Casinos in Macau, the Vegas of the East, have managed to renew crucial gaming licenses. But there's a hefty catch — they need to pump in $15 billion into non-gaming sectors.

macau macau
Macau's economy has been battered by the COVID-19 pandemic.
  • Macau's six casino operators pledged to invest nearly $15 billion in non-gaming sectors.
  • In return for the investments, Macau's government has renewed their gaming licenses.
  • This may put investors at east about the future of the gaming business, which is a key contributor to Macau's economy.

Casinos in Macau, also known as the Las Vegas of Asia, are starting their end of the year celebrations early this year — their casino licenses have just been renewed after a months-long agonizing wait, easing investor fears about the future of the businesses.

But there's a catch — they need to diversify their offerings away from gambling, at a hefty price tag. 

Six casino operators — Sands China, Wynn Macau, Galaxy Entertainment, MGM China, Melco Resorts, and SJM Holdings — have pledged to invest 118.8 billion Macanese patacas, or $14.8 billion, collectively, into non-gambling related activities, Macau's government said in a Friday press release. Over 90% of the investment will go to the development of non-gaming projects and exploring overseas markets.

Gaming licenses for the six major casino operators had expired back in June, throwing into question Macau's future as a gambling hub. These six operators manage Macau's 41 casinos collectively.

The new 10-year gaming licenses come into effect on January 1, 2023.

Among the six gaming companies, Sands China has committed to spending the most in non-gaming projects — about 27.8 billion patacas, or $3.5 billion. It has pledged to develop the conventions and exhibitions sector, and will be reaching out to international markets including Japan, India, and the US.

Galaxy and Melco Resorts are planning to build new theme parks.

Tourism and gaming are crucial to Macau's economy, with casino revenues collectively making up half of the Chinese Special Administrative Region's annual GDP. Tourists from Greater China, which includes travellers from Hong Kong and Taiwan, made up over 90% of visitor numbers in 2019, according to Macau's tourism authority.

But Macau's economy has been battered by the COVID-19 pandemic, and its GDP plunged 33% in the third quarter of 2022 from a year ago.

While the Macau's economic diversification could buffer the territory against overreliance on one sector, experts say it could take some time for the results to become evident. 

"This is inevitably going to be a slow, gradual process, given that Macau has really struggled to diversify away from its reliance on gambling for years, but only made limited headway. The pandemic has really driven that point home," Nick Marro, global trade lead at the Economist Intelligence Unit told Insider.

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