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Understanding Macau’s Complex Gaming Economy

Macau is a special territory of China, and is the only part where casino gaming is legal. As such, the casino industry has come to dominate the land, accounting for the vast majority of revenue in the region.

An economy based around gaming

To give you an idea of just how much wealth is involved, the casino industry in Macau generated $36 billion in revenue in 2019, with more than a third of that revenue claimed in tax. There are also over 56,000 jobs in the sector, making it one of the main areas of employment.

From a tourism perspective, most people head to Macau for the gaming. Around 71 percent of visitors are from mainland China and another 19 percent come from Hong Kong. Casino revenues far exceed that of Las Vegas.

However, recent years have seen serious declines in tourism numbers, and therefore serious dents in turnovers. The gross revenue of casinos in Macau dropped by around 70 percent between 2019 – 2021, also shrinking the overall economy by two thirds.

This is a devastating blow for Macau, which is known as the Las Vegas of the East.

Land-based casinos are up and running again in Europe and America, with the EPT London recently concluding in the UK, signalling a return of full scale poker events. For Macau, it’s been a slow start and a weary return to the tables.

Could laws restrict growth?

Recent amendments to gaming laws have brought tighter regulations to the casino industry in Macau, arguably further restricting growth in the coming years.

Casino operators will be subject to limits when it comes to the number of table games and slot machines. The new amendments outline that a casino can have 6,000 tables and 12,000 machines. Each table must achieve a minimum annual gross income of 7 million patacas ($860k) and each machine must produce income of at least 300,000 patacas ($37k).

Casinos will also have to adhere to increased and occasionally vaguely defined social duties, and should aim to create a more appealing environment for leisure in order to attract a greater number of overseas tourists.

Understanding-Macau’s-Complex-Gaming-Economy-2

One possible direction is to utilize new gaming technologies to attract the next generation of travelers. This could include digital payments, the availability of mobile gaming on-site, and other types of digital experience that are currently not allowed. To enhance leisure, casinos may increasingly offer attractions such as water parks and shows.

Other changes to law in mainland China can also affect the casino industry in Macau, and could continue to do so in either direction.

For example, China’s anti graft campaign deterred big spenders. Given that Macau is frequented by high rollers, this potentially scared away the target market. This is perhaps one of the reasons Macau’s gaming revenue was already on the decline, dropping from $45 billion in 2013 to $36 billion in 2019.

The more recent notion of “common prosperity” discourages “unnecessary” spending by China’s burgeoning middle class, who could otherwise become a greater target market for Macau’s casino industry.

E-Visas for Chinese citizens

Although Macau’s casino industry is no doubt shaken, it’s not all bad news. It was recently announced that from November 1, Chinese mainland residents will be able to apply for e-visas to go over to Macau. This is available for 49 approved cities and can be approved nearly instantaneously.

Given that Chinese visitors account for around 71 percent of tourists, this is very welcome news for operators and for Macau’s economy in general. So much so that the news caused a mini rally in the stock market, with stocks for casino operators jumping by around 10 percent in one day.

As tourism picks back up and hotels earn five star accolades, Macau’s economy will inevitably recover. But how long it takes and whether it can surpass previous revenues is still open to debate.

As it stands, analysts estimate that revenues for operators will recover to around 80 percent of 2019’s levels by 2024. Given a 30 percent year on year growth, it will take until 2025 for Macau’s casino industry to get back on track.

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