Macao government has a transparent government policy to regulate the gaming industry and to change the public attitude. The residents are comparatively more positive and receptive towards the gaming. Certain Facts and Figures about the Industry The largest casino in Macao is The Sands Macao, located in the Macao city. The casino has 277 table games and some 405 casino slot machines and video poker games. (Source: Mitchell, 2009) The first graph represents the number of mainland Chinese people visiting Macao while the next one shows off the gross gaming revenue in Macao. The following image displays the revenue amount collected from different gaming activities starting from the year 2005 till the year 2010. Another table shows off the total betting amount from pari-mutuels and lotteries from the year 2005 to the year 2010. (Source: Godinho, 2010) The following table displays the total and gaming GDP as a percentage of Tourism industry.      For the year ended December 31,        2004     2005     2006     2007     2008     2009        (US$ in millions, except percentages)   Total GDP    10,279      11,524      14,214      18,682      21,483      21,168    Year-on-year Change, nominal    —        12.1 %    23.3 %    31.4 %    15.0 %    (1.5 )%  Tourism GDP (1)    7,881      8,409      10,162      13,946      17,422      18,478    Tourism GDP as a % of Total GDP    76.7 %    73.0 %    71.5 %    74.7 %    81.1 %    87.3 %  Gaming GDP (2)    5,375      5,788      7,023      10,225      13,383      14,673    Gaming GDP as a % of Tourism GDP    68.2 %    68.8 %    69.1 %    73.3 %    76.8 %    79.4 %    (Source: Sands China Ltd, 2009) The above image shows the total GDP of Macao. At the same time, the graph displays the gaming GDP in that region. In the year 2009, the gaming GDP amounted to around 15000 US $. The Impact of Macao Gaming Industry It cannot be denied that the gaming industry plays a significant role in the lives and well being of the local population. The industry has brought considerable economic growth and wealth to the economy. This, in turn, has created various employment opportunities in the region. According to the report by Census Services, unemployment has decreased from 6.4 % in the year 2002 to approximately 4.1 % in the year 2005. In this period, around 58 % of the population was working in the industry. A considerable number of people want to work in this industry. This is because of the salaries which is more than the peer graduates working in the government and private sectors. Moreover, the industry supports both the casinos and a number of different subsidiary business activities. In this case, a large number of tourist people visit the territory on a regular basis. The tourists mostly intend to participate in the gambling as well as to enjoy significant historical sites and heritage of Macao. It has been estimated that each month approximately 1 million people come to this territory. PRC national holidays have allowed this figure to increase to approximate figure of 1.5 million. In the October, 2006, the Statistics and Census Service had indicated that the total number of tourist arrivals reached at 1,663,623 which are up by 10.2 % from the previous year (Schalkwyk, Tran & Chang, 2006). This cannot be denied that the gaming industry has put a positive impact on the economic growth of the region and at the same time, on the Macao tourism industry. The following image shows the proportion of gambling revenue in Macao’s GDP. (Source: Hunangov, n.d.) One of the significant negative impacts on the Macao gambling industry is that the industry would have negative impact on the young population in there. According to Yin Yifen, a professor on social economy and public policies in Macao Polytechnic Institute, an increasing number of young people in Macao do not go to the high schools or universities for the further studies as it is quite easy to find a well paid job in the casinos (Hunangov, n.d.). At the same time, it has also been seen that with an increasing number of casinos in the city, the crime rates also increase at a sharp pace. At the same time, as most of the youth talents are getting attracted to the high paying casino jobs, other significant industries in there may suffer from the shortage of qualified and talented workforce. So, it cannot be denied that the industry has both positive and negative impact on both economic and social aspects. Conclusion The recent recession has put an adverse effect on the industry. The region’s gross gambling revenue from the year 2007 to the year 2008 has increased by 31 %. However, from thereon, the gambling industry has witnessed an obvious downturn trends due to the global financial crisis. Macao is blessed with rich and contrasting cultural characteristics and can be vividly described. The place is strategically located at the Pearl River Delta at the South-eastern coast of Mainland China. This has also been significant to make it an important tourist place. Since many years, the place is known for its enriched gaming Industry. The place is exemplary in exhibiting the tuneful co-existence of both gaming and cultural attractions. Undoubtedly, the industry has been considerable contributor in the economic growth of this region. However, at the same time, it must look at the adverse impacts arising from the expansion of the gaming industry in there. The government must look into the matter carefully to enhance the positive impacts of the gaming industry by curbing out the adverse effects of the same. Reference Godinho, J. May 24, 2010. Highs and lows in the Macao gaming industry. [Online]. Available at: http://Macaogaminglaw.blogspot.com/ [Accessed on February 07, 2011]. Government Information Bureau. No Date. The Gaming Industry. [Pdf]. Available at: http://www.gcs.gov.mo/files/factsheet/Gaming_EN.pdf [Accessed on February 07, 2011]. Hunangov. No Date. Macao: from gambling to a diversified economy. [Online]. Available at: http://3us.enghunan.gov.cn/viewthread.php?tid=9134 [Accessed on February 07, 2011]. Kan, C. No Date. Gaming industry stands to benefit. [Online]. Available at: http://jmsc.hku.hk/jmsc6030/bridgestory/regional/Macao/gaming_industry.html [Accessed on February 07, 2011]. Koo, C. L. No Date. Staying ahead of the game in Macao. [Pdf]. Available at: http://www.mgra.org.mo/jounal/%E7%AC%AC%E4%B8%89%E6%9C%9F%E5%AD%B8%E5%88%8A%E7%A8%BF%E4%BB%B6/Staying%20ahead%20of%20the%20game%20in%20Macao.pdf [Accessed on February 07, 2011]. Mitchell, T. October 5, 2009. Macao table take outstrips Vegas. [Online]. Available at: http://www.ft.com/cms/s/0/59d63126-b1c8-11de-a271-00144feab49a.html#axzz1DHaTpSfP [Accessed on February 07, 2011]. Sands China Ltd. 2009. Annual Report 2009. [Pdf]. Available at: http://yahoo.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHtmlSection1?SectionID=7242164-5014-665469&SessionID=crloH6aPNiq7p_7 [Accessed on February 07, 2011]. Schalkwyk, G. Tran, E. & Chang, K. 2006. The Impact of Macao’s Gaming Industry on Family Life. [Online]. Available at: http://chinaperspectives.revues.org/603[Accessed on February 07, 2011]. World Casino Directory Staff. 2011. Macao Casinos & Gambling. [Online]. Available at: http://www.worldcasinodirectory.com/Macao [Accessed on February 07, 2011]. Bibliography SINOPTIK. May, 2009. Annual economic report: Macao 2008. [Pdf]. Available at: http://www.sinoptic.ch/hongkong/pdf/eco/macao/2008_Macao_Annual.economic.report.pdf. The Victorian Casino and Gaming Authority. 2001. The Social and Economic Impacts of Gaming: A Framework for Research. [Pdf]. Available at: http://www.justice.vic.gov.au/wps/wcm/connect/47e0bd80411779a88ed9df5c241e6dc3/(1)_Social_%26_Economic_Impact-Contents.pdf?MOD=AJPERES. University of Florida. No Date. Facts at Your Fingertips. [Pdf]. Available at: http://www.hhp.ufl.edu/trsm/ctrd.default/activity/hospitality_files/GamingReport2008.pdf. Read More