OPINION – Tiger trials

Macau Business | February 2022

By José I. Duarte | Economist, Macau Business Senior Analyst


The Legislative Assembly is currently discussing the changes to the gambling regulations. Once passed, a negotiation period for the new concessions will open later this year. Meanwhile, the gambling inspectorate is reviewing and, at times, renewing the junket licenses. Both issues are full of implications for the future shape of the sector and its regular operation. Until the new frame settles, our analyses will be stronger on speculation than facts.

For now, we must deal with the facts on the ground and what they can tell us about the future, whatever the precise configuration of the new era that is now brewing will take. Data for the whole year are coming out and can help us frame the challenges that will persist.

Let us start, with no surprises, with the gambling figures. The final numbers for 2021 were up by more than 40 percent. That is a positive development; indeed, no one should be exaggeratedly carried away by this figure. We are recovering from a shallow base. That revenue was still less than 30 percent of the 2019 value.

The combined revenues for 2020 and 2021 amounted to half or less than the values recorded in either of the two previous years. For the sector to reach three-quarters of the 2019 revenue, bets would need to grow 2.5 times this year. Nothing suggests that such a growth is remotely plausible.

On the contrary, strong winds are pulling against the primary source of revenue, Baccarat. First, the evident reduction in junket activity will limit the promotion activities and the ability to bring in customers. Second, we can expect a natural reluctance of their customers to appear in Macau in association with a business clearly in the authorities’ crosshairs, not to mention being conspicuously visible in mostly empty casinos.

Table performance will stay far from what was common in previous years. The sector potential will continue markedly under-used. The under-employment of existing resources will extend to most related economic activities: lodging, food and beverage, shopping, or other supporting services.

Another significant indicator far from its usual levels is the number of visitors. Here, the figures and circumstances do not seem favourable either. The main impact is not so much for gambling, as its revenue is relatively independent of the number of visitors – their profile matters more. But for many smaller businesses in town, the absence of actual customers deals a severe blow.

The prognosis is reserved. Figures are even more striking than in the case of gambling. Compared to the year before, the visitors’ growth in 2021 barely exceeded 30 per cent; and the combined figure for 2020 and 2021 amounted to just one-third of the number observed in 2019.

The pandemic further concentrated the sources of visitors, increasing the (already very high) reliance on mainland visitors. They represented alone, last year, more than 90 per cent of the visitors. The timing for opening to other regions or countries, including Hong Kong (our second most important source), is uncertain and contingent on unpredictable outbreaks. In the present circumstances, the persistence of the current anti-epidemic policies can imply a continuing, open-ended stop-and-go regime.  

In the last two years, the economy lost momentum. Physical resources are under-used. Staff was reduced, routines were lost, and the pool of skills shrank. The flows of tourists dwindled, as did travel risks. Re-opening travel channels will take time. The resulting difficulties cannot be overcome instantaneously. The path ahead is unclear. Its inherent unpredictability is compounded by the uncertainty about the future concessions’ operational setup and the unknowns associated with the pandemic control approach. One should not expect an early arrival of the recovery.