MACAU 20 YEARS

Asia first choice for mass, but VIPs venturing further

It’s difficult to enter a tourist hotspot in Asia without observing signs written in simplified Chinese, or a street vendor shouting greetings in Mandarin - a testament to the influence that Chinese outbound tourism has had in Asia.

Statistics from the China Outbound Tourism Research Institute (COTRI) show that China is expected to see around 180 million border crossing in 2019, a figure which is expected to hit 400 million by 2030.

While this is a promising statistic as a whole, experts believe that Asian countries, in particular, will need to step up their game if they want to keep their slice of the pie.

In the past, the majority of outbound travel has been to the Greater China region, which includes Hong Kong, Macau, and Taiwan.

Prof. Glenn McCartney from the University of Macau said this has been due to a level of “familiarity” to the tourists’ home country that these destinations offer.

According to the professor, this market segment has been attracted to countries that are proficient in Mandarin (or Cantonese), that support familiar payment methods, such as Alipay and WeChat, and that offer food they are familiar with.

“There is a large Chinese outbound travel segment that still travels [based] on levels of familiarity,” said McCartney.

However, COTRI has seen a shift, especially from the wealthier segment of Chinese tourists, who have been venturing off the beaten path.

“First and second-tier city residents, who make up the majority of Chinese outbound travelers, are generally moving away from popular destinations in favor of more novel, less-visited locations.”

This type of tourist is becoming more sophisticated and selective about their travel experiences - which has led to the birth of “customized travel,” according to Dr. Wolfgang Arlt, founder and director of COTRI.

This profile of Chinese traveler places more importance on quality and value for money, rather than quantity and cheap prices.

Customized travel, as opposed to the wellknown “package tours,” typically involves a smaller private group with a greater say over chosen itinerary and activities. Forced shopping and typical sightseeing spots are not common items on these itineraries, and “experiences” have become the main objective of travel.

For integrated resort operators in Asia, this means offering their Chinese customers something unique, genuinely local, and experience-rich, say experts.

“There is increasing travel for experiences,” adds McCartney, pointing out that Malta and Ireland have become popularrecently as these locations were used for the filming of HBO’s Game of Thrones TV series.

This profile of Chinese traveler places more importance on quality and value for money, rather than quantity and cheap prices, added Dr. Wolfgang.

“They are more and more interested in new, authentic offers based on local culture and nature if provided and communicated in the right way, through the right channels.”

Some of the proposed integrated resort concepts for Japan appear to be headed in the right direction.

Tribal gaming operator Mohegan Gaming & Entertainment recently revealed the concept for their Hokkaido IR project in Tomakomai, promising horse-riding, cross-country skiing, and other outdoor activities as part of their offerings.

Melco Resorts & Entertainment’s Morpheus Hotel tower in Macau, designed by the famous architect Zaha Hadid, which opened in June 2018, was built with the intention of becoming a tourist attraction of its own.

During its opening, Melco CEO Lawrence Ho said the building was designed as a landmark that would be seen as “uniquely Macau.”

However, the right products in the right place are not the only requirements to satisfy demanding Chinese tourists, say experts. Seamless travel experiences and “China-ready” destinations are key.

On the technology front, this means the development of cashless payment systems.

“Prior to the emergence of mobile payment apps in China, the country was primarily a cash-based society. However today, apps like Alipay and WeChat are transforming China into a cashless society where transactions are commonly carried out via the phone in your pocket,” said Dr. Wolfgang.

“Yes, social media matters,” McCartney remarked. The use of the smartphone and apps such as WeChat and Weibo. Not just for payment methods but a host of functions beyond. So cashless payment methods are the way forward for destinations receiving Chinese outbound.”

On the customer experience front, McCartney points out that there is a need for customer service in host countries to be “China-ready.”

“There is a level of face-to-face service and hosting expectations. So for countries to be ‘China-ready’, sure, they must have the technology in place, but at the same time, must have a level of service staff trained to host Chinese visitors, such as language and customs.” he said.

In 2015, the Cambodian Ministry of Tourism announced the development of a “China-ready Accreditation System,” an initiative aimed at developing better travel products to suit the Chinese market. This included upgrading infrastructure facilities across the country, a more favorable visa policy for Chinese visitors, and cultivating professionals and talents in the tourism industry.

Its efforts may be paying off with Cambodia appearing in the top 15 travel destinations for Chinese for the first time this year.

In the gaming industry customer service staff will need to go further than just learn the language, they will need to know Chinese customs and thought processes back-to-front.

Looking ahead, Dr. Wolfgang says that there is a huge opportunity for the tourism and entertainment industry to tap into 3rd and 4th tier cities in China.

The lowering of entry-requirements for Chinese citizens, and the increased flight connectivity, particularly in 2nd, 3rd and 4th tier cities, will also help to spur the outflow of tourists, he said.

“Today, no more than 10 percent of Chinese citizens possess passports. Almost all live in 1st and 2nd tier cities.”

“Yet, there are growing numbers of residents from third and fourth-tier cities who are starting to take their first trips abroad. This growth is being aided by the growing numbers of international flights and visa centers becoming available outside of first-tier cities.”

Dr. Wolfgang believes that Asia will continue to be a destination of choice for first-time travelers, as well as gaming travelers. This is good news for mass-market focused gaming operators, who will benefit by tapping into 3rd and 4th tier cities in China.

However, experts believe the region will see less growth from high-income tourists - those who will be looking for more remote, and exclusive destinations. With that in mind, it appears that attracting VIP tourists is set to become a whole lot harder.

Technological breakthroughs and regulatory brakes

Macau is not known for being an experimental market in terms of quick adoption of new technology or games, however its sheer size and unique requirements have helped to drive some key innovations and that trend is expected to continue.

When asked to name a new product or technology that has helped to change the market in Macau, leading suppliers all point to the rise of electronic table games.

A combination of a government-imposed cap on table numbers, the high costs of live dealers in a city where only locals are allowed to take up the position and a player profile of Mainland Chinese who prefer tables, but who may be new to the floor and shy of joining a thronged game, have all helped propel strong growth in this sector.

The dominant player in the market is Paradise Entertainment’s LT Game unit, which has 60 percent of the installed electronic tablegame base in Macau, with its Live Multi- Game Terminals, which were first introduced in 2011 in Sands.

Jay Chun, chairman and managing director of Paradise and head of the Macau Gaming Equipment Manufacturers Association, said the LMG terminals offered an optimal solution to tackle the issue of ashortage of dealers, whilst acting as a gamechanger for Macau’s casino operators given the cap on gaming tables.

“With that, mass patrons can enjoy the excitement of table games at much affordable costs,” he said. “As a result, the landscape in casinos has a new look welcoming a new spectrum of clientele.”

Interblock Gaming President for Asia, Michael Hu, said no one had really expected such a rapid rise in ETGs in table-dominated Macau.

“When I started in 2005, the ETG footprint in casinos was not more than 3 percent.

Today, it’s around 15 percent,” he said, adding however, that the market is evolving and the new generation of ETGs need to have a greater entertainment focus built in.

Traditionally, gambling was gambling, and entertainment was entertainment. But today, the two must go hand in hand.

“Traditionally, gambling was gambling, and entertainment was entertainment. But today, the two must go hand in hand,” he said. “We have been implementing technology with entertainment in mind.”

Jumbo Technology’s Allen Hsu agrees. “You’re going to see even more variety when it comes to ETGs, with new variations of roulette, baccarat, and other traditional table games.”

In terms of table games themselves, the introduction of automated solutions has revolutionized the floor, vastly improvingthe accuracy and integrity of transactions and changing a process that had remained virtually the same for the past 100 years.

“Smart shoes and shufflers were the precursor to more complete solutions such as Perfect Pay Baccarat, and other Smart table solutions,” said Emily Io, senior VP sales at Walker Digital Table Systems.

“Live table games will continue to dominate the casino floor, while the addition of real-time data available through the introduction of technology to the live table games, will open a new platform of opportunity to drive new player experiences, improved customer service and increased game volatility,” she said.

While slots have always been the poor cousin in Macau, they have gained traction as suppliers developed games specifically for the local market and as the mass segment has expanded.

Aristocrat has the largest market share in Macau. Its sales and business development director for Asia Pacific, Lloyd Robson, says it was the hyperlink that was the “biggest game changer” for the company. “Hyperlinks really put link technology on the map, to the point that when you go to Macau and look at the mass market slot halls, you’ll see it is driven by hyperlink and link games.”

With about 95 percent of Macau’s $38.3 billion in gross gambling revenue generated from table games last year, coupled with the notoriously difficult regulatory process, it’s understandable how the adoption of cuttingedge products and technologies has been slow.

However, with most properties now built out, competition has been rising in Macau, pushing operators to find a way to get a winning edge. Suppliers say one way will be the increasing use of artificial intelligence and other forms of technology to improve customer services and the player experience.

Ken Jolly, vice president, and managing director of SG Gaming Asia points to the use of hand-held devices on the casino floor that can relay messages directly from the player to the nearest staff member to improve customer service.

“The player comes in and puts a card in, so the system knows that. Should the player want a payout, the message comes out to the nearest host,” he said. “If they leave you can have a messaging saying that you might get a discount on steak etc.”

Michael Cheers, sales director, Asia at IGT also points to how customer service will be a key differentiating factor for operators and one where technology can help.

“We will be utilizing tech to provide a better service experience on the gaming floor. We ensure the players’ needs are met, whether that is a game perspective, or food and beverage.”

In an increasingly screen-driven world, there’s one major innovation most say they would like to see introduced in Macau and that’s the approval for multiple devices on the casino floor.

“In five years the gaming floor may not look materially different from what it looks like today,” Walker Digital’s Io says. “However, always-connected consumers are today using multiple screens simultaneously both for entertainment and to stay more connected. For gamblers to play how they like to live, the trend board shouldn’t be the only screen at the table. Mobile and multi-layered gaming experiences will be a significant part of the gaming floor in the years to come.”

That is if the regulators allow.

High-end restaurants add star quality to Macau’s IRs

Nineteen. That’s how many Michelin-star restaurants Macau has racked up to date, firmly establishing the former Portuguese colony as a gastronomic powerhouse on the world’s culinary stage.

In fact, the 30 stars awarded to these 19 properties makes Macau, which is home to more than 600,000 people, one of the leading cities for stars per head of the population. For the leading IRs, a lavish Michelin-starred restaurant serving up cutting-edge dishes and a world-renowned chef installed at the helm has almost become the ultimate status symbol in the Special Administrative Region.

Filipe Senna Fernandes, catering sales manager for MGM Macau and VP of the supervisory board for MISE (Macau Meetings, Incentives and Special Events), says: “From an hotel perspective, a fine dining experience – somewhat similar to a shopping experience – is not only a way to differentiate from competition, but is also a non-gaming offering to attract and retain the VIP segment, which has become smaller in size, but has grown to become more sophisticated.”

Taipa’s Grand Lisboa houses two of Macau’s three restaurants to be awarded a coveted three Michelin stars: The Eight with its mix of Cantonese and Huaiyang, and the Robuchon au Dôme with its French contemporary menu. The other establishment in this elite club is the Cantonese-inspired Jade Garden at Cotai’s City of Dreams. Those holding two stars are Tasting Room at City of Dreams, Golden Flower and Mizumi at Wynn Macau, and StarWorld Macau’s Feng Wei Ju. Legendary French-born Monegasque chef Alain Ducasse’s eponymous restaurant, situated on the third floor of the Morpheus Hotel, rounds off the list.

Another 11 restaurants in the world’s largest gambling hub have been bestowed one-star status by the esteemed Michelin Guide. “It is certainly special and rare to have 19 Michelinstarred restaurants in a city of just 30 square kilometres,” says Desmond Lam, professor of integrated resorts and tourism management at the University of Macau. “I think Michelinstarred Chinese restaurants are popular as they brought out the uniqueness of dining in this part of the world. But all 19 Michelin-starred restaurants are good in helping to create special experiences to our visitors.”

Meanwhile, Shaun McCamley, managing partner of Euro Pacific Asia Consulting, says Macau offers not only the “very best in fine dining for high-end VIP players” visiting from the Mainland and elsewhere, but also unique flexibility. “If a VIP player walks into the property’s headline fine dining outlet and asks for noodles and rice soup, he gets it without question or raised eyebrows. I’m not sure that would happen in a Michelin-starred property in Europe or the US.”

With its distinctive fusion of Asian and Portuguese flavours, which gave birth to Macanese food more than 400 years ago, the city has long been synonymous with cuisine, whether that be upmarket restaurants or mom-and-pop eateries. Indeed, for years many Hong Kongers have taken the one-hour ferry ride to Macau solely for a meal out. Yet with the influx of tourists from Mainland China and further afield, the authorities have made a concerted effort to elevate Macau’s standing into a premier destination for high-end cuisine. “In the past few years, the Macau government has deliberately positioned Macau as a city of gastronomy,” Lam says.

Moreover, it is another step towards diversifying Macau from being a gamingfocused destination. The Statistics and Census Bureau recently announced that gaming and junket businesses accounted for over half (50.5 percent) of the city’s GDP. For the resorts, each unveiling of a glitzy restaurant generates headlines and a real buzz of excitement for their respective properties. And each resort tries to outdo the competition with ever-more dazzling interiors to impress their diners. A case in point is Morpheus, designed by the late renowned architect Dame Zaha Hadid, which opened at the City of Dreams in June 2018, with over 600 Lasvit-designed crystal chandeliers suspended from the ceiling of Ducasse’s restaurant.

So, just how important is fine dining, and dining more generally, for these properties from a revenue standpoint? Most agree they are not major contributors.

“These fine dining restaurants are subsidized and supported by casino gaming, so their price points are fairly accessible if you compare to Michelin-starred restaurants in Europe, for instance,” MGM’s Senna Fernandes says.

It is certainly special and rare to have 19 Michelinstarred restaurants in a city of just 30 square kilometres.

McCamley adds, “Unlike Europe or the US, food and beverage in Asia is viewed very much as a support function to the gaming department, which means most, if not all, either run at breakeven, or some even at a loss.”

“Headline high-end western brands don’t generate any real interest or excitement; what the VIP players here want are top-of-the-line exotic dishes prepared by top Asian chefs who know what the market’s tastes are and, importantly, what the market craves.”

While gourmet dining is now a must-have element of any IR, not just in Macau, Lam wouldn’t go as far to call these restaurants ‘loss-leaders’ for the city’s properties. “I would not consider them as loss-leaders but an added attraction to our visitors, expanding and diversifying our customer base beyond just gaming customers. Their continued presence will only add value to Macau’s economy. These lavish restaurants help provide more unique experiences to our visitors, other than gaming and I believe they will continue to excel and help Macau to achieve its aim of diversifying out of a gaming-centric economy.”

In 2017, Macau underlined its culinary credentials when it joined 25 other cities to hold the coveted “UNESCO Creative City of Gastronomy”. It shows that this gaming hub no longer plays second fiddle to Hong Kong in the dining-out stakes and has gained a reputation for attracting some of the world’s top chefs producing experimental, cutting-edge food.