Understanding the reactions of government and gaming concessionaires on COVID-19 through the neo-institutional theory – The case of Macao

Abstract

This paper looks at how Macao, the world’s most densely populated city, deals with the COVID-19 disease, with a focus on government interventions and responses of the gaming concessionaires who operate integrated resorts. Macao was selected as the case not only because of the background of the authors, but also because Macao has been cited in many media coverage as a “good practice” example when it comes to fighting against this COVID-19 pandemic situation. Since there are already ample of articles on the background, development timeline, and overall commentary, this paper adopts a mixed approach by combining supplementary secondary data on the COVID-19 timeline in Macao (focusing on government interventions that can affect the tourism and hospitality industry) and primary qualitative in-depth interviews with senior management personnel (holding positions of Director or above) from major integrated resorts in Macao to get insights on industry strategic responses and expectation on future. A total of seven interviews were conducted with senior management members of five integrated resorts in May 2020. Four areas of responses were identified. They are 1. Survival; 2. The New Business Norm; 3. Business Rebound Strategies and 4. Corporate Social Responsibility (CSR). The findings indicate a seemingly utopian scenario among the major integrated resorts and gaming concessionaires in Macao towards their compliance and autonomous actions. The mechanism of this utopian-like scenario is explained by adopting the neo-institutional theory.

1. Introduction/background

1.1. The COVID-19 pandemic

The world notorious novel coronavirus which was officially named as the COVID-19 has caused around 27 million cases globally with close to 900 thousand deaths reported (World Health Organization, 2020). In comparison, the 2003 SARS incident only affected around 8000 people (most of whom were from Asia) with less than 800 deaths until the announcement of containment by the World Health Organization (WHO) in July 2003, 8 months after the first reported case (World Health Organization, 2003). The statistics of the COVID-19 cases keep growing and there have been speculations that this virus could become a seasonal occurrence like influenza and immunity (even if developed) may not be long-lasting enough to cause the virus to die out completely (CGTN, 2020; Cohut, 2020). Parsons (1996) differentiates crises into three types: Immediate, Emerging, and Sustained crises. Apparently, the COVID-19 crisis is going to be sustained for a relatively long period. This pandemic not just affects the public health aspect but also tourism. The impact of the COVID-19 on the tourism and hospitality industry is unprecedented and worldwide. Hospitality and tourism practitioners around the world demonstrate serious concern on both survival during the pandemic and recovery and rebound afterward. It is also with this objective that the UNWTO has published a Global Guidelines to Restart Tourism at the end of May (UNWTO, 2020). In addition, within a mere 5-month timeframe the academia has seen the influx of articles on the COVID-19 pandemic situation and development. As of May 2020, there were 17 journal call for papers (CFPs) and 8 CFPs for book or book chapter topics on tourism and the COVID-19 on the Travel & Tourism Transformed website, in addition to the 31 journal articles that have already been published (Travel and Tourism Transformed, 2020a, 2020b). The counts reign free if you type “COVID-19” or “coronavirus” and “tourism” in any search engines. The pattern of academic attention typically starts with a surge of publications laying out the timeline of the commencement and development of an incident. The current situation of the COVID-19 has seen this stage climaxing and therefore it is an opportune time to bring the subject issue forward by taking a more empirical approach to look at the phenomenon.

The purpose of this paper is to look at how one relatively successful case, Macao, deals with the COVID-19 pandemic, with a focus on government interventions and responses of the integrated resorts. Macao was selected because it has been cited in many media coverage as a “good practice” example when it comes to fighting the COVID-19 pandemic situation (Barret and McGregor, 2020; Hung, 2020; Travel Weekly Asia, 2020). Since there are already ample articles on the background, development timeline, and overall commentary, this paper adopts a mixed approach to draw meaning interpretation by combining the strength of both quantitative secondary data on the COVID-19 timeline in Macao and primary qualitative in-depth interviews (Creswell, 2014). Senior management personnel (holding positions of Director or above) from major integrated resorts who are gaming concessionaires in Macao were conducted to obtain insights on industry strategic responses and expectations in the near future. The main research objectives are two-fold: (i) to learn from a successful case in dealing with the COVID-19 pandemic situation and (ii) to try to understand how this is made possible. The major areas that came out from the study are related to government interventions, actions from concessionaries, and the ‘new normal’. These are then explained through the lens of neo-institutional theory.

1.2. Macao as the case

In the case of Macao, a detailed yet general timeline was published by McCartney (2020). Other than that no publications until the date of writing have been on a more specific aspect of how government interventions pertaining to tourist flows and casino operations have impact on and the reaction from the hotel industry in Macao through the lens of primary data. Moreover, most previous literature on crisis management has a primary focus on terror or war-related issues (Israeli, 2007; Israeli and Reichel, 2003; Mansfeld, 1999; Ritchie, 2004). Others seek to establish crisis management framework when the crisis has fully subsided (post-crisis management) while crisis management practices in the hospitality industry are relatively sparse (Israeli and Reichel, 2003). This Macao case study aims to reveal how the hospitality industry copes with the pandemic and government interventions by devising the strategies effectuated to manage industry recovery and rebound while the pandemic is still on-going, using both primary and secondary data.

Macao has been deemed the “best practice” example due to its contextual situation (Barret and McGregor, 2020; Hung, 2020; Travel Weekly Asia, 2020). Being the closest neighbouring city to Mainland China (where the first COVID-19 case was spotted); the world’s most densely populated city with 48,003 people per square mile or 18,534 people per square kilometer (Wee, 2019), not including the 28 million tourists (or 71 percent of its total tourist arrivals) coming from Mainland China in 2019 (Macao Statistics and Census Department, 2020b), the city has recorded one of the world’s lowest figure of reported cases (46 cases at the time of writing and no new recorded case since June 26th, 2020). Many media coverage applauded the triple zero achievements of the Macao SAR (zero infection acquired in local communities, zero patient, and zero death case) (Wong, 2020; Xinhua, 2020). This is believed to be largely attributable to the enclave government’s firm handling over the pandemic case, with closing down the city’s breadwinning casino operations for 15 days since February 5th, 2020, an unprecedented situation ever in the gaming history of Macao (Macao Government Information Bureau, 2020). This iron-wrist top-down measure was considered to be a bold move given that gaming tax revenue accounted for 86 percent of the total government revenue in 2019, standing at around US$13 billion through November (O’Connor, 2019). The effect of this was immediate and large, reporting a nosedive of negative 88 percent, 80 percent, and 97 percent in gaming revenue for February, March, and April respectively (Macao Gaming Inspection and Coordination Bureau, 2020). The closure of casino operations, coupled with the suspension of group tour and individual traveller visas from Mainland China earlier, the Macao SAR government recorded a 99.7 percent drop in visitor arrivals and the average hotel occupancy rate plunged by 78.6% year-on-year in April (Macao Statistics and Census Department, 2020a, 2020b).

Table 1 below depicts key milestones or incidents that were specific to the control and relief measures directly related to the hotel industry in Macao, yet not to repeat the general items that the existing publications have captured.

Table 1.

Key milestones or incidents related to the hotel industry in Macao during January to June 2020.

Date	Incident/Measures	*Implications
Jan 5	A Level III alert (moderate level) was announced in response to the viral pneumonia outbreak (a).	Awareness
Jan 21	Establishment of the "Novel Coronavirus Response and Coordination Centre". The Centre holds a daily press conference at 5 pm to provide updates on the development of the situation (a).	Awareness
Jan 22	The first case of Novel Coronavirus confirmed in Macao SAR, marking the first wave of confirmed cases (a).	First Wave
Jan 24	Group tour visas for Mainland Chinese to Macao SAR suspended (b).	Control
	Macao Government Tourism Office announced to cancel Parade and celebration activities during Chinese New Year (a).
Jan 27	Reduced operation hours of Border Gate checkpoint until further notice (a).	Control
Jan 28	Individual traveller scheme from Mainland China to Macao SAR suspended (b).
Feb 4	Hong Kong-Macao Ferry Terminal operations were suspended by the Hong Kong SAR Government (c).
Feb 5	41 licensed casinos and other entertainment venue operations suspended for 15 days (a).	Escalation
Feb 7	Sands China Ltd (one of the 6 concessionaires) suspended the operations of several of its hotels (Four Seasons, St Regis, Conrad), triggering a domino effect of operation suspension to include a total of 29 hotels (a).
Feb 13	Macao SAR Government announced a series of economic relief measures including the launch of electronic vouchers for local consumption valued at US$375 for each Macao resident to be spent during the three months from May to July (a).	Relief
Feb 20	Casinos permitted to resume operations (a).	Escalation
	16 of 29 hotels closed over the pandemic threat reopened (f).
	All non-resident workers from Mainland China needed to undergo a 14-day medical observation at a designated place in Zhuhai and obtain a medical certificate before entering Macao SAR (a).
Feb 26 – Mar 17	All individuals who have been to South Korea (starting Feb 26), Italy (Feb 29), Germany, France, Spain or Japan (Mar 10) and all countries/areas outside of China (Mar 17) within the past 14 days prior to entry into Macao SAR must undergo 14-day medical observation at a designated venue (a).	Escalation
Mar 15	A New COVID-19 case confirmed since Feb 4, marking the second wave of confirmed cases (a).	Second Wave
Mar 18	All non-Macao residents were banned from entering Macao SAR, except residents of the Mainland China, Hong Kong SAR, and the region of Taiwan, as well as holders of non-resident worker’s identification card (a.k.a. blue card) (a).	Escalation
Mar 19	All non-resident workers (except from Mainland China, Hong Kong SAR, and the region of Taiwan) were banned from entering Macao SAR (a).	Escalation
Mar 25	Residents of Mainland China, Hong Kong SAR, and the region of Taiwan who have been to countries/areas outside China in the past 14 days were banned from entering Macao SAR (a).	Escalation
	All arrivals who have been to Hong Kong SAR and region of Taiwan within the past 14 days prior to their entry into Macao SAR must undergo a 14-day medical observation at a designated venue (a).
Apr 6	Hong Kong-Zhuhai-Macao Bridge (Delta Bridge) closed to public transportation and most other traffic. Immigration counters at the bridge reduced operation hours from 24/7 to 10:00 to 20:00 (d).	Escalation
Apr 8	Details on a US$1.25-billion community-support fund released, including the second phase of the electronic vouchers scheme, adding another US$625 to be consumed locally within 5 months from August to December (a).	Relief
May 3	Operation hours resumed for the two immigration checkpoints (Border Gate and Delta Bridge) (e).	(Partial) Relaxation
May 7	Macao SAR Government announced ceasing consideration of the possibility of tourist tax imposition on which discussion was initiated in 2019 due to over-tourism (a).	Relief
May 11	Non-resident workers from Zhuhai meeting certain criteria could be eligible for exemption from the 14-day medical observation (a).	(Partial) Relaxation
May 19	No new COVID-19 case was recorded for 41 consecutive days since April 8 and all patients discharged, records reset to zero count (a).
June 26	The 46th case was recorded, since then no reported case, all patients discharged, recordsreset to zero count at the time of writing (a).

Sources:

^a(Macao Health Bureau, 2020).

^b(GGRAsia, 2020b).

^c(GGRAsia, 2020e).

^d(Macau News, 2020b, 2020c).

^e (Macau News, 2020c).

^f(Macau News, 2020a).

^*Please refer to Fig. 3 of the “Discussion” section for further explanation.

1.3. Neo-institutional theory

Neo-institutional theory from the field of organisational sociology suggests that business behaviour is not always guided by rational economic decisions aiming to maximise financial benefits (DiMaggio and Powell, 1983; Meyer and Rowan, 1977; Powell and DiMaggio, 1991; Scott, 1995; Zucker, 1977). It is argued that external environmental factors such as regulations, norms, values, beliefs, and traditions will influence managerial and organisational decisions and behaviours. In the process, various stakeholders, for example, government agencies, professional agencies, consumers, interest groups, employees, media, and citizens can exercise their pressure to stimulate change and behaviour. Organisations respond to the pressures and expectations of various stakeholders because they need to gain legitimacy to be regarded as socially acceptable and appropriate (Meyer and Rowan, 1977). The pillars of an institution are a widely adopted framework to look into how environmental factors shape organisational behaviour (Scott, 1995). According to Scott (1995) there are three pillars that provide legitimacy to an organisation’s behaviour and influence its structure and practice. As depicted in Fig. 1 , regulative institution relates to conformity to rules, laws, and regulations. These are government agencies exercising their coercive pressure upon organisations. Organisations must conform to the legal and regulative requirements to gain regulative legitimacy. The normative institution focuses on the normative rules as imposed by professional agencies, industry associations, and academic institutions. Normative pressure will influence organisations to act according to the norms and traditions (such as industry standards) and organisations can gain normative legitimacy by meeting the expectations from these stakeholders. A cognitive institution is the take-for-granted expectations from individuals or organisations and this can be related to values and beliefs shared by stakeholders. This is argued to be mostly connected to and intertwined with culture. Organisations respond to these take-for-granted expectations in order to gain cognitive legitimacy. In summary, organisations respond to the pressure from these institutional constituencies, and consequently, gain legitimacy by conforming with the regulations, norms, values, beliefs, and expectations (DiMaggio and Powell, 1983; Meyer and Rowan, 1977; Scott, 1995; Zucker, 1977). In recent years, there are examples of hospitality related studies that used institutional theory to explain phenomena such as the adaptation of environmental management (DeBoer et al., 2017; Mensah and Blankson, 2013; Ouyang et al., 2019; Zhu et al., 2013), corporate social responsibility reporting (De Grosbois, 2016), investment in experiential learning (Dicen et al., 2019), anti-smoking regulations (Simons et al., 2016) and adaptation of technology such as e-marketing (Gyau and Stringer, 2011).

Fig. 1.

Neo-Institutional Theory Explained.

2. Research method

A qualitative research approach is adopted to seek insights from the industry incumbents’ reactions and strategies to cope with the pandemic. A constructivist approach is deemed appropriate to this study (Berger and Luckmann, 1991). Twelve key informants are identified who are senior management personnel (Director or above), have been in the industry for an average of 10 years and have held executive management positions at the hotels for an average of more than three years. Invitations were sent to these 12 identified potential informants who covered all the six gaming concessionaires, and a total of 7 positive replies were received. Interview questions were sent in advance for review. Interview questions were designed based on the research questions as well as the updated development of the pandemic situation.

Interviews were mostly carried out either at the coffee shops of the informants’ properties or at their office. Interviews were carried out in either Chinese or English as it was subject to the preference of the participants. The interviews lasted an average of 2 hours. Table 2 shows the participants’ profile. Interview data were transcribed verbatim and coded individually by the research team members. Codes were discussed, data analysis was performed by following the steps of data reduction delineated by Huberman and Miles (2002) and data were structured according to the method of Gioia et al. (2013) which is a systematic approach to inductive research. It begins with presenting the concepts/codes, then developing themes at a theoretical level, and finally presenting the aggregate dimensions as consolidated results (Fig. 2 ). Following the data structure technique of Gioia et al. (2013), the data went through the organisational process under which the first-order concepts, second-order themes, and finally the aggregate dimensions were generated. The four aggregate dimensions are (1) Survival; (2) The New Business Norm (3) Business Rebound; (4) Corporate Social Responsibility. The four dimensions are the aggregated representing the second-order themes.

Table 2.

Participants’ Profile.

Participant	Gender	Position	Year with Company	Year in Current Position
H1	Female	Financial Controller (equivalent to Director of Finance)	14	4
H2	Female	Director in Human Resource Department	11	3
H3	Female	Senior Vice President in Marketing	16	1
H4	Male	Director in Human Resource	12	6
H5	Female	Director in Human Resource	14	4
H6	Male	Director in Retails (equivalent to Retail Director)	7	3
H7	Male	Vice President in Operations	5	5

Fig. 2.

Data Structure.

3. Findings

3.1. Survival

3.1.1. Labour cost reduction

Labour intensiveness is a feature of the hospitality industry. Ever since the entry restriction imposed by the local government on 18 March as illustrated in Table 1, there was a 99.7 percent drop in visitor arrivals and the average hotel occupancy rate plunged by 78.6% year-on-year in April (Macao Statistics and Census Department, 2020a, 2020b). Nevertheless, during the time of the interview, participants indicated that the occupancy rate has dropped to only between 5%–10%. Labour and operating cost reduction is inevitable to sustain the business as concealed by all participants. Despite the heavy drop in visitor arrivals, there are departments still operating in full motion such as security, engineering and maintenance. For departments such as housekeeping, retail, food, and beverage, which heavily rely on overseas workers who are stranded outside Macao, can only maintain minimal operations due to insufficient manpower. For other departments, in order to reduce labour cost, there are various leave-taking packages offered to staff and clear guidelines are given. For management-level staff, it is compulsory to take non-paid (NP) leave, for example, one day a week to be taken until the end of the year. Plus, they have to clear off their annual leave (AL). A management-level staff eventually works 3 days a week (5-1AL-1NP). For non-management level staff, they are advised to initially clear off their annual leave leading to taking voluntary no-paid leave and reduction of work hours. In order to gain compliance and boost up morale, various incentives have been put in place such as take one no-paid leave and get one day off for free. As revealed by one participant, a serious review of staff redundancy among local staff is underway in order to prepare for further cost-cutting. Meanwhile, personal development trainings are being offered to staff on and off the premises, taking this low business window. Regarding overseas labour contracts, many are not renewed after expiration, and voluntary retirement has been advised to those reaching legal retirement age.

3.1.2. Operating cost reduction

Other than labour cost, all other expenses, in particular marketing expenses, are mostly cut. One participant revealed that all marketing and promotional budgets have been frozen. In addition, shortening operating hours of retail shops and temporary closure of properties’ restaurants are implemented to accommodate the reduction of labour and to reduce operating costs. Services to staff, for example, the frequency of staff shuttle bus service has been reduced to cater for the decreased number of working staff as well as for cost containment. On the other hand, marketing promotions, such as Foodcation and Staycation, are created to target local customers’ patronage. Most of the participants addressed the importance to run local market promotion so as 1. to maintain minimal business operation (keeping staff active); 2. to provide promotion to the local market as part of the Corporate Social Responsibility. To survive in this pandemic, all participants’ hotels have undertaken cost reduction in all areas, while they have tried hard not to lay off local staff to worsen the local economy.

3.2. The new business norm

SARS had impacted the region dating back to 2003; however, participants saw limited lessons/experience to be applied in the current pandemic due to its global-scale and the different era of time, in particular to the development of social media and technology. New challenges, such as service employee mandatory wearing face masks, hygiene standard in all areas of a property, and cybersecurity at work were highlighted as predominant concerns.

3.2.1. Mandatory face masks

The mandatory face mask is considered a new practice for the hospitality industry, and there is no timeline for such a measure to be lifted. Various trainings on hygiene and safety are currently in place to disseminate information and reshape the perception of wearing a face mask to provide services in the industry. The mandatory face mask is considered a double-edged sword. On the one hand, it enhances the security (hygiene and safety) of guests and staff; on the other, it curtails (perceived) service level immensely. One participant revealed the difficulty that her hotel encountered:

“All frontline staff know very well that wearing a mask is a ‘must’ to protect themselves and our guests from the virus, but they also complained that wearing masks impairs their communication with guests, and they could not breathe properly during service/work. You know… because of that, they (staff) sometimes did not wear the mask properly. This is so wrong and defeats the whole purpose (protection), so, we have rounds and rounds of training to help them out.”

3.2.2. Hygiene and safety

Ensuring guest and staff safety, especially during guest patronage, has become the prime objective of the industry. Hygiene and operations are the keys to cope with the restart of the tourism industry. It is heavily reflected from the participant data as well as the section of hospitality under the newest guideline issued by UNWTO on 28 May 2020 – Global Guidelines to Restart Tourism (UNWTO, 2020). Technology such as UV Disinfection Robot, various touchless devices (door opener, check-in/out devices, virtual TV remote control), and many more explorations are under testing and adoption as informed by the participants. One participant addressed that technology adoption is a very important competency to provide not only a safe environment for guests but a brand-building strategy as well. It is particularly critical to creating confidence among guests who may be very intimate to travel again once tourism restarts. In addition, adopting technology in the housekeeping department for example offers challenges to staff who get very much used to the traditional cleaning routine of guest rooms and public areas of a hotel. Participants revealed that numerous training are currently taking place to prepare staff to work confidently and comfortably with the application of new technologies.

3.2.3. Cyber security & security

The hospitality industry has been more of a brick-and-mortar and non-cyber type of industry. The participants agreed that the COVID-19 disease offers new ground for exploration. The management staff were instructed to stay home and work during March when there was an increase in infected cases in the city. A number of participants commented that having limited access to a company’s network and information for work had caused a certain level of difficulty. It arouses the management’s concerns on cybersecurity in terms of granting access right for remote access to the company’s network. Thus, policy and measures on cybersecurity are deemed necessary to be established. Meanwhile, mandatory face mask as discussed earlier imposes an extra challenge on the security issue, in particular to gaming operations. Exemplar quotations are stated in Table 3 under the theme of Cyber Security and Security.

Table 3.

Exemplar Quotations.

Dimensions	Themes	Exemplar Quotations
New Business Norm
	Wearing Masks	End of Jan everyone in the gaming area must wear a mask (first measure) and during that time the virus was spreading fast. This was a very abnormal practice for the hospitality /gaming industry.
	Hygiene & Safety	When talking about Safety, it refers to how we could make sure our guests stay/visit us worry-free and with the highest standard of safety. Hygiene… we can’t stay with the old style of housekeeping and cleaning. We are currently experimenting with all sorts of technology, e.g. cleaning robot, ultraviolet sanitiser, and stuff to bring our “Safety” to the highest level. Providing peace of mind is the key for our visitors and guests
	Cyber Security & Security	It is a very sensitive game, wearing a mask makes everyone very anxious. This is a big taboo as there are a lot of security issues (cheating during games, cannot identify players' identity, cannot see what is inside the mask, etc).
Survival
	Labour Cost Reduction	For any blue cardholders, no matter they are rank-and-file, or executive level, when the blue card is expired, we will simply discontinue. Simple as that!
	Operating Cost Reduction	To be honest, a big chunk of the operation cost is fixed cost… we can’t cut much… well, we do cut down, say some elevators’ operation and reduce/cut suppliers/vendors services due to slow business or even no business.
	Redefine CSR	We are trying our very best in safeguarding local employees' jobs, though voluntary time off and all sort of pay deduction is inevitable.
Business Rebound Strategy
	Hardware Maintenance and Development	This is the prime time to change all the carpets in the casino floor and area that we never got time to polish and upgrade.
		We have changed the entire casino floor and cleaned all the chandelier. When the guests are back, they will see a new hotel in a way
	Labour Training	Hygiene, new technology, new service standards… all kinds… we are so busy to conduct training these days…Training department is busier than before.
		For those who do not want to take leave, they will be trained. Look at videos and online resources. We do live webinars, interactive classes, for over 40 students in each class, some are in the office, some at home. 90% of the training is recorded SOP, safety training, leadership, and general areas. In March and April, each day they have 4 hours of video training, per person (3.8 hours), 7,000s staff. We have 20K+ staff, so, some are off, some are working and some are receiving training.
	Marketing Campaign Readiness	We have been contacting previous clients, we call them, tell them our new promotions for them and offer for them, for example, hotel booking offers free stays after booking a certain amount of days, offer them access to VIP rooms, offers for retail, and restaurants, free cancelations, etc. We sent emails for families too, with offers, free cancelations, etc. Just as an example, and, I can't give details.
Corporate Social Responsibility
	Marketing	The cost is huge if your property has been used for medical observation… sanitising, hygiene, concerns raised by staff, and future customers. Well, we did not avail our property so…we are not sure but I think that’s great marketing.
	Society	CSR is not about donations, photo-taking, and showing off. CSR is about a genuine way to help the community… like helping SMEs, the elderly, even animals, etc… it is about doing it, genuine care, not just about photo opportunities.
		All 6 operators have massive investments in Macao. Everyone wants to make sure they can continue their success. Continue to serve and do the right thing. When it comes to the decision to WHY NOT renewing, we need to make sure we are doing the right things and the government also wants to make sure we operate responsibly. We have been very supportive of the people, people still being employed and not let go, so this meets the expectation of the Chief Executive.

3.3. Business rebound strategy

3.3.1. Hardware maintenance and development

The perceived outlook of the post-COVID-19 hospitality industry in Macao is generally positive. There is a sense of optimism about the reopening of the city in the coming month due to the geographical proximity of the city to mainland China. All participants revealed the implementation of different levels of facility maintenance (hardware and software) and development during this “Pause” period of the business. For example, hotels with the on-going construction of new sites have allocated more resources to speed up the construction process aiming to target the resumption of tourism in Macao. One participant emphasised that:

“The whole property is going through all kinds of facelifts, to upgrade facilities and decorations. Now is the prime time for all these. We did not have time to do all these before the pandemic… we like to have new look to welcome our guests’ arrivals or even return after this gloomy period.”

3.3.2. Software enhancement and readiness

Face mask, hygiene, and safety are becoming the new business norm, staff training thus becomes imperative, according to the participants. In addition, participants from the human resource department commented that now is the prime time to offer training and optimise staff learning capacity. Before the pandemic, scheduling staff training was challenging across various departments. Currently, the situation has been turned upside-down and thus training is widely available via live-online classes, pre-recorded media, and online materials. This is being implemented in all areas of the hotel property as a strategic move to equip staff with better service standards, latest knowledge in hygiene technology and boost their capacity to accommodate the return of tourism.

Marketing strategy is another core area of concern during the past few months as expressed by the participants. Marketing promotion has been focusing on targeting local customers and tourists. Local promotions, such as “foodcation” (promotion aims to offer food and beverage experience at the hotel) and “staycation” (promotion aims to attract local customer to stay with the hotel for a night or two), as discussed in the section of Survival has been launched and executed. Marketing campaign targeting tourists are planned for tourism restart, and there is an emphasis on stimulating return and repeat customers once travel restrictions are lifted.

Furthermore, branding exercise emphasising on guest safety and hygiene is also one marketing strategy as mentioned by an participant. Building customer trust in safety and hygiene in the post-COVID-19 era will be the prime marketing objective as agreed by most participants. Another marketing strategy, for example, engaging loyal customers, is in place to remind customers about the hygiene and safety measure undertaken by hotels. Nevertheless, formulating strategies to prepare for the return of tourism in Macao is not quintessential to all hotels interviewed. For example, one participant mentioned that his integrated resort has not formulated any strategy specifically targeting the return of tourism which is considered as a rather spontaneous process. According to this participant:

“This is the beautiful thing about Macao, everyone in China knows about Macao. Many people can't wait to come, there is a demand for hospitality, for shopping, and entertainment, there isn’t much we need to do. Like the first shut down back in February, and after that, demand was back, but then only after the 14-day quarantine measure, it was all gone. So, if the 14-day quarantine is lifted both ways, people will be returning very fast. Everyone believes in that.”

3.4. Corporate social responsibility (CSR)

Between February and March, all participants’ hotels had donated face masks to government, local charity organisations, schools, and non-profiting making associations when face masks were short in supply. Participants revealed that pandemic is the time to show their support to the society. One participant disclosed that the hotel had purchased face masks around the globe, as early as at the beginning of February, to be able to make face mask donation possible to the local community. The face mask cost and freight charge were huge as stated by the participant.

In addition to the face mask donation, participants also reported that their companies have taken corporate social responsibility very seriously during this difficult time of the society. Corporate social responsibility was the reason for keeping local employment intact to reduce further harm to the already dampened local economy. In addition to keeping local staff, one hotel offered MOP1,000 (approximate to USD125) cash coupon to all staff. The money was advised to be spent at local small and medium local enterprises (SMEs) to further support the local economy during this tough time. This action indeed echoed very much the government’s direction in launching a series of economic relief, for example, the electronic vouchers (USD$1000 per citizen) for local consumption to be spent between May and December. Supporting SMEs has always been a government policy consideration for the city. During normal time, the local government has implemented and executed various supporting policies towards SMEs’ survival and development. The local government has reiterated the same direction during this pandemic to help SMEs sail through these challenges.

Corporate Social Responsibility is further acknowledged by a few participants whose hotels have been made available to house Macao citizens arriving from overseas for the 14-day medical observation. Participants expressed various concerns such as the potential impact on branding, arousing guest worries, and operational difficulties. At the same time, they also asserted the importance of making the property available for medical observation due to the current situation as they knew that the city has limited space and insufficient facilities for such purpose. Participants also mentioned that this could be an effective branding for the hotel as well; however, the costs and benefits have to be weighed very carefully.

4. Discussion

4.1. Government interventions and impact on hotel industry

From these key incidents depicted in Table 1 earlier, it is not difficult to see that the Macao SAR government has been proactive in dealing with this pandemic such as escalating the situation into a Level III Alert as early as Jan 3rd and establishing the “Coordination Centre” to promote awareness and maintain transparent communication with the communities before the first case was confirmed. The government also quickly announced and/or implemented various levels of control measures in February and March, in most cases before the situation further became worsened. On the one hand, the government turned a hard wrist towards the restriction of human traffic (in particular tourist traffic) and on the other hand, a series of generous economic relief measures were announced early enough to ease the nerve of the society and to provide timely assistance to the people hard hit by this situation. All of these eventually resulted in a zero-case record which marked the “stage victory” on May 19th,2020. In general, the citizens hold very positive comments on the performance of the government. The government’s actions seem to be highly coordinated and forward-looking. From the information collected the authors summarise these government measures into five notable stages, namely “Awareness”, “Control”, “Escalation”, “Monitoring” and “(Partial) Relaxation”. Fig. 3 below put these into a graph for better discussion, punctuated by the arrival of first and second wave cases, two main economic relief measures, and eventually arriving at a stage containment with the triple zero achievements mentioned earlier. This good record continues through the time of writing.

Fig. 3.

Stages of Government Measures from January to May 2020.

Source: Based on Table 1.

However, these actions are not without costs as they have huge implications on the operations (and eventually the bottom line) of all 6 gaming concessionaires. Overall, the gross gaming revenue plummeted by an unprecedented 97 percent to 754 million patacas (US$95 million) in April, 3 percentage points worse than analysts’ estimation (Bloomberg, 2020). The First quarter of 2020 has seen deep red figures for all 6 gaming concessionaires, with a reported quarterly loss of US$22 million for MGM China; US$53 million for SJM; US$154.2 million for Wynn Macau; US$166 million for Sands China, and US$364 million for Melco Resorts (Blaschke, 2020; GGRAsia, 2020a, 2020c, 2020d, 2020f). Galaxy Macau also reported a daily operating cost of US$3 million albeit that there has been almost no business in the properties (Master, 2020). Yet, external speculation has been quite optimistic and positive on the level of resilience of these concessionaires. In a piece of recent news, the JPMorgan analyst noted that with the current level of liquidity each operator is possessing, “Galaxy has enough cash to survive 6+ years of no revenue (or 5 years even if it finishes Phase 3), SJM has four years (or three years even if it finishes Grand Lisboa Palace), Sands/Melco/Wynn have about two years, and MGM over a year” (Shriber, 2020b). None of the concessionaires has confirmed this comment though. Nevertheless, no one would deny the devastation created to the hotel industry in Macao as a result of this pandemic. They have to survive, not just survive in the short term but to get ready for recovery and potential rebound of business.

4.2. Combat strategies by the concessionaires

The strategies reviewed from the qualitative data in the previous section are mostly straight forward and are expected to produce immediate results. Tse et al. (2006) study the neighbouring city of Hong Kong on how restaurants responded to SARS point out two major directions of measures, cost reduction, and revenue enhancement, which align very much with the findings of this study. Israeli and Reichel (2003) when reviewing the strategies used by leading hotels in Israel in times of crisis they also identify similar practices because measures to reduce labour and operating costs are on top of the list. The importance of boosting domestic market demand by offering discounts and promotions and exploring new services catering particularly to the local community is another common area. This also resonates with Mansfeld’s earlier study on determinants and management of crisis and recovery in the Israeli tourism industry (Mansfeld, 1999). However, both Israeli studies object to the idea of infrastructure expansion (instead they advocate that industry operators should cut down on expansion and maintenance to save cost), which is contrary to what some concessionaires are doing, as revealed by the participant. The contextual situation between Macao and Israeli is obviously different. In Macao when in a normal day hotel occupancy rate stays high most of the time. The average hotel occupancy rate of 5-star hotels in 2019 was 92.2 percent (Macao Statistics and Census Department, 2020a). This makes maintenance and expansion without compromising guest experience a huge challenge to most hotel operators. Therefore, it is not difficult to comprehend the decision of expediting expansion and maintenance works of some hotel operators in times of slow business, so that they can get ready to welcome business rebound. Another area where our study does not align with their findings is that the government’s role is highlighted while none of the participants in this study mentions the need for government support in their entire recovery plan. This may be (partially) attributable to the fact that the Macao government has announced a series of major relief measures to help boost the local economy, without the need for constant urge from the industry. Another (implicit) reason is that all concessionaires are facing gaming license renewal in 2022. They may not want to project a feeble image to the government which might affect their chance.

4.3. The new normal

“New Normal” is a term in business and economics that refers to what happened/happens in the aftermaths of major crises (e.g. previously there was the financial crisis triggered by Lehman Brothers’ collapse and now there is the COVID-19) with an implication that what was previously unusual (abnormal) will become common practice. In the case of the COVID-19, due to the uncertainty of development and also no foreseeable complete control over the issue over a long period, certain practices are expected to be in place for a sustained duration and these will become the “new normal”.

From the social perspective, it is anticipated that the virus will change daily life for most people, including wearing face masks regularly and limiting social contact as much as possible (such as keeping social distance, limiting handshakes and hugs) (Griffith, 2020). From the business perspective, many people have been working from home (WFH) and some big tech companies such as Facebook, Google, and Microsoft have even decided that some positions can be on WFH mode for an extended period or even permanently (Lerman and Greene, 2020). Among the interview data, a new (business) normal has evolved as a result of this crisis. WFM mode emerges as a potential need for even hotel companies to examine and study its feasibility in the future. Conventionally, all hotel staff work on-site at the property including the front and back of the house. Due to the pandemic, staff who are from the back of the house, such as the accounting department, human resource department, have been asked to operate on WFH mode. Cyber security and information technology readiness of a property is put to test. It is revealed from the interview data that there are hotels that are not ready for WFH mode and further investment on information technology is needed to equip the property and prepare staff to cope with this new mode.

Wearing a face mask may become indefinite for service operation in the tourism and hospitality industry. Hoteliers/ service providers have to review their potential impact on service quality and service delivery to customers. The seminal work of the SERVQUAL model (Parasuraman et al., 1985) and its application on the hospitality industry are deemed necessary for revisiting (Saleh and Ryan, 1991). The components of expressive service under the model, such as Courtesy, Communication, Security, and Tangibles will likely affect service expression and ultimately the entire service experience.

Regarding the concerns of Health and Safety, both derived from customers and hoteliers, new forms of partnership or cooperation are anticipated between medical products or health providers and hotels. Hotels partnering with cosmetic brands to provide in-room amenities to hotel guests have been in practice for years; while partnering with health care providers or health and safety brands is emerging due to this pandemic. For example, Hilton has worked with Mayo Clinic to enhance Hilton properties cleanliness and disinfection process around the world (Oestreich, 2020). With this New Normal, hoteliers should further explore different kinds of cooperation to elevate customers’ confidence and safety during their stay at hotels.

4.4. The autonomous participation of beyond compliance practice: a neo-institutionalism view

Three major areas came out from the study, namely government interventions, strategies from integrated resorts, and the ‘new normal’ as discussed above. What is interesting about the findings is the level of autonomy towards the participation of beyond compliance practice among the integrated resorts which are gaming concessionaires. These organisations have put in lots of effort towards containing the spread of the COVID-19, tackling the downfall of the tourism and hospitality industry and bearing its cost, intensifying the practice of CSR, and yet there have been no complaints or requests for any support from the government. This seems too utopian-like for many. The ultimate question is: how did this happen? In an attempt to address this, the neo-institutional theory is adopted to help explaining the phenomenon (Fig. 4 ).

Fig. 4.

The case of Macao under the lens of neo-institutional theory.

In our study, we find that the government has worked on their regulative institutional and coercive pressure as soon as there was a sign of the spread of the disease in Wuhan. The series of measures illustrated in Table 1 led to creating a historical downfall of the gaming, hospitality, and tourism industry. Moreover, the measures from the government have sent critical signals to the industry and the population about the seriousness of the pandemic. The government has disseminated their new expectations, standards, rules, and values that have consequently influenced the normative institution (i.e. professional agencies) and cognitive institutions (i.e. take-for-granted expectations from individuals and organisations) (Fig. 4). This assumption reflects the view of a few participants who praised the government for acting fast and effective early on to control the spread of the virus by sending a clear message to stakeholders. This has helped the implementation of internal organisational measures with ease as employees would not resist most measures and compliance has been relatively high among employees.

As reflected in our study, gaming concessionaires have autonomously worked out ways to meet the expectations from the regulative, normative, and cognitive institutions. Since January, the measures implemented by each gaming concessionaire have been documented and published via multiple media platforms and news outlets. This gives an opportunity for organisations to learn from each other and be aware of the interventions used by competing organisations in the industry. As reflected among the participants, there was a sense of awareness of what each other were doing concerning the measures and strategies being implemented. There was a sense of motivation to match each other if not trying to come up with the best measure to meet the expectations from the three pillars of the institutional theory. This phenomenon relates to the outcome derived from mimetic pressures. DiMaggio and Powell (1983) suggest that organisations respond to mimetic pressure to appear legitimate and competitive by adopting the behaviour of the successful and respected companies in their industry. Fundamentally, the institutions and their relative pressures lead to what is known as isomorphism (Fig. 4) (DiMaggio and Powell, 1983; Powell and DiMaggio, 1991). This is the process that forces organisations to assemble each other and to engage in the adoption of beyond compliance practice due to institutional pressures. Ouyang et al. (2019) point out that the hospitality industry has a tendency towards a homogenisation process by which organisations conform to the changes in the institutional environment.

Ultimately, the engagement of a variety of autonomous action and activities to meet the expectations from the regulative, normative, and cognitive institution is to gain legitimacy as illustrated in Fig. 4 (Meyer and Rowan, 1977; Scott, 1995; Suchman, 1995). In summary, regulative legitimacy is gained by complying with all the measures implemented by the government. Pragmatic legitimacy refers to the fulfilment of the self-interest of the organisation’s immediate stakeholders. Pragmatic legitimacy is gained by ensuring financial stability to endure the heavy impact caused by the pandemic. Normative legitimacy is gained by their participation in beyond compliance practice. Finally, cognitive legitimacy is gained by their CSR measures to support the government (such as donation of face masks), support local SMEs, and keeping local employment intact. The engagement of CSR is viewed as an example of what Meyer and Rowan (1977) term as “ceremonial activities” to gain access to perceived legitimacy (Bertels and Peloza, 2008; Lammers and Garcia, 2017).

Understandably, organisations need to gain regulative legitimacy because there are legal implications and it is understandable that they need to gain pragmatic legitimacy because they are directly serving the self-interests of key stakeholders. But why did these gaming concessionaires engage in so many beyond compliance practice to earn normative and cognitive legitimacy? Normally large firms can resist more pressure from normative and cognitive institutions compared to small firms (Ouyang et al., 2019). A possible explanation could be the moral standard of these gaming concessionaires is very high. Or perhaps they want to create a very positive reputation to improve the value of their brand. Or perhaps it is related to the gaming license that each gaming concessionaire desperately needs to generate supernormal revenue and profit. After all, gaming revenue represents about 90 percent of the total revenue of these integrated resorts (Shriber, 2020a). In Macao, depending on the contract terms, the government will reassess and renew the gaming licenses of the concessionaires. Currently, there are 6 concessionaires with gaming license expiring in 2022. For this reason, apart from gaining regulative legitimacy (compliance), pragmatic legitimacy (financial success), and normative legitimacy (compliance to norms and standards), engaging in beyond compliance practice such as CSR will certainly help to gain more points to boost the chance of obtaining license renewal. During the time of the pandemic, the government has emphasised several times that businesses have to redefine what CSR means, and they have to fulfil their CSR to do greater good to society instead of doing CSR for the cameras. In this study, a few participants noted that CSR is certainly very important, and it is their responsibility to contribute to the city and it is also very important for them to further justify their legitimacy of getting their license renewed. After all, they have made a lot of capital investment in the city and they have to do everything they can to renew the license. CSR is one of the areas they cannot neglect. All in all, this shows another critical success factor stimulated by the regulative institution which has created coercive pressure to influence the behaviour of organisations. In this case, it has created autonomous adoption of beyond compliance practice and boosted CSR among organisations.

5. Conclusion

By adopting the seminal work of the neo-institutional theory and applying to the case of Macao, this study shows the effective and successful use of regulative institution that stimulates autonomous actions that lead to the development of new ideas and innovations, beyond compliance practice and boosts CSR among major integrated resorts in Macao. All those autonomous actions taken by the gaming concessionaires (operators of the integrated resorts in Macao) may not be easily comprehensible and possible in their current scale and speed (from the outside world) if Macau government does not regulate the industry. By doing this, it enables us to dissect the compliance made by the gaming concessionaries during this difficult time of the world – COVID- 19. This contributes to the hospitality industry worldwide, in particular during crisis.

Inevitably, the ‘new normal’ that is here to stay in the industry, at least in the short to medium term. The Macao government has executed successfully the institutionalisation process where conception such as norms, values, social roles, behaviour, or beliefs are embedded in society and organisations. This institutionalisation process has adjusted the institutional logic of individuals and organisations. Institutional logic is the worldview or guiding principles that reflect the interests, identities, values, and assumptions of organisations and individuals (Friedland, 1991; Thornton and Ocasio, 1999). With the current COVID-19 pandemic around the world, this study sheds light on how certain level of government regulative actions leads to the development of new ideas and innovations of the hospitality industry. The findings on labor and operating cost reduction, business strategies to deal with the new business norms, preparation of business rebound strategy as well as careful manipulation of CSR are the most current and pertinent lessons to be learned and considered for implementation to the hotel businesses. Given that there are more and more destinations tapping into the affluent yet vulnerable gaming market, this study (and the lesson learned from the case of Macao) can provide them with some reference on how this business can be regulated to optimise and balance the benefits of all stakeholders (government, industry operators and the society). As a concluding remark, the institutional logic has been adjusted due to the COVID-19 pandemic and from now on there will be expectations of autonomous beyond compliance practice and CSR as ‘new norms’ for the gaming concessionaires. Asides from understanding the utopian-like scenario through neo-institutional theory; industrial insights, including survival tactics, combat strategies, the critical importance to alleviate safety and hygiene of hotel properties are revealed in this study. This could be of paramount importance to industry incumbents to sustain the hotel business in the near future.