Macau is the largest gambling destination in Asia, and its economy revolves around casinos and tourism. After an 80% drop in first quarter casino revenues, casino operators have been quietly asking for a break on their 35% tax rate. And the Macau government said ‘no.’
System of a Lockdown
Macau was once the gambling giant of the East, doubling and even tripling the casino revenue of Las Vegas. Until the coronavirus pandemic struck. Since most of Macau’s revenue came from mostly-Chinese gambling tourism, the sudden loss of income during the Macau casino shutdown was epic.
As China was ground zero for the coronavirus epidemic, borders slammed shut and Macau’s casinos closed to fight the epidemic. And once the virus became a global pandemic, all bets were off in Macau.
Macau casino revenue dropped 80% during the lockdown, crippling a huge portion of the country’s revenue. Even after Macau casinos reopened in late February, there were no gamblers at the tables.
Economic Diversity Needed
Macau’s main problem is is dependence on casinos for the lion’s share of its tax revenue. The government has discussed the need for economic diversity, as the casino shutdown has illustrated.
Macau’s chief executive, Ho Iat Seng, warned the country of the need to diversify its economy – a message painfully illustrated by the pandemic. He said that the situation had “once again exposed vulnerability and risks of Macau’s economic structure.”
Casino revenue keeps falling, and analysts predict a 95% decrease in revenue due to travel bans between China and Macau.
Las Vegas was also hit hard after the closure of its casinos, being the epicenter of gambling action on the U.S. West Coast. The state of Nevada’s economy is heavily reliant on casinos, hotels, and tourism for income, so much so that the largest casino operators sought government relief.
Since the casino closures, the entire industry has been appealing to local authorities to allow them reopen. Casino operators in Macau and Vegas are suffering from long term losses in the wake of the global pandemic.
Gambling isn’t going away any time soon, and punters are heading to online casinos in droves to while away their time in their lockdown. But the message is clear to jurisdictions relying heavily on casino tourism: diversify or die.
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