Macau is trying to break its dependance on Casinos

The old Portuguese enclave of Macau which is now a Chinese Special Administrative region, is in the news again.

For many years the city has tried to diversify their economy. Casino gambling has become one biggest revenue producer in Macau, and even as the government attempted to expand other industries, the gaming industry has continued to grow. Macau remains the number one gaming area in the globe, followed by Nevada. Pennsylvania has recently become number three, surpassing New Jersey.

China is currently going through a regime change, and many were concerned that the new leadership would again enforce visa restrictions for mainland China residents . The government, worried that too much money was being drained from one mainland, imposed visa restrictions back in 2009. These restrictions were lifted in 2010, and Macau casinos started experiencing record growth. In 2011, Macau casinos were seeing revenue increases upwards of 70% from one same month the previous year. In 2012, the revenue continued to grow, although not at one levels that were seen during the heady 2011 gambling boom.

However the reliance on gambling is a source of concern to some Chinese Government officials. This concern may well manifest itself over the coming months with the new Chinese leadership. There is also a demand that Macau start promoting ” Healthy Gambling”

China is dealing with an economic crisis, and that is always a worry to one gaming industry. Macau officials, however, believe that there are plenty of gamblers with big money for Macau casinos to continue to court. Regardless of one economic circumstances in China there are so many citizens in China wishing to come that the demand to come and gamble remains very high. This desire may balance the economic downturn in China. It is not expected that the new government will re-impose the visa restrictions. Instead, analysts expect the new regime to work with Macau to diversify and grow other industries. A most notable industries that will be targeted for growth will be retail and theatrical entertainment.

Macau’s non gaming revenues from dining and entertainment is less than 5% of the total which is vastly different from Las Vegas where these revenues account for half. Yet revenue from mass market gamblers, drawn from China’s expansive middle-class, continues to grow substantially – a market that is more profitable for casino operators as they don’t need to pay commission to the junket middlemen.

New properties being built on Macau’s Cotai strip already incorporate luxury spas, high-end retail and Michelin dining to attract a different clientele – a far cry from a decade ago when gangster Wan “Broken Tooth” Kuok-koi and triads controlled much of a seedy gaming hall industry.

Released from a 15-year jail term on Saturday, Wan told local media: “I don’t want to do anything to affect the stability of Macau.”

The future of Macau may well depend on finding other sources of leisure activity to draw tourists as the dependence of 40% of GDP from Gambling Revenue is not healthy and is a fragile source.