Macau used to have it easy. In 2006, the territory surpassed Las Vegas in gambling receipts, which, as of 2007, made up 70% of total government revenue. The average visitor stayed just one day, leaving around 75% of the money he brought with him in the dealer’s pocket. All the Macanese had to do was spend it.
However, as the economy cooled, stories of corrupt officials gambling away embezzled funds at Macau’s casinos gained more traction in the mainland press. Beijing responded by placing restrictions on mainlanders visiting Macau. Casino revenues correspondingly fell: 17% year-on-year in January, 15.5% in February, and a further 6% in March.
Time to diversify
Feeling the pain of its overdependence on gaming, Macau hopes to reinvent itself as a tourism and MICE (meetings, incentives, conferences and exhibitions) destination. The cornerstone of this strategy is the development of the Cotai Strip. With the Las Vegas Sands Venetian Hotel Macau at its heart, the Strip is intended to satisfy every need – tourism, gaming and MICE. When complete, the area will have 20,000 rooms and more than 90,000 square meters of new convention space.
While Macau’s efforts appear to be paying off in terms of tourism – it attracted 30 million visitors in 2008, surpassing Hong Kong, which drew in 25 million tourists, for the first time – industry participants have mixed feelings about the territory’s MICE sector.
“Macau lacks sufficient infrastructure for MICE,” said Cetin Sekercioglu, vice president and general manager of the Shanghai Pudong Shangri-La Hotel.
Aside from an airport that is still too small to receive flights from major carriers, the territory suffers from kinks in service and employee supply that are typical of a reasonably young business. Hong Kong, which has a longer track record in MICE, has largely ironed out these shortcomings. Put simply, Macau’s geographical proximity to China and growing capacity have yet to make it a serious competitor, said Peggy Lau of destination management company Pacific World China and Hong Kong (PWCHK).
The current macroeconomic climate is not helping. The Cotai strip development project is currently suspended and other investors have cooled their heels as well. For example, the Shangri-La hotel chain recently decided to cancel a MICE project in Macau over concerns about the territory’s overall viability.
According to Macau Government Tourist Office statistics, the territory’s MICE industry grew by around 430% year-on-year in 2007. In 2008, expansion slowed to 17%. A total of 364,320 tourists used Macau’s MICE facilities, and the total number of events rose from 1,177 in 2007 to just 1,240 in 2008. Hong Kong lured in over 750,000 MICE visitors in 2008 – although its convention numbers fell by 8% compared to 2007.
“Macau is a casino destination,” said Matthew Yeung, director of Hong Kong-based GL Events, which recently opened an office in Macau. MICE clients heading to Macau and MICE clients en route to Hong Kong are after two different classes of customer, he explained. Hong Kong’s reputation as a global financial center and its proximity to mainland China mean a large number of its MICE travelers are there strictly for business. Macau, on the other hand, draws clients looking to combine business with pleasure.
A package deal
Hong Kong and Macau’s main MICE competitors are not each other. In fact, the two destinations are increasingly packaged together, according to the Hong Kong Tourism Board. For example, US-based Wyeth Pharmaceuticals last year took 1,000 employees on a cruise trip to both Macau and Hong Kong.
The real threat comes from Beijing and Singapore, said PWCHK’s Lau. The Beijing Olympics spurred significant investment in MICE facilities, while Singapore’s reputation as a modern, convenient and international city – and as a regional business hub – gives Hong Kong a run for its money.
However, Shangri-La’s Sekercioglu noted that mainland MICE centers enjoy one key advantage: proximity to a massive number of customers. “Remember, 40% of MICE business is local,” he said.