The practice of Macau gaming operators offering complimentary drinks and food, including popular items such as bubble tea, egg tarts, and the locally renowned Cha Siu (BBQ pork) rice, has sparked a viral trend on Chinese social media, resulting in significant publicity success. However, according to experts consulted by AGB, these free offerings do not align with a strategy focused on premium mass clientele.
A gaming expert from an international brokerage, who prefers not to be identified, indicates that “these free offerings aren’t for premium mass at all.” According to marketing norms, offering free hotel rooms is the main practice used by operators to please premium mass players.
Nevertheless, different gaming operators in Macau have joined this price war-like battle due to the intensifying competition in the market.
“This reinforces the market view about intense competition—everyone has to spend to attract foot traffic so that they might earn higher gross gaming revenue (GGR),” said the expert.
Earlier this year, MGM Macau started offering free popular bubble tea, Häagen-Dazs ice cream, and some bakery snacks in gaming areas at no cost. Wynn Macau also launched the famous Chinese liquor brand drink, Moutai ice cream, as well as Moutai latte for their members inside the casino.
Following these, Parisian started to offer croissant ice cream, and Ponte 16 also offers BBQ pork rice.
The marketing strategy has gained many internet reviews on social media, mostly tutorials for people to get free food in casinos, while those casino properties also received different exposure from that.
“These free offerings, however, are very effective in terms of promoting themselves through word-of-mouth,” notes the expert.
Surge of budget travelers
The term “Special Forces-style Tourism” referring to budget travelers, has recently gained popularity on China’s social media platforms. It denotes the current trend among young individuals to explore numerous attractions and indulge in a variety of delicious cuisines while minimizing both time and expenditure.
In this context, the rationale behind the popularity of Macau gaming operators’ free offerings becomes evident.
Speaking to AGB, Zeng Zhonglu, from the Macao Polytechnic University’s Gaming Research Team, points out that budget travelers are not the target clients for Macau casinos. He notes that Macau’s limited space cannot rely solely on the quantity of visitors but rather on quality.
“High-end visitors are always the focus of Macau casinos, which is why Macau operators consistently build top-tier hotels.”
Zeng Zhonglu
Galaxy Entertainment Group recently announced the opening of a new Capella Hotel, scheduled for mid-2025. Situated in the prime Cotai area, Capella at Galaxy will be housed in a 17-story building, offering only 36 Sky Villas and 57 Suites.
Currently, Sands China is also investing some $1.4 billion in Londoner Phase 2 and the revamp of its Cotai Arena.
Zeng believes that the premium mass market holds significant importance for future growth and market share competition.
According to data published by the SAR authorities, the per-capita spending of visitors was MOP2,293 ($286) in the first quarter, representing a 40.3 percent increase from the same quarter of 2019. However, this figure reflects a 24.3 percent year-on-year decline.
Zeng interprets that due to China’s economic headwinds, conservative consumption has become a trend for some travelers. In this context, the return on investment (ROI) of gaming operators has been on a declining trend since the pandemic. However, fears of missing out on the market’s competition have spread widely among the operators.
Player reinvestment surges ahead of GGR growth
An investment memo issued this week by CLSA highlights that player rebates and other forms of player reinvestment in the Macau casino market have been growing faster quarter-on-quarter than the overall casino gross gaming revenue (GGR).
The report notes that total player rebates and reinvestment increased by 10 percent quarter-on-quarter in the first quarter of 2024, reaching $1.27 billion. This outpaced the GGR growth of 6 percent from the fourth quarter of 2023 to the first quarter of 2024.
Consequently, rebates accounted for 18 percent of the sector’s GGR in the first quarter of 2024, up from 17.3 percent in the previous quarter. Analysts anticipate intense competition ahead, as such investments are crucial for driving business.
In previous equity research from Goldman Sachs, it was mentioned that Galaxy Entertainment tripled its marketing team from 100 to 300 hosts right before Chinese New Year (CNY), as the operator aims to capture at least 20 percent of the GGR market share, up from 17.8 percent in 4Q23.
SJM has also expanded its marketing team from 12 to about 100 people recently, with plans to increase it further to 200, aligning with MGM and Wynn.
In the second quarter of the year, HSBC also quoted industry operators expressing that the industry’s competition is intensifying, but reiterated that it remains manageable. According to these operators, margins for the high-end mass segment could face more pressure from competition but be buffered by operating leverage as top lines continue to grow.
Pressure on local SMEs
Concerns over the Macau operators’ free offerings strategy have been escalating due to pressure from local small and medium enterprises (SMEs). Representatives from some local SMEs have flagged that the free snacks are eliminating the survival space of local small businesses.
AGB has learned that the Macau government has already entered into discussions with Macau concessionaires to eventually stop this practice. However, as of the publication of this article, those free drinks and snacks continue to be available in Macau’s casinos.
