Macau is now firmly established in the gambling industry, thanks to the strong Chinese demand. In 2020 however, when Covid-19 was released, the city faced new challenges.
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Macau is a Special Administrative Region that covers approximately 32.9 square kilometers of land. It has a population of around 680,000 people. The territory has allowed gambling since 1849 when it was still under Portuguese control. However, it became a major destination for gamblers in 1962, after the STDM was given a monopoly.
The influx from Hong Kong was one of the first signs. It wasn’t until the STDM monopoly was broken in 2002 and Las Vegas Sands moved into the area, along with Wynn Resorts, MGM Resorts International and Wynn Resorts that Macau overtook Las Vegas to become the leading gambling destination.
Las Vegas is no longer the only option.
Since 2007, Macau has seen its gaming revenues surpass those of Las Vegas. The gap between these two places continues to grow. By 2019, Macau’s revenue stood at MOP292.46bn (PS25.82bn/EUR30.08bn/$36.60bn). Nevada and Las Vegas both reported gaming revenues of $12.03bn in the same year.
Both locations have very distinct characteristics. The gambling in Vegas is not the only revenue stream. There are many other entertainment and amenities. According to a study by University of Nevada Las Vegas, gaming accounted for 34.4% of Las Vegas Strip revenues in 2019.
Macau is, however, dominated by the gaming industry. Macau’s industry generated 50.9% gross domestic profits in 2019. Non-gaming revenues totaled MOP 33.74 billion, which is 10.4%.
It had an enormous impact when Macau’s casinos closed and the mainland Chinese travel ban was extended until last September. As a result of this, revenue was down by 79.3% in 2020 to MOP60.44bn (about $7.56bn). Nevada actually outperformed Macau with a gaming revenue totaling $7.87bn for the full year.
Macau has recovered from the pandemic slower than Nevada. Nevada posted its first total monthly of over $1bn this April. Macau appears to have a much higher level of confidence for the long term. Macau’s licencees are on solid financial ground, and properties don’t have to hire staff quickly. It also has an enormous Chinese market nearby.
Gambling dependency
Its dependence on gaming is still a problem. Ho Iat Seng, the chief executive of the SAR in April last year warned about Macau’s dependence on gambling.
Ho stated that “Without a doubt, this novel coronavirus has had repercussions on the tourism and gaming industries, resulting in measurable declines. This will have ramifications for industries related to them.” This shows, yet again, how Macau’s economy is overly dependent on the gaming and tourism industry.
The healthy, stable and long-term development of Macau’s gambling and tourism sectors will ensure the stability of Macau’s economy for some time to come. If the monolithic industrial structure is not changed, this will hinder the development of Macao’s economy.
Gaming concessions for operators expire 2022. Updates on the way Ho’s government plans to handle the renewal process could come as early as this year.
The industry must show that it is committed to expanding and diversifying its range of products and services, both now and in the future. However, anything approaching the revenue splits of Las Vegas seems like a pipedream.
This report will explain why Macau is such an important industry center. The report will examine who will visit and what the future holds for Macau. I would like to thank Alidad Tash for her valuable contribution, Chris Wieners, and Annie Siara.
