Casino suppliers quit Macau for resurgent Singapore, Philippines

Macau's casinos aren't buying any new equipment until they get licences to continue operating at the end of the year. PHOTO: REUTERS

HONG KONG - Suppliers of slot machines, baccarat table systems and other casino equipment are moving out of Macau to more welcoming markets, in another sign of the damage China's Covid-19-zero policy has wrought on the formerly bustling gambling hub.

With demand in Macau waning, Light & Wonder, a leading provider of products used in casinos, is relocating its expatriate staff to the Philippines, which has become its top market in Asia and where it is opening a new office. Another equipment maker from Japan is also moving employees to the Philippines and Singapore.

The Japanese company is relocating as many as 30 per cent of its employees and has taken more than half of its inventory out of Macau due to supply chain challenges, a person familiar with the matter said. The firm has seen revenue plunge about 90 per cent in Macau as casinos shelved purchasing plans amid a prolonged industry slump.

Macau's casinos are not buying any new equipment until they get licences to continue operating at the end of the year, and without fresh sales, Light & Wonder is getting only limited revenue from maintenance and technical support, said Mr Ken Jolly, the American company's Asia vice-president and managing director.

Fading away

After well over a decade as the world's pre-eminent casino centre, Macau ceded that crown back to Las Vegas as Covid-19 lockdowns and China's travel bans choked off the usual flood of people coming in by air, sea and land. Prior to the pandemic, Macau's gambling market - heavily reliant on mainland customers - was six times bigger than Vegas', with annual revenue of US$36 billion (S$50.5 billion).

Macau Gaming Equipment Manufacturers Association chairman Jay Chun said he knew of at least four multinational casino suppliers relocating manpower and resources overseas. The trend could accelerate after the government announced a cap of 12,000 gaming machines across the city for 2023 under a new casino law. There were already 17,000 machines in the market in 2019.

China crackdown

Macau was under pressure even before the pandemic struck, with Chinese President Xi Jinping cracking down on high-rolling gamblers in the territory as part of a campaign against money laundering, corruption and capital flight.

This June, a virus flare-up prompted China to suspend quarantine-free travel with Macau for more than a month, a devastating blow to casino operators already bleeding millions of dollars. Tourist arrivals averaged a paltry 300 a day in July and gaming revenue dropped to a record low of US$49 million in the month, when a lockdown also shuttered casinos for two weeks.

While social distancing rules still apply at gambling tables, some restrictions have been peeled back. But people are staying away, fearful of getting trapped in a snap lockdown like those that have also enveloped Chinese cities such as Shanghai, Sanya and Chengdu.

Other markets

For August, Macau's gaming revenue was just US$271 million, about 9 per cent of pre-pandemic levels. Meanwhile, gaming revenue in Singapore returned to 70 per cent of the level seen before Covid-19 in the second quarter, while the Philippines and South Korea are both back to about 75 per cent.

"Singapore and the Philippines are growing exponentially," Mr Chun said. "Macau has already lost its shine."

G2E Asia, one of the world's biggest gaming conferences, was held outside Macau last month for the first time since the annual event started in 2007. As South-east Asian casino operators and global suppliers gathered in Singapore's Marina Bay Sands resort, representatives from gaming companies in Macau, where residents still need to undergo seven days of hotel quarantine when returning from overseas, were absent.

New standards

Macau is also revamping standards for electronic gaming machines, requiring manufacturers to design new software, which could be particularly costly and challenging for smaller suppliers. Some may decide not to update less popular machines as a result, Mr Chun said.

The shifting priorities of suppliers and fewer types of gaming machines could threaten Macau's ambitions to develop a Vegas-style, entertainment-driven mass tourist market to counter China's campaign against high rollers.

Unlike premium gamblers who prefer table games, casual bettors tend to be attracted by slot machines, Mr Chun said.

Slot machines accounted for about 5 per cent of Macau's gaming revenue in 2019, compared with more than 50 per cent for the Las Vegas Strip.

To secure new licences and as part of Beijing's push to reduce Macau's reliance on gambling, casino operators must commit to investing in non-gaming areas such as Chinese medicine and technology.

This will force them to cut spending on low-yielding gaming machines, said Mr Daniel Cheng, a former executive at gaming companies including Hard Rock International.

"Macau cannot expect normal services to resume as before," said Mr Cheng. "The Macau of old is a thing of the past." BLOOMBERG

Join ST's Telegram channel and get the latest breaking news delivered to you.