Macau is one of the former Portuguese Colony. The island is bordering the mainland China. As early as 1847, the Portuguese legalized gambling in an attempt to generate revenues for the government. During this time there were popular Chinese gambling games known as fan-tan. When this legalization came into effect, it has been reported that about 200 fan-tan houses were required to pay gambling levies to the government of the time (Gartner & William 6).
With the gaming industry development, 1937 saw granting of the second casino monopoly to the Tai Heng Company. Nonetheless, it was not until 1962, when gambling experienced real breakthrough in the economic vibrancy and the government granted the monopoly rights to a joint syndicate STDM formed by some Hong Kong and Macau business people. This cartel was responsible for introducing western style gambling to conservative Chinese gambling.
After becoming an administrative region of China in 1999, Macau gambling developed nearly accounting for 50% of its GDP. The industry is divided into casino games, horse racing and greyhound racing (McGowan & Richard 4).
Gambling tourism is without doubt one of the biggest single revenue generators for the Macau economy. Over the years close to 50% of revenue has been generated from activities in this industry as direct taxation, licensing among other avenues. However, there are still several adequate steps that the government can take to improve the economic viability and future sustainability of the industry.
The world is becoming increasingly competitive in terms of business development and no single economy can afford to remain closed. Therefore, as much as we understand that the major clients for Macau gambling tourism are from mainland China and Hong Kong, it is time for the players in the industry to employ new strategies. We shall outline a few steps that can help to improve the industry (McGowan & Richard 12).
Our model methodology suggests:
- articulating for change in the government policy;
- expansion of target clientele;
- widening the scope of gambling activities;
- enhancement of training in the hospitality industry.
Research & Analysis
In order to create more profitable gambling reliant economy, Macau administration has to be ready to embrace some degree of free-trade policy. In such an economy the forces of demand and supply are left to regulate activities of the market without government interferences. At present there are some government restrictions holding back this industry to a certain extent.
Even though gambling is legal in Macau, the government is yet to change its policy to allow online gambling which is still restricted. Let us appreciate the fact that gambling monopoly was ended in 2002 to pave the way for more competitiveness in the industry, however much can be done. The regulation of the industry by Gaming Inspection and Coordination Bureau is a positive move by the government (Gartner & William 7).
This has ensured overseeing of all gaming activities and operation of all layers under the government franchise and common set of rules. It is reported currently that there are 33 casinos. The introduction of poker is also a move in the right direction. Most of the dealers now have live poker tournaments almost every weekend as part of casino activities. If the government can again review and enact regulations that will facilitate online gaming and gambling, it would be a new way to attract potential clientele who would not otherwise participate in gambling as a result of being out of reach. New clients can place online bets from comfort of their homes and even while being abroad in foreign countries. Online gambling would be a booster for the industry in Macau.
When the industry was growing, the clientele largely comprised of Chinese and Hong Kong personalities for so many years. Perhaps, this was due to the historical connection regarding the originality of fan-tan houses for Chinese games. All the same, with introduction of western style games, a considerable flow of patrons from western nations and Australia started taking interest in the activities of industry here. It is recorded that in 2007 the gaming revenues here surpassed revenues realized in Las Vegas.
The industry players can now expand their clientele base by marketing campaigns and promotions to other parts of the world, like Europe and the Americas. Since the government has a subsidiary interest in the industry, its promotion can be fused with promotions of the island as a favorable tourist destination and include horse racing and other kinds gaming as part of the package.
Widening of the scope of gaming activities can be an attraction of potential clients who will not necessarily play in a casino set up. Horse racing, dog racing, hunting eagles and even car racing competitions can be included as part of the gambling activities. The other thing would be increasing the frequencies of competitions. Currently in Taipa Island of Macau the horse racing takes place 2 days a week, whereas it can be arranged to take place 4 days per week (Lam &Newman 56).
It is reported that the Macau Jockey Club is one of the largest private employers engaging about 1, 400 employees and at least 1,100 of the part-time staff. Translating this to all the gambling employment related aspects, we find that indeed a large number of people depends on the industry for survival. Thus in order to remain relevant for future development of the industry, the government must create avenues for enhancement of training in human capital for general growth of the hospitality industry.
Gaming activities here have direct correlation with tourism. Casinos have become important social life forms ages ago and will continue to have impact in future. With rapid economic development around the world, people find that they have more time and financial capability for entertainment and some find casinos and gaming more appealing. Coming up with this growth in the industry is the need for managers to recruit and train staff to perform effectively in the industry.
However, with the ever-changing consumer demands, there is a need for human capital upgrading to be relevant with anticipated future challenges in the gaming industry. According to the Journal of Macau Gaming Research Association, effective human resource management is one of the most important considerations necessary to maintain competitiveness in hospitality industry as well as gambling activities which largely correlate with tourism.
It is worth noting that this business is not just about games, money and recreation. There is a huge inherent relation between legality and morality. This affects not only the gamblers and patrons but also the employees’ performance, behavior and general loyalty to the job. That is why human resource management becomes critical.
Problems & Recommendations
Gambling as an industry has been the source of problems and instability in Macau. As much as economy gains heavily from it, the nature of the industry is not very susceptible to technological changes as well as general growth in the sector of hospitality (McGowan & Richard 28). We can infer that the biggest disadvantage is that prosperity of the industry is solely reliant on the general well-being of other economies. For instance, most patrons for gaming industry in Macau are from China and Hong Kong. So, it would largely depend on the prosperity of these two nations to have adequate nationals participate in the gaming in Macau.
It is previously indicated that about 50% of GDP is derived from this industry. Hence, once it collapses, there will be economic stagnation. It is recommended that to overcome this problem, the administration must look for ways to diversify into their economy. They can start with expanding tourism sector, venturing into commercial sporting activities as well as adopt telecommunications and development of such trades as shipping activities and other commercially viable options that will link Macau to the rest of the world.
There is also the problem of government policy and control. Inasmuch as after the handover of Macau to China, there was general opening up of the industry by releasing licenses to other players and ending monopoly, the administration is yet to legalize online gaming. This move to allow competition is responsible for realizing revenues by a good margin and it is projected that gambling taxes and related incomes accounted for 70% of the administration income.
In the same light, liberalizing the industry can generate more revenues as it would pull in more investors. The multiplier effect of this expansion and investment will create subsidiary industries that will open up new employment opportunities, capital inflow and foreign exchange inducement that will improve economic productivity of the domestic economy.
On the one hand, the industry brings in billions in revenue, while on the other it is viewed as creating a lot of harm on the social fabric. During the colonial times Macau registered high crime rates associated with gambling activities. After the return of Macau to China administration, remarkable security improvements have been noticed. However, new patterns of organized crimes have also emerged. The growth of the industry has given birth to a new type of illegal business, popularly known as bate-ficha, run by organized criminal gangs involved in the industry (Lam & Newman 30).
The business involves certain clique of patrons and selling their dead chips which are irredeemable for cash. This is an intricate web with gamblers involved and it has continued to attract deadly gangsters battling for quick fortunes. This has brought along the issues of extortions and racketeering as groups compete for control and often break into violent escapades (Gartner & William 56). Due to the money stakes involved, these groups are seemingly more powerful than the local police. Macau administration is trying to control these cartels but the problem is still entrenched in the local scenarios.
Another perceived problem relates to the health and cleanliness. Most casinos are characterized by patrons who are heavy smokers and drinkers. Secondary smoke poses health complications to the non-smoking staff. Working long hours in the gambling chambers can bring respiratory illnesses. To make matters worse, some gamblers are rude and unruly to the staff. Casino owners should be sensitive to the health matters and provide rooms that can allow free and ample circulation of air. At the same time they also need to prevail up on the patrons to behave in professionally acceptable manners.
Another challenge to this trade emanates from cultural grooming. Throughout Chinese history, the activities of gambling were perceived as socially undesirable. The ancient philosophers had reiterated that gambling is disruption to the social order. More so, where gamblers would bet their houses, monies and belongings, they eventually leave their families in abject poverty. It is a fact that problem of the gamblers affect not only them but everyone related to them (Lam &Newman 14). The underground movements and impending money laundering scandals taunt the legitimacy of legalizing the trade.
By extension, casinos frequently join to prompt spenders, so there is a tendency for sex-trade promotion as commercial sex workers avail themselves in search of hookers to make quick money. Money, alcoholism, prostitution and crime go hand in hand, hence they add up to the perception that gambling as an industry is morally dirty. Perhaps, what leads many to this conclusion is the shear level of secrecy that activities in casinos seem to have. To demystify gambling, the relevant authorities could engage in public awareness of the benefits and losses involved. Nevertheless, regardless of the positive campaigns that authorities and gambling professionals can conduct, there will also be the impending spiritual inclination in people (Gartner & William 39).
Some critics of the industry blame it for concentration of much effort for promotion of VIP gaming as opposed to the mass market. They foresee an impending problem in the event of the government’s visa regulations which may hamper the tourism activities. Likewise, it is their argument that neglecting the mass market is just like prolonging the already painful situation. That way, it stops and creates obstacles for local development of more diverse and sustainable economy.
The critics have gone further to argue that concentration on VIP gaming will eventually bring about some negative image regarding some issues in the country and may in the long run ruin international reputation of Macau. Instead, they advocate for promotion of the local mass gaming market and diversification to other sectors of economy (Lam &Newman 26).
Macau gaming market is credited for some estimated revenue generation of about US $ 23.5 billion in the year 2010 and is set to achieve yet higher revenue in the coming years. This is such a critical sector that the government must be thorough and more articulate when passing on the polices that can affect the industry. More important will be the way by which the new regulations will come into force as the level of potential players is set to increase (Gartner & William 39).
In order to be more sensitive to the staff working in the gaming industry, investors should endeavor to create smoke-free gambling sections as opposed to advocating for ban in smoking which may impact negatively. The government should encourage investors to engage in the corporate social responsibilities as a bridge to demystify the impending moral and spiritual demonization on the gambling activities.