The new pneumonia Epidemic has caused a major recession in Macau’s economy. China’s crackdown on capital outflows has further plunged Macau’s gaming industry into an unprecedented crisis. Although casino results have recently rebounded from the bottom, the resurgence of the epidemic in China has cast a shadow over the prospects of the Chinese New Year prime season, and some analysts believe that if the epidemic continues, it will inevitably affect the gambling license bidding that will begin as soon as next year.
Under the impact of the new pneumonia epidemic, Macau’s annual gaming revenue dropped by nearly 80% year-on-year last year, with total revenue of about MOP60.4 billion (about US$7.5 billion).
Driven by mainland Chinese tourists, Macau’s gaming revenue has increased for two consecutive months since December last year. According to figures released by the Macau authorities, gaming revenue in January exceeded 8 billion patacas, the most in a year, although year-on-year comparison, Macau gaming revenue has fallen for 16 consecutive months, but last month’s decline has narrowed to less than 64%.
The Chinese New Year holiday is traditionally a prime Time for Macau’s gaming industry. Morgan Stanley, a foreign securities firm, said that the increase in overnight visitors to Macau, coupled with an increase in per capita bets, is optimistic that gaming revenue this month will expand to 26% year-on-year, meaning that gambling revenue this month is expected to return to the level of more than 10 billion patacas.
The “New Year in Place” has cast a shadow over Macau’s gaming industry
However, Macau media personality Cui Zizhao, who follows the gaming industry, is not as optimistic. He told the Voice of America that the resurgence of the new pneumonia epidemic in several Chinese provinces and cities, coupled with the authorities’ initiative to “spend New Year’s Eve locally,” has cast a shadow over Macau casinos’ prime Chinese New Year season this year.
Cui Zizhao said: “The epidemic in the mainland is actually very unstable. There are outbreaks all over the provinces. Macau’s gambling revenue from Jan. 15 onwards was not good. Mainland tourists are afraid (to come to Macau). This year’s Lunar New Year (Chinese New Year) visitors to Macau, I think it is much less than last year. Mainlanders in this condition should be much less inclined to leave their hometown for outbound travel.”
China’s Ministry of Culture and Tourism earlier decided to tighten controls on “gambling tourism,” with plans to blacklist so-called “cross-border gambling destinations” and restrict Chinese travel to the cities in question. Although the measures will not be implemented until the first of next month at the earliest, but has made many mainland luxury customers have some fears. In the face of the new policy, Macau casinos have changed their positions on the eve of the Chinese New Year.
Cui Zizhao said: “Now you can use the ‘water quiet river fly’ to describe the situation in the VIP lounge. In the past, the VIP’s luxury customers, huge gambling big customers, many are afraid to come over. Now the first priority of the gaming enterprise is to attract the public tourists. At the beginning, Bo enterprise may have some cooperation with China, the president of the United States Sands Group in the mainland App live marketing hotel suites in person. So their strategy now is to target the middle class first, to target the general tourists, to attract them to come over to Macau at a very good price to play and to gamble by the way.”
According to China’s Ministry of Culture and Tourism, the new policy is based on the fact that some offshore cities with casinos are attracting Chinese tourists to gamble out of the country and disrupting the orderly operation of the outbound tourism market.
Cui Zizhao said, “There are some people who would have liked to fly from Beijing to Southeast Asian countries such as Cambodia. I believe they will be intercepted by customs when they leave the country, because China has a very large system of social credit system, and I believe there will be some lists of people who go out with a high chance of gambling, or, although he is not on top of these lists, but the authorities will also use warnings to remind him not to go gambling.”
The number of “code transfers” plummeted as a result of the crackdown on gambling tourism
The number of “turnovers” from cash to chips in Macau casinos has always been considered an important indicator of casino performance. In an interview with the Voice of America, media personality Cui Tizhao said the crackdown on gambling tourism has not yet been implemented, but it has had an immediate effect.
Cui Zizhao said, “The total amount of turnovers is disastrous. the total amount of VIP lounge turnovers in 2019 reached more than MOP2,850 billion, already down about 25 percent from 2018, and by last year 2020 the annual turnovers were only more than 470 billion, a year-on-year (year-on-year) decrease of more than 80 percent.”
Cui Zizhao said that the Chinese mainland authorities in order to crack down on money laundering, keeping a close eye on large transactions in bank accounts, to the mainland luxury customers of Macau casinos “VIP hall” had to find another way.
Cui Zizhao said: “To put it bluntly, the VIP lounge is like a lending institution, because the Chinese can not bring a lot of cash to travel to Macau, if the identity of rich people, and trusted by the VIP lounge, they become members of the VIP lounge will give them loans to gamble, their bets are very high very high. The amount of money you can bet is very high. It may be three hundred thousand to one million MOP each time. The VIP lounge will say to the guests, ‘You deposit a sum of money in, and you will receive a very high interest rate every year and every month, also in disguise to the VIP lounge has a great cash flow.”
He said that the casino cash crunch, the recent “VIP lounge” was forced to limit the withdrawal of luxury customers.
Cui Zizhao said: “At that time there were a lot of restrictions. For example, there is a daily (amount) limit, or in the VIP lounge to change after the gambling, gambling before withdrawing.”
Economic homogenization takes its toll on Macau
The gaming industry has long been seen as the lifeblood of Macau’s economy. In an interview with Voice of America, Chuang Tai-liang, an associate professor in the Department of Economics at the Chinese University of Hong Kong, said that too much reliance on the gaming industry has cost Macau.
There are advantages and disadvantages to having a single industry,” Chong said. The good thing is that when the economy is good, people make a lot of money. Macau’s GDP per capita is even higher than Hong Kong’s, but if the economy is bad it can have a big impact on the economy. And Macau’s economy is mainly based on casinos and the gaming industry, and the epidemic has really affected Macau’s economy a lot.”
Due to the difficulties in the operation of the gaming industry, the Macau Finance Bureau earlier revised for the third time the overall gaming special tax revenue last year, which plunged 71 percent year-on-year. Macau lawmaker Au Kam San told the Voice of America that tens of thousands of families were affected by the economic depression.
There are tens of thousands of people working in the gaming industry in Macau,” Au said. (The epidemic) has affected the economic situation of tens of thousands of families. Gaming revenue is a major source of revenue for the Macau government. The significant drop in gaming tax revenue last year and this year, which may be only a few percentage points or about 10 percentage points, has had a significant impact on the overall economy of Macau as well as the government’s tax revenue.”
Macau opened its gambling market after the return of sovereignty to China, and the current six gambling licenses will expire together in 2022. The authorities have not yet revealed their intention to dispose of the gambling licenses. Some public opinion estimates that if the gaming industry continues to slump, it is not ruled out that some licensed operators will therefore withdraw. The newest addition to the list is the newest addition to the list.
The company’s investment as a gaming operation is to look at the long-term, the past 20 years they have earned a lot of profit, taste a lot of sweet, the two years under the influence of the epidemic business is poor, should not affect their intention to bid for the gambling license. I think all six gaming companies are keen to continue operating.”
Media personality Chui Tze Chiu also believes that maintaining the status quo is in the best interest of Macau’s gaming industry and that closing casinos is a negative solution.
This means many people will lose their jobs,” said Chui Tze Chiu. Macau is a very stable place. If the number of gambling licenses is reduced, it means that other gaming companies may buy up the casinos that are to be removed. Now the six major gaming companies are slimming down to reduce their expenses. Many companies have reduced their expenses from US$3 million a day to US$2 million a day. I think maintaining six gambling licenses is a more prudent approach.”
Although industry insiders generally expect that Macau’s gaming industry will rebound this year, but it is believed that the earliest to 2022, to recover to the level of 2019.
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