Significant decline of 93% in Macau.
Macau, a popular Asian gambling hub, is facing a significant dip in revenue for its land-based casino business. In May, there was a 93.2% decrease in revenue compared to the previous year. This negatively affected the gross domestic product (GDP), which has nearly halved. Despite the reopening of casinos, guests are absent due to travel restrictions. Can Macau overcome the Corona crisis?
GDP Plummeting by 48.7%
Recent sales data highlight the impact of the Corona crisis on the Chinese Special Administrative Region of Macau. The total casino revenue in May came to about €198.4 million, more than double the figure in April, but still a 93.2% decline when compared to the previous year. Although casinos have been reopened, travel limitations continue to impact business.
Revenues for the year so far total €3.7 billion, which is 73.7% less than the previous year. More than two-thirds of this amount comes from gambling. Chinese tourists make up a major portion of casino guests, who are currently unavailable due to travel bans and restrictions.
By May 30th, the GDP in the first quarter of 2020 declined by 48.7%. This is partly due to the two-week shutdown in February, but predominantly to the tourism collapse. Macau generates 60% of its GDP from the gambling sector. These absent tourists leave behind a permanent deficit in earnings.
Record Slump in Revenue
Bloomberg reported that the decline in revenue is primarily due to border closures related to Corona. May marks the eighth consecutive month of decreasing revenues. The ongoing decline emphasizes the "challenging task of recovering from the February shutdown."
Although the pandemic has been subdued in China, Macau and Hong Kong, casinos are still plagued by empty gaming tables due to border restrictions and visas. These constraints result in a daily loss of around €960,000. With the relaxation of restrictions, there will still be "a clear series of risks." Health authorities are concerned about a potential second wave of infections.
Guest absence is another reason for empty casinos. Only 46% of gaming tables have been reactivated. The few guests must adhere to strict hygiene and safety protocols. The Macau Daily Times reports that casinos are adhering to these measures, but remain with few visitors.
Macau's Overdependence on Casinos
Chief Executive of Macau, Ho Iat Seng, criticized the "excessive dependence" of the country on the casino industry. Macau will likely be greatly affected by the Covid-19 pandemic and could take years to recover from the economic damage. Ho urged "more economic diversification."
Regarding this matter, Ho rebuked earlier government measures, stating they lead to "no noteworthy results." Gambling still comprises more than half of Macau's GDP. The gambling and tourism sector will continue to be the foundation of Macau's economy, but if the "monotony of the industrial structure" persists, sustainable economic growth will be impeded.
The Chief Executive also announced a public consultation on casino concessions in 2020. The current agreements with the six concessionaires (SJM, Galaxy, Sands, MGM, Melco, and Wynn) expire in June 2022. The call for greater economic diversity will be addressed during the discussion. Additionally, the gambling law will be revised.
The contracts will be amended with "fixed diversification clauses" going forward. Few details have been disclosed by the government. However, Ho underscored public interest in the matter and stated, "The public consultation will be organized as part of the new legislation. This is a prolonged process that will not be completed this year."
A rescue fund of roughly €1.2 billion has also been established to assist residents, workers, and businesses. The goal is to bring casinos back to full operation as soon as possible. The Chinese government was also asked to lift border restrictions when the crisis is under control.
Although Macau is economically secure, with reserves amounting to around €55 billion (equivalent to 90,000 euros per resident), the timeline for economic recovery from the crisis remains unclear. Will the industrial structure be modified? For the time being, Macau will rely on gambling.
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Source: www.onlinecasinosdeutschland.com
