Hainan ‘No Imminent Threat’ to Macau

A plan to introduce online gaming on Hainan Island in the South China Sea should be no cause for concern among Macau gaming operators—at least for now, says a report from Fitch Ratings Inc.

Longer-term challenge could exist

Fitch Ratings Inc. says a proposal to bring gaming to Hainan Island does not “pose any imminent threat” to Macau’s dominance in the industry.

The agency released a report saying Macau will “remain the only Chinese territory able to operate physical casinos.”

But the report also said a challenge to Macau “could potentially emerge over the longer term should China revise existing criminal laws that prohibit most forms of gambling in the mainland, or if other emerging gaming destinations in Asia were to gain significant favor among Chinese tourists.”

Even so, the report added, this scenario likely would roll out gradually, “which would provide the authorities time to respond with policy measures such as expenditure cuts or budget amendments.”

Fitch predicts Macau’s real gross domestic product will expand by 5 percent in 2018, allowing for a “moderation in gaming revenue growth to around 10 percent, and a continuation of ongoing infrastructure initiatives aimed at enhancing the territory’s connectivity and attractiveness as a tourist destination,” reported GGRAsia.

It said year-on-year gross gaming revenues should grow 11 percent across the market, with mass gaming comprising almost 50 percent of that total.

Bloomberg News reported that the Chinese government under President Xi Jinping are considering allowing online gaming, a lottery or sports betting in Hainan, a proposal that in time could pave the way for bricks-and-mortar casinos.

Earlier this month brokerage Sanford C. Bernstein pointed out that some forms of sports betting, operated by the government’s China Sports Lottery, are already legal on Hainan, and a government-run lottery is available too. “It is not clear how Hainan would benefit from a lottery program,” the team said.

Macau is the world’s reigning gaming destination with some $33 billion in annual GGR.

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