Analyzing the Casinos and Gambling Industry Outlook for Macau for the Rest Of 2018

Analyzing the Casinos and Gambling Industry Outlook for Macau for the Rest Of 2018

Macau has been the most lucrative gambling market in the world, with revenues topping six times that of Las Vegas. However, since 2016, there have been questions about whether Macau can continue this successful trend. That year, China’s government began its crackdown on what it called money laundering and corruption in the Macau casinos. The casinos have suffered as a result of this crackdown. Revenue dropped alarmingly. However, there are some signs that the casinos in Macau are beginning to recover. These signs should continue through the final quarter of 2018.

Gambling in Macau

Gambling in MacauThe gambling industry in Macau has been legal since the 1850s when it was a Portuguese colony. The reason for the legalization of gambling was because the government needed the money. Portugal returned Macau to China in 1999. The Chinese government decided to leave the laws that governed gambling in Macau alone. In fact, the government expanded gambling. It decided to expand the casino licensing agreements to 16 in 2002. The government has since expanded to 38 casinos in total.

Macau’s economy relies heavily on gambling for government revenue. Gambling generates 40 percent of Macau’s GDP. However, the revenue percentage of gambling has been decreasing in the last few years. In 2017, the percentage of the GDP of Macau from casinos was 35 percent. Research has estimated that the decrease in casino revenue is, in part, because of Internet gambling. Another reason is the lasting effects of the Chinese corruption probes.

The Income Stream in Macau

The reliance of the government on gambling is problematic. Recent incidents have demonstrated that it is possible for the revenue stream to fluctuate. An example of a fluctuation could be the recent shutdown of the casinos because of typhoon activity. The typhoons forced all the casinos to close for days. Another recent fluctuation is the decrease in junket trips made to Macau from other areas in China and abroad. In addition, Chinese government officials can’t use the casinos as a social gathering place to conduct business and have fun.

The growth of online gaming has also affected the income stream. Although it is illegal, Chinese gamblers are still managing to gamble using offshore accounts and using cryptocurrency. The state-run lotteries in China are also showing growth. The Chinese government has introduced appealing new games that have proven very popular.

The Gaming Forecast

Experts expect the casinos in Macau to continue to increase in revenue. However, they don’t expect it to be at the pace that they experienced before 2016. There are a couple of reasons the casinos may experience slower growth. First, the casinos are still attracting the attention of the Chinese government. Government officials suspect that money laundering may be occurring. The government is especially concerned with money laundering within drug cartels. The country suspects government or business officials as well to be taking money from the government. China has been working toward ferreting out corruption, and the government still feels that money laundering is taking place.

This means that several government agencies are scrutinizing the gamblers at Macau’s casinos. High rollers, in particular, do not like the extra attention. And, as a result, they may take their money where the government is not as nosy. In addition, junket takers are offering additional incentives for Chinese high rollers to take trips out of China. High rollers are heading to Australia and Cambodia where they can spend their money without much government interference. The casinos of Macau are looking to lure gamblers back, but it remains unclear whether they will be successful.

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