Macau Suffers Hit on Gaming Revenue Due to Coronavirus Outbreak

macau-suffers-hit-on-gaming-revenue-due-to-coronavirus

In February, local government in Macau ordered the closure of brick-and-mortar casinos for a two-week period due to Coronavirus concerns. First, visitors were made to wear masks, but more radical measures were taken at the start of February to limit the spread and ensure the health of visitors and residents.

It’s to be expected that the city would take a severe hit. Macau’s gambling industry is huge, casinos are whole resorts that in 2019 alone welcomed more than 35 million people. The closure was expected to last between the 5th and the 20th of February, and casinos started to reopen as of the 20th, but visits are at a record low.

The Hit in Figures

According to the information released by the Gaming Inspection and Coordination Bureau, the monthly gross gaming revenue for February 2020 has dropped by 87.8% on a yearly basis due to the closure.

That comes after a steady decline marked in 2019 compared to 2018. The Coronavirus outbreak only further hurt the GGR of the city. Even though locals don’t think the virus can scare off people from gambling and diminish their enthusiasm, the prognoses for the financial year of the gambling industry are not too optimistic.

Market analyses expect a 24% drop to be realized in 2020 for the gross gaming revenue, with an average decrease of GGR of 70% in March and 35% in the second quarter.

No Tax Reductions Despite the Crisis

The gambling industry in Macau is definitely suffering from the Coronavirus outbreak and it will need time to recover from the losses. But the local government is not going to follow the example of other countries in the region, like Singapore, that granted the sector a tax reduction.

The Special Administrative Region government here depends severely on income streams coming from the resort-based gambling industry in Macau. It collects 35% of GGR, operators have to pay contributions and allotments to various funds and foundations. The highest tax rate that can be incurred on the peninsula is 39%.

That, for the most part, explains why no tax cuts are considered at the moment. In 2019, over an 11-month period, 86% of the government’s revenue depended on that industry.

The economic pressure of Covid-19 has echoed across the globe. So tax reductions are not out of the question. For now, though, Macau’s SAR government is rather going to work on ways to diversify its income streams and the economy as a whole, to make it less dependable on the gaming industry.

That being said, the local government is trying to encourage spending and help its economy stay afloat by issuing vouchers. Each is worth $375 and can be used only on the peninsula.

Where Does the Industry Stand?

The industry is not pushing in its favor either. That’s mainly because the operators’ licenses expire in 2022 and talks for renewals are expected to start this year. It is far from the time to pressure the government.

On the other hand, the gambling industry in Macau is definitely taking a hard hit from the Coronavirus outbreak. Optimistic prognoses expect the revenue from gambling to level out later in the year when public concern over the virus is expected to diminish.

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