Macau Gambling Industry Facing Strong Competitive Forces

Written by Derek S. on 2012-06-04 at 18:14
online casinos in China - GamingZion
Prior to 1999, Macau has been an obscure territory few gambling giants cared about.

When in 2001, the Chinese decided to grant licenses under the new Chinese gambling laws, few big operators cared. After all, Las Vegas was the king of gambling. Few would expect that 10 years later Macau’s casino revenues would be multiple of Vegas.

Yet, strong and uninterrupted economic performance in China contributed to the growing ranks of wealthy as well as large middle class of citizens, many of which like to gamble, and since in mainland China casinos aren’t allowed, the travelers come to Macau.

Macau’s gambling industry resembles an oligopoly. It is controlled by six operators that were granted 20-year licenses. These include Wynn Macau, Galaxy Entertainment Group, Sands China, and Melco Crown Entertainment. These casinos are licensed since 2002 until 2022. They, of course, hope to have the licenses renewed. Other two operators, based on Stanley Ho’s licenses, are SJM and MGM China. Their partnerships expire in 2020.

The gambling bonanza continues and these operators rake in tens of billions of dollars annually. This makes them hardly complain about the 40% tax rate China imposed on gambling revenue in Macau. Yet, there is looming competition on the horizon.

Singapore is one of the competitors. It taxes the casinos from as little as 12.5 % to still relatively low 22.5%, depending on gambling type (i.e, high roller vs. small bettor). But low tax rates alone aren’t enough. After all, in Nevada casinos pay as little as 6.75% on their revenues.

What really counts is the proximity to fast growing Asia-Pacific gambling market and, especially, its high rollers. Other countries besides Singapore are seeking to grab their share. One is the Philippines. Also, Russians are looking to create gambling resort in Vladivostok. Even North Koreans are thinking about it (in fact once they ran casinos near South Korean border).

As it looks, Macau is facing lots of pressure. Not only from other land-based casinos but also from offshore sites that offer access to online casinos in China as an easy alternative.

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