* By Sudhir H. Kalé, Ph.D.
The casino industry in Macau grew from US$2.77 billion in revenues in 2002 to over US$45 billion in 2013. Then, in 2015, revenues fell precipitously to under US$29 billion, a fall from which casinos are still reeling.
In 2009 two very senior casino executives predicted casino revenues to top US$100 billion by 2020. Now that we are approaching the cusp of the new decade, a figure of US$35 billion seems more realistic.
Macroenvironmental factors (such as “tigers and flies” campaign, restrictions of Union Pay credit card withdrawal, and tightening of credit in China) aside, the casino industry in Macau, has partially been a victim of its own success. The years from 2004 (when Sands Macao opened on the Peninsula) to 2013 were marked by a building flurry with scant regard for customer retention. The number of casinos in Macau increased from 15 to 35 during this time with the number of gaming tables going up from 1,092 to 5,750. This feeding frenzy came to an abrupt stop in 2014, beginning three years of sequential decline. All operators were quick to cut their head count, consultants were shown the door, and player reinvestment was further reduced from an already low base.
Today, as 2019 draws to a close, we are again witnessing serious challenges. Markets such as Singapore, Philippines, Cambodia, and Vietnam are ramping up their offerings and luring customers away from Macau. At a time when customer franchise building should be the clarion call for Macau’s six casino operators, most seem preoccupied with cost-cutting.
When over 90 percent of large businesses around the world are competing primarily on customer experience, casino operators in Macau are cutting back on customer-facing initiatives to shore up the bottom line. It appears that senior leadership in the Macau casino industry is running out of ideas to deal with—or is simply oblivious—to the current and impending competition in their backyard.
According to Union Gaming, around US$65 billion will be invested in casino properties in Asia between now and 2025. Economic growth in Asia will not be enough to fuel the new casino development across the region, the analysts warn. With a slowdown in Mainland China’s economy, the looming re-licensing question in Macau, continued restrictions on the outflow of currency in China, and devaluation of the Renminbi, we could very well be looking at 2014 all over again.
The supply in the casino industry in Southeast Asia is increasing every day and will continue to increase for at least another five to ten years. The demand for the casino product is simply not there to handle the increased supply. Asian customers visiting casinos are increasingly cutting back on their gambling budgets and this cutback is already hurting casinos everywhere from Melbourne to Macau, from Singapore to Sydney. These developments could cumulatively result in another perfect storm to hit Macau, and this time it won’t be a typhoon like Hato which devastated Macau in 2017.
Casino operators need to act now and focus almost singularly on initiatives to foster customer retention and customer intimacy. These customer-franchise building activities should include all customers, not just the much-touted premium-mass segment. Corporate ethos in the Macau casino industry needs a serious overhaul, a redirection toward a customer-centric culture and market-oriented management.
* Sudhir H. Kalé, Ph.D., is the Founder and CEO of GamePlan Consultants. He has written over 100 articles on the management and marketing of casinos. Sudhir has advised casino clients in the areas of customer experience, marketing and CRM on five continents. You can write to him at [email protected]