Turning Away Gamblers, Macau Risks One-Fifth of GGR

China’s crackdown on cross-border gambling includes closer scrutiny of mainland visitors to Macau. Since 2021, immigration officials have identified some 90,000 frequent gamblers, who were then declined entry to the special administrative region. The policy could cost the industry 20 percent of gross gaming revenue.

Turning Away Gamblers, Macau Risks One-Fifth of GGR

China’s ongoing crackdown on cross-border gambling has put limits on nonessential travel, including by visitors who want to gamble at Macau casinos.

Since 2021, the National Immigration Administration has “spotted and stopped” some 90,000 would-be gamblers who then were declined entry to the special administrative region (SAR). Over time, Credit Suisse analysts say, the stricter policy could rob Macau’s chief industry of 20 percent of gross gaming revenue (GGR). Macau is the only place in China that permits legal gambling.

According to Asia Gaming Brief, Macau’s Ministry of Public Security is targeting people who have visited the gaming hub more than three times a year in the past three years.

The analysts say the impact will be greatest among VIP and premium-mass players, and could erase 30 percent of that business, or 20 percent of the industry total. By 2024, they estimate, the market will be comprised of 20 percent direct VIP, 40 percent premium mass and 40 percent mass.

“Tighter visa control is one of the key reasons for the slow recovery” from Covid-19 in Macau, the Credit Suisse team wrote. “In fact, GGR for May has been disappointing with GGR (down) from MOP200 million (US$24.7 million) during the Golden Week holiday to MOP50 million (US$6.175 million).” Those figures are markedly down even from late 2021 and early 2022, which saw a range of MOP250 million to MOP 300 million for weekly revenue.

There may be a silver lining as the local government considers reducing taxes for operators who bring in tourists from outside Greater China, AGB reported. Macau now assesses an effective tax rate of 39 percent with a 35 percent base tax on GGR and 4 percent in extra levies. Officials have proposed waiving the 4 percent depending on individual operators’ efforts.

Credit Suisse suggested this might be accomplished through ring-fencing parts of Macau casinos, reserving them for passport-holders from outside the region. They added that it might be difficult to contain players who want to go where the action is—on the main casino floor.

The analysts also say the proposed tax cut, if enacted, may have minimal positive benefit due to the low level of foreign travel to Macau. International tourists traditionally make just 8 percent of visitation, and their gambling spend tends to be about a third of that spent by Chinese gamblers.

Foreigners’ GGR is “immaterial” at 2 percent to 3 percent of the total, the team wrote. Even in a “blue sky scenario” in which foreigners generate 10 percent of GGR, the EBITDA benefit would amount to just 1.6 percent. This estimate doesn’t factor in the money it would take to market to international tourists.

The crackdown on casino tourism is part of the Beijing government’s push to diversify Macau’s economy away from the gaming-centric model that has dominated in the modern era. According to AGB, “the temptation of low-hanging fruit from China has discouraged these efforts.” And despite Macau’s rich Chinese-Portuguese history, even nongaming tourism offerings appeal more to visitors from Mainland China.

Meanwhile, new details of proposed amendments to the SAR’s Gaming Law were disclosed at a May 17 meeting of the Macau Legislative Assembly (AL). They include a new provision that if Macau’s Chief Executive unilaterally terminates the contract of a concessionaire in the public interest, the concessionaires would be entitled to reasonable compensation, to be calculated based on the time remaining on their contract and their investment.

The Macau government also would reserve the authority to change the minimum GGR it requires each concessionaire to make based on market conditions. In the original text of the amended Gaming Law, it was stipulated that if the gross revenue of the licensee did not reach a “minimum income” level, the licensee would have to pay a special premium to make up the difference. The Chief Executive would set the minimum income per table and slot machine each year.

According to Inside Asian Gaming, the amendment would “address the potential for unforeseen events, such as the global pandemic, to artificially increase the effective rate of special gaming tax.”

“The government can change the threshold of minimum income at any time in response to economic conditions or unforeseen events, and the committee has no strong opinion on this,” Chan said.

The Chief Executive would also determine the number of gaming tables and slot machines that each individual concessionaire may operate, rather than just defining aggregate totals for the whole market.

The Second Standing Committee of the Legislative Council hopes to finish its review of the Gaming Law by June 10.

According to Macao News, meanwhile, Mary Mendoza, managing director of marketing company the Platinum Ltd., is certain that tourism to the city will bounce back.

“The pandemic is a temporary obstacle compared with a longer-term vision for Macau and the Greater Bay Area” (GBA), she said. “Macau experienced a SARS outbreak and the 2008 global financial crisis, to name just two. We have seen that Macau got back on its feet and thrived again. However, this time it may take some time.” Mendoza was recently appointed to lead the GBA Tourism & Leisure Committee of the France Macau Chamber of Commerce (FMCC).

Mendoza added, “There are a plethora of benefits that the GBA has for tourism and leisure. It is a super-hub of opportunity—among which is the access to over 86 million people coming from diverse backgrounds. To date, nearly 60 percent of tourists who visit Macau come from the GBA.”