Development Issues And Directions Of Macau’s Gaming Industry – Analysis
By Anbound
By He Yan
Macau, sometimes touted as the “Monte Carlo of the East”, is a global casino hub with an economy heavily reliant on the gaming industry. For a long time, this sector has contributed around 80% of the local government’s tax revenue. In recent years, however, Macau’s gaming industry has been severely impacted by the COVID-19 pandemic, leading to significant economic repercussions.
As a result, Macau is also exploring economic diversification to reduce its dependence on casino revenues. On December 20, 2024, Sam Hou Fai was sworn in as the sixth Chief Executive of the Macau Special Administrative Region. During the ceremony, national leaders gave a speech urging Macau to transition from a gaming capital to a moderately diversified economy. The goal is for non-gaming industries to account for about 60% of Macau’s GDP by 2028, up from 50% before the pandemic in 2019.
Over the past 25 years, Macau’s GDP has grown fivefold, with its economic achievements being globally recognized. However, its overly singular economic structure has made it vulnerable to the shocks of the pandemic and the global economic downturn. Especially in the post-pandemic period, its economic recovery has been quite slow. According to Statista’s information on the gross revenue from gaming and gambling in Macao from 2013 to 2023, the highest total gaming revenue before the pandemic was MOP 361.87 billion, while the lowest was MOP 224.13 billion. After the pandemic, the gaming industry in Macau was severely affected, with total gaming revenue falling to a record low of MOP 42.84 billion in 2022. Although the economy rebounded significantly in 2023, the total revenue reached only MOP 183.7 billion.
In the current development difficulties of Macau’s gaming industry, particularly the issue of sluggish recovery due to the impact of the pandemic, ANBOUND has pointed out several key reasons:
First, the gaming industry is a cultural industry. Culture is the most important industrial factor and the most important consumer factor, as it determines whether an industry and consumption will undergo an upgrade or a downgrade. For instance, Monaco’s gaming industry is known for its cultural characteristics, with cultural symbols embedded in every corner of its gaming sector. The history of Monte Carlo dates back to the 6th century CE, when it was part of an ancient Greek city-state. Throughout history, many artists, writers, musicians, and actors have lived and worked in Monte Carlo, including the great artist Picasso, and famous movie stars such as Marilyn Monroe and Elizabeth Taylor. World-renowned events like the Monte-Carlo Jazz Festival and the Les Ballets de Monte-Carlo are important cultural symbols of the region. Additionally, the Hôtel de Paris under the Monte-Carlo Société des Bains de Mer showcases original artworks by the Monaco royal family in its suites. Similarly, the Hôtel Hermitage Monte-Carlo, known for being an art connoisseur’s hotel, often hosts important art exhibitions, concerts, philosophical conferences, and events where art and thought converge.
Meanwhile, Macau’s gaming industry is known for its focus on money. Although the gaming industry is a pillar of Macau’s economy, its lack of investment in culture has caused its appeal to be solely centered around “gambling”. For example, the VIP rooms, which once dominated Macau’s gaming industry, have been rife with illegal activities such as money laundering, under-the-table gambling, and violent debt collection. Junket operators often organize trips for Mainland Chinese residents to Macau for high-stakes gambling, and some corrupt officials have become regulars at these VIP rooms. In this city of decadence, the tragic stories of gamblers losing everything are played out daily. Near the MGM casino, there is a pedestrian path known by gamblers as “Paralysis Avenue”. Some gamblers, having lost all their money, will curl up on the stone benches here, spending the night in hope of borrowing money to try their luck again at the casino. Is this a cruel “gambling city” or a global tourism and leisure capital? The answer is obvious.
It is precisely due to the lack of a culturally rich foundation that, during the pandemic, Macau was only able to resort to hosting concerts and sports events to increase revenue. Since the reopening over a year ago, Macau has seen a continuous stream of concerts, with singers and bands from Hong Kong, Taiwan, South Korea, and the United States performing. International sports events have also been on the rise. In early December, U.S. media reported that the NBA had signed a cooperation agreement with Sands China, and from 2025 onwards, the NBA preseason warm-up games will be held in Macau. However, hosting concerts, sports events, and other diversified activities cannot save Macau’s economy or gaming industry. According to local casino employees, there is a clear lack of overlap between concertgoers, general consumers, and the clientele of the gaming businesses themselves. Therefore, although the concert business seems to be thriving, it has not brought in significant profits, with casinos mainly generating income through venue rentals. Furthermore, the majority of fans attending concerts, who tend to favor younger singers and music groups, are not interested in gambling. As a result, these concerts have not effectively driven betting activities in the casinos.
Secondly, there is the impact of consumer demographics. On one hand, economic weakness has led to a downgrade in spending among Mainland Chinese visitors. For many years, tourists from Mainland China have been the primary customer base for Macau’s gaming industry, but after the pandemic, the consumption patterns of Mainlanders have changed, which affected Macau’s economy. Data shows that in 2023, Macau recorded over 28.21 million inbound tourists, equivalent to 71.6% of the number in 2019. Among them, 67.5% came from Mainland China, followed by 25.5% from Hong Kong, and 1.8% from Taiwan. Mainland tourists overwhelmingly dominated the numbers, with no significant difference before and after the COVID-19 pandemic. However, they did not bring the same economic benefits as before. It is understood that familiar visitors to Macau often take the free shuttle buses operated by Macau’s gaming companies that connect all the major casinos, hotels, land border checkpoints, airports, and piers. Additionally, a huge amount of free snacks at the casinos were consumed. According to the gaming expenditure information by Macau’s Statistics and Census Service, in 2023, 61.1% of the operating expenses of gaming companies were for goods and services provided for free to customers, which saw an increase of 3.7 times to MOP 19.51 billion, with hotel rooms and food-beverages being the major expenditures.
On the other hand, there has been a loss of elite consumer spending. It is understood that the current revenue from Macau’s gaming industry comes almost entirely from the more common “lucky gaming” types in casinos, such as table games and slot machines, and a small portion coming from lottery activities. In 2019, the revenue from VIP rooms accounted for nearly half of the total “lucky gaming” revenue, reaching 46.2%. However, this proportion dropped to a quarter in 2023, only 24.7%. The increased revenue has shifted from the VIP rooms to the mass gaming tables. In 2019, mass gaming tables accounted for 44.2% of gaming revenue, but by 2023, this had risen to 63.9%. According to a report by Citigroup analyst George Choi in September last year, the bank observed 228 “whale” gamblers who collectively wagered HKD 433 million since 2024, surpassing the total amount wagered by 224 “whales” in 2023, which was HKD 397 million. Despite this, some experienced gaming industry consultants believe that while the entire gaming industry has recovered well and the mass market is thriving with casinos making profits, VIP rooms represent high-value customers, with individual bets often reaching one to two million patacas. In contrast, bets at mass tables are only a few hundred patacas each, meaning it would take tens of thousands of customers to make up for the loss. At present, with this shift, elite spending in VIP rooms has not been recovered, and the capacity of the mass market is near saturation. This leaves little room for future growth in the gaming industry.
Final analysis conclusion:
After the pandemic, Macau’s gaming industry suffered a severe blow, and the decline of this major industry has dealt a heavy impact on the local economy. Although Macau is striving to achieve economic diversification to seek more stable economic growth, the gaming industry will remain the iconic sector of Macau for a considerable period of time. Therefore, it is particularly important for the Macanese authorities to gain a deep understanding of the real challenges facing the development of Macau’s gaming industry. This includes recognizing the importance of culture to the gaming industry and understanding that the elite consumer group is a key driving force for consumption growth.