Macau is China’s answer to Las Vegas. But the former Portuguese colony has long surpassed the City of Lights as the world’s casino capital, with revenue from gambling receipts exceeding the entire state of Nevada back in 2010. As well as drawing in the punters, it has the glittering architecture to match.
The story of Macau is one of globalisation and the rise of China. It is a globalisation story because of the role played by foreign multinational casino companies. And it is a story of the rise of China because it has been the economic prosperity of its citizens that has allowed them in great numbers to travel, see the world, and gamble.
Macau returned to Chinese rule in 1999 as a special administrative region, which means it has different laws to the mainland. It is the only part of Greater China (which includes China, Hong Kong and Macau) where gambling is legal, making it the country’s sole gambling destination.
In the years before the 1999 handover, the environment in Macau was fraught, with organised crime a violent presence competing for access to the sub-contracted VIP gaming rooms. These VIP rooms, which host high stake games in a private setting, are another dynamic behind Macau’s success. They made the Macau gambling experience different from that of other casino destinations.
Macau China Gambling Revenues
Macau’s focus on high-spending customers, with private rooms and special privileges – rather than mass market gamblers – is the source of much of the casinos’ revenue. Casinos were originally built around VIP rooms. These were sub-contracted to gambling promoters who shared in the profits from bringing in wealthy gamblers. These high rollers made up 66% of total casino revenues in 2013.
Macau is China’s answer to Las Vegas. But the former Portuguese colony has long surpassed the City of Lights as the world’s casino capital, with revenue from gambling receipts exceeding the. Macau’s gross gaming revenue (GGR) looks set to improve mid-August, according to investment bank JP Morgan. Analysts DS Kim, Derek Choi, and Jeremy An believe the market will begin to recover as a delayed result of the easing of border restrictions between Macau and mainland China. For the first 11 months of 2020, Macau’s gaming revenue is down 80.5% to $6.58 billion. In all of 2019, Macau casinos produced $36.6 billion in gaming revenues. Las Vegas Sands, Wynn Resorts,. Figures released Wednesday by Macau’s Gaming Inspection and Coordination Bureau (DICJ) show the special administrative region of China’s casinos generated revenue of just MOP716m (US$89.7m) in.
International investment
Casino operations generate substantial tax revenue for the government: in 2001 it was 40% of all tax revenue collected. Ten years later, government income from casino gaming taxes amounted to 81% of all tax revenue collected. This massive change is the result of the decision to open up the casino industry and invite foreign firms to compete for a casino license.
Until 2001, only one company was licensed to operate casinos and for four decades this was monopolised by a company called Sociedade de Turismo e Diversões de Macau, SA (STDM). From 2002, casino licences were awarded to several foreign multinational firms and joint ventures. This included big firms from Australia, Hong Kong and the US, with recognisable names from Vegas, such as Las Vegas Sands, MGM, Galaxy and Wynn Resorts.
They invested heavily in big new casino resort complexes, with luxury hotels and high-end shopping malls. Given Macau’s tiny size – it originally consisted of a mainland peninsula and two small islands measuring 11.6 square kilometres in 1912 – land reclamation projects were necessary to host the burgeoning industry. By 2010, the territory measured 29.7 square kilometres, including six square kilometres of new land connecting the small islands of Coloane to Taipa, which plays host to the big casino complexes.
These new casinos have provided some employment opportunities for local citizens, but the greater impact for the economy has been the tourist visitor numbers and the tax revenue generated. After a decade of ever-increasing growth in gaming revenue with the opening of new casinos, tax revenue from the sector peaked in 2014 and then declined after China’s president, Xi Jinping instituted a widespread anti-corruption campaign.
The VIP gaming rooms in Macau became seen by the government in Beijing as a massive leakage of capital from the Chinese economy. A large part of the big money being gambled by these VIPs was seen as the proceeds of corruption and bribery on the mainland.
In 2014, gaming tax revenue provided 84% of the Macau government’s total revenue; by 2017 it had declined to 79%. But these percentages conceal the decline in the actual amount available to the government, from US$20.1 billion in 2014 to US$15.7 billion in 2017. This is because a number of Chinese elites eschewed Macau’s casinos to avoid scrutiny during Xi’s corruption crackdown.
Casino revenue now appears to have stabilised, helped by a move in Macau away from relying on the VIP sector and towards mass market entertainment. The government has also encouraged diversification beyond the casino gaming room and, like Las Vegas, it is looking to attract exhibitions and events to be held there.
The new bridge connecting Macau with Hong Kong should support increasing tourist visits by easing travel to the territory, further supporting diversification. But Macau must increasingly contend with neighbouring rivals. The anti-corruption campaign encouraged Chinese gamblers to visit other Asian casino destinations, including new resorts in Singapore and Manila in the Philippines.
Modern Macau is built on China’s rise and the increased wealth of its citizens that this has brought. Macau’s continued success is contingent on its ability to attract the mass market gambler, along with other tourists, as a vacation destination. As China’s middle class continues to grow, it should guarantee a steady supply for years to come.
The gambling industry is one of the largest financial generators in the world today.
The online gambling industry is proliferating, but it is still not able to offer the experience of going to a land-based casino.
Therefore, a lot of people still enjoy visiting brick and mortar gambling venues, and some of them even travel across the world to do so.
The so-called “gambling cities” generate billions of dollars every year from casinos, sportsbooks, and hotel arrangements. The two cities that are the best at doing this are definitely Las Vegas and Macau.
But which one has more success and deserves to be called the “Capital of Casino Gambling?” That’s what we’ll try to answer in this article by taking a closer look at the information collected by Casino Sites in an interesting infographic.
Macau Gambling Revenue
A Comparison of Revenues
Revenues are one of the most important things that we should consider when talking about this topic. It might seem that Macau is at a disadvantage since its surface area is three times smaller than that of Vegas. However, the population of both cities is pretty much the same.
Even though Macau is a much smaller city and has less space to fit gigantic casino resorts, it still has a gambling revenue that is three times higher than that of Las Vegas, which is quite impressive.
The GGR (Gross Gaming Revenue) of Las Vegas is $6.4 billion, 34% of which comes from playing casino games. The rest comes from hotel rooms and restaurants. On the other hand, Macau has a GGR of $28.04 billion. Of this amount, the city will get around $12 billion, which is twice as much as Las Vegas earns in total.
Moreover, Macau’s revenue keeps growing each year. Last year, the revenue rose by 23.7%, which was more than the projected 15-20% growth.
How Much Do They Tax Casinos?
Gambling cities’ main source of income is collecting taxes from casinos. They need to find a proper balance to take enough to keep growing, but not to take too much, or else they will repel the casino operators.
The monthly tax rate in Las Vegas for gambling businesses is 6.75% of GGR, which is not too bad. However, Vegas also requires casinos to pay a fixed annual tax of $250 on each slot machine if they have more than 15.
Moreover, the federal tax is 15-39%, depending on a lot of factors, and there are additional fees as well. So operating a gambling business in Vegas is not easy at all.
On the other hand, Macau has decided to simplify things as much as possible. Gambling businesses need to pay 40% of GGR in taxes to the city, which is a lot. In total, gambling taxes represent 78% of Macau’s income.
Demographics Play a Role
One of the biggest reasons why Macau is taking the role of the world’s capital of casino gambling away from Las Vegas is the demographics. Namely, two-thirds of Macau’s visitors come from China.
China is a growing economy, which makes people willing and excited to spend money on things they could not afford before. The visitors base is much larger as well since China has a population of 1.3 billion people.
Macau China Gambling
On the other hand, 49% of those who visit Las Vegas come from the Western United States. The rest of them come from foreign countries, mostly from Western Europe. A lot of Vegas visitors come on family and sightseeing trips.
They place some bets along the way, but they avoid overdoing it. That affects the revenue numbers, which is why Vegas earns much less than Macau.
Macau Gaming Revenue
You can look at an infographic: https://casinosites.me.uk/lasvegas-vs-macau-infographic/