Can the World’s Largest Gambling City See Off its Competition?

Macau is the most successful gambling city in the world, but it has experienced some turbulence of late.

Many people wonder if this Chinese island can cement its position at the top of the market or if one of its competitors could overtake it.

The island has been expanding its casino operations for the past 16 years. It currently draws in around $33bn in revenues each year, making it the world leader in this regard.

China has a blanket ban on gambling, with the exception of Macau. This allows Chinese citizens and tourists from all across Asia come to get their gambling fix.

Is Macau invincible?

There are some signs that Macua’s fortunes may be slowing down somewhat. While it is still set to hit record levels of profits in 2019, the Chinese economy is starting to cool off, which could have a major effect in the coming years on the island’s prosperity.

Other potentially lucrative gambling centers are opening up in Asia.

Japan, for example, is currently accepting bids for three mega-resort casinos, in its first foray into this sector. Other countries such as Vietnam and Cambodia are also relaxing their gambling laws.

This will mean that people would no longer have to travel to Macau in order to get their gambling fix in Asia.

Ongoing trade war

There is also the issue of the ongoing trade war between China and the United States.

A number of major American casinos that have a presence in Macau need to renew their licenses over the next three or four years. This includes Wynn Resorts, MGM Resorts International and Las Vegas Sands Corps.

These licenses could be used as a bargaining chip by the Chinese in the trade war. There is a significant correlation between the number of high-rollers regularly gambling when the economy is good and significantly less so when the economy is struggling.

This is the reason behind a decrease in forecast growth in the coming years. Analysts estimate revenue growth in Macau will fall from 19% in 2017, down to 18% in 2018 and 5% by 2019.

A large portion of these revenues come from the tourist industry. Tourists spend a lot of money on food and entertainment in addition to the gambling offerings.

There are not many plans to expand attractions on the island in the coming years. And if the economy is struggling and budgets tighten, fewer people will go on vacation.

Only a few operating licenses are up for grabs on the island, with many of them expiring in the next few years. They cannot be simply renewed. Macau will launch a new bidding process for them, the details of which have yet to be outlined.

This uncertainty will lead to the major operators refusing to make significant investments in new projects in the region.

What about Las Vegas?

A clear second in the rankings of gambling locations in the world is Las Vegas, which was largely the inspiration for Macau. Las Vegas has been struggling somewhat during 2018. Many of the major casinos on the Strip have seen little if any growth  in recent months.

Gaming on the Strip is down 1% on the year which represents a downward trend.

Casinos in the city have a lot of concerns. While gambling revenues are third on their list of revenue sources, they bring in probably the highest margins. So they are buckling down and getting ready for tough times ahead.

One of the reasons for this decline is down to the fall in high rollers coming to Las Vegas coming from China and elsewhere in Asia. Baccarat was their preferred game. Revenues for September for baccarat were $69m in comparison to $116m in the same month in 2013.

Baccarat kept the doors open for a number of Las Vegas casinos during the recession, but it appears that this option is no longer there. This will be of a serious concern to the casinos, all of which have large costs to deal with on a monthly basis.

Therefore, despite some issues, it appears as if Macau will continue to lead the rankings for the most successful gambling city in the world.