Gambling revenue in Macau plunged 72.5 per cent in October year-on-year, extending the steep coronavirus-driven declines of recent months but at a slower pace as visitors to the world's biggest casino hub from mainland China picked up slightly. Figures released Wednesday by Macau’s Gaming Inspection and Coordination Bureau (DICJ) show the special administrative region of China’s casinos generated revenue of just MOP716m (US$89.7m) in.

Macau’s gambling industry reported its best revenue in four years in 2018 after Beijing’s crackdown on corruption and luxury spending saw spending plunge by over a third, government data show.

The special administrative region’s gaming industry continued its recovery, with gross revenue in the sector reaching 303 billion patacas ($38 billion), a 14% increase year-on-year, according to figures from the Gaming Inspection and Coordination Bureau, Macau’s gambling watchdog.

Four years after the Chinese government started the crackdown, Macau’s annual gambling revenue has once again surpassed 300 billion patacas, marking the second straight year of gross gaming revenue growth. It is still below 2013’s revenue of 361 billion patacas.

• The gaming results for April represent the seventh straight month of declining revenue, coming after Macau had already been battered by a two-year-long trade war and months of Hong Kong protests.
• Macao's hoped-for lift in casino revenue didn't materialize in November, as monthly gross gaming revenue (GGR) came in at 6.75 billion patacas, or $845 million, a 70.5% decline from last year and a.

In 2014, 2015 and 2016, revenue declined 2.6%, 34.3% and 3.3%, respectively. The industry’s revenue grew 19% in 2017.

Macau’s casino industry struggled after China introduced capital restrictions and carried out measures to combat corruption. The typhoon in September also led casinos to temporarily close (link in Chinese).

The sector’s performance in December also went beyond analysts’ expectation. In the month, gross gaming revenue rose to about 26.5 billion patacas, a 17% climb year-on-year.

“Macau December GGR (gross gaming revenue) came in stronger than expected… above Bloomberg consensus of (an increase of) 11 percent and above our estimate of (an increase of) 12 percent to 15 percent,” said analysts from brokerage firm Sanford C. Bernstein & Co. LLC in a research note on Tuesday.

Analysts said that the October opening of the Hong Kong-Zhuhai-Macau Bridge likely did little to boost revenue. The number of people visiting Macau rose 15.3% year-on-year in November, which is being attributed to the bridge, according to a Union Gaming Securities Asia Ltd. research memo.

However “the surge in visitation is not translating to casino foot traffic,” said Union Gaming analysts. “Rather, we’re seeing a dynamic where tour groups are utilizing the bridge instead of the ferry service to shuttle people between Zhuhai and Hong Kong by way of Macau.”

The Union Gaming analysts said they expect to see strong growth continue into the coming year.

Morgan Stanley analysts said in a report that gaming stocks are likely to do well in the coming years, even if the sector faces disruption from higher taxes or greater competition. The government won’t announce an updated policy on gaming license renewals until after Macau’s new chief executive is appointed in December, the Morgan Stanley report said.

Macau’s economy relies heavily on the gaming industry, benefitting from visitors from the Chinese mainland, where the only form of legal gambling is state-backed lotteries. In 2013, the gaming industry peaked at over 60% of local gross domestic product (GDP), according to a report published by Tianjin University.

“Although Macau’s gaming industry entered a period of decline thereafter, its share of GDP was still as high as 47% in 2016,” said the authors of the report, adding that Macau’s lack of a broad-based economic structure has raised concerns over the sustainability of local economy.

Zhao Runhua also contributed to this report.

Contact reporter Timmy Shen (hongmingshen@caixin.com)

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Macau is China’s answer to Las Vegas. But the former Portuguese colony has long surpassed the City of Lights as the world’s casino capital, with revenue from gambling receipts exceeding the entire state of Nevada back in 2010. As well as drawing in the punters, it has the glittering architecture to match.

The story of Macau is one of globalisation and the rise of China. It is a globalisation story because of the role played by foreign multinational casino companies. And it is a story of the rise of China because it has been the economic prosperity of its citizens that has allowed them in great numbers to travel, see the world, and gamble.

Macau returned to Chinese rule in 1999 as a special administrative region, which means it has different laws to the mainland. It is the only part of Greater China (which includes China, Hong Kong and Macau) where gambling is legal, making it the country’s sole gambling destination.

In the years before the 1999 handover, the environment in Macau was fraught, with organised crime a violent presence competing for access to the sub-contracted VIP gaming rooms. These VIP rooms, which host high stake games in a private setting, are another dynamic behind Macau’s success. They made the Macau gambling experience different from that of other casino destinations.

Macau’s focus on high-spending customers, with private rooms and special privileges – rather than mass market gamblers – is the source of much of the casinos’ revenue. Casinos were originally built around VIP rooms. These were sub-contracted to gambling promoters who shared in the profits from bringing in wealthy gamblers. These high rollers made up 66% of total casino revenues in 2013.

International investment

Macau Gaming Revenue

Casino operations generate substantial tax revenue for the government: in 2001 it was 40% of all tax revenue collected. Ten years later, government income from casino gaming taxes amounted to 81% of all tax revenue collected. This massive change is the result of the decision to open up the casino industry and invite foreign firms to compete for a casino license.

Macau China Gambling Revenues

Until 2001, only one company was licensed to operate casinos and for four decades this was monopolised by a company called Sociedade de Turismo e Diversões de Macau, SA (STDM). From 2002, casino licences were awarded to several foreign multinational firms and joint ventures. This included big firms from Australia, Hong Kong and the US, with recognisable names from Vegas, such as Las Vegas Sands, MGM, Galaxy and Wynn Resorts.

They invested heavily in big new casino resort complexes, with luxury hotels and high-end shopping malls. Given Macau’s tiny size – it originally consisted of a mainland peninsula and two small islands measuring 11.6 square kilometres in 1912 – land reclamation projects were necessary to host the burgeoning industry. By 2010, the territory measured 29.7 square kilometres, including six square kilometres of new land connecting the small islands of Coloane to Taipa, which plays host to the big casino complexes.

Macau Casino Revenue

These new casinos have provided some employment opportunities for local citizens, but the greater impact for the economy has been the tourist visitor numbers and the tax revenue generated. After a decade of ever-increasing growth in gaming revenue with the opening of new casinos, tax revenue from the sector peaked in 2014 and then declined after China’s president, Xi Jinping instituted a widespread anti-corruption campaign.

The VIP gaming rooms in Macau became seen by the government in Beijing as a massive leakage of capital from the Chinese economy. A large part of the big money being gambled by these VIPs was seen as the proceeds of corruption and bribery on the mainland.

In 2014, gaming tax revenue provided 84% of the Macau government’s total revenue; by 2017 it had declined to 79%. But these percentages conceal the decline in the actual amount available to the government, from US$20.1 billion in 2014 to US$15.7 billion in 2017. This is because a number of Chinese elites eschewed Macau’s casinos to avoid scrutiny during Xi’s corruption crackdown.

Casino revenue now appears to have stabilised, helped by a move in Macau away from relying on the VIP sector and towards mass market entertainment. The government has also encouraged diversification beyond the casino gaming room and, like Las Vegas, it is looking to attract exhibitions and events to be held there.

The new bridge connecting Macau with Hong Kong should support increasing tourist visits by easing travel to the territory, further supporting diversification. But Macau must increasingly contend with neighbouring rivals. The anti-corruption campaign encouraged Chinese gamblers to visit other Asian casino destinations, including new resorts in Singapore and Manila in the Philippines.

Macau Gambling Revenue

Modern Macau is built on China’s rise and the increased wealth of its citizens that this has brought. Macau’s continued success is contingent on its ability to attract the mass market gambler, along with other tourists, as a vacation destination. As China’s middle class continues to grow, it should guarantee a steady supply for years to come.