How COVID-19 Has Impacted China’s Gaming Industry

Under Chinese law, gambling has been strictly limited to the Special Administrative Regions of Hong Kong and Macau since the 1940’s. Since then, the former Portuguese colony of Macau has grown into the Monte Carlo of the East, with gambling tourism contributing to over fifty percent of the region’s economy.

But the arrival of the COVID-19 pandemic brought a swift change to the previously thriving city. One and a half years later, they are suffering more than ever. Gambling operators are still waiting for tourists to return to the now quiet city, but with the ever-present threat of another outbreak, they have yet to regain their title of “Gambling Capital of the World.”

Why the massive drop in revenue? Will China be able to resurrect its gaming industry before it’s too late? Keep reading to find out more about the country’s response to the COVID-19 pandemic and the obstacles standing in its way.

Severe Drop In Total Revenue 

Business continues to struggle one and a half years after the onset of the pandemic. In August alone, the gross gambling revenue for Macau dropped to $554 million, nearly half of July’s revenue. By comparison, the city’s average monthly revenue in 2019 was $3 billion. That’s right, last month, the city made less than one fifth of their normal gambling revenue!

In 2020, Macau reported its lowest gambling revenue in over 14 years. With a moderately impressive income of $36.6 billion in gaming revenues in 2019, 2020 was anything but successful. The massive drop totaled 79.3%, bringing in only $7.56 billion for the year. The last time Macau casinos collected such a small number was back in 2006, just four years after the government opened the gaming market to foreign-based casino operators.

Heavily Restricted Tourism 

With heavy travel bans and restrictions in place, it’s no wonder large casinos are suffering far-reaching effects from the pandemic. Travel restrictions remain in place in hopes of preventing another outbreak, but that means less people in the casinos and less revenue for the Chinese city.

In July, a new hope seemed within reach as reported COVID numbers dropped in China, the biggest source of the city’s high rollers. All it took was a handful of Macau residents returning from the mainland to test positive for the COVID-19 Delta variant to cause another blow to the city’s already flagging recovery.

As of August 17, Macau has only recorded 63 COVID cases for the entire length of the pandemic. Considering the United States surpassed this number back in 2020 at the end of March, just a couple of months after the first confirmed case on U.S. soil 63 is incredibly low.

On August 24, the Macau government announced that it would be relaxing travel restrictions for neighboring Chinese provinces. Travelers must be able to provide a negative COVID test from seven days prior to travel, vs the 48-hr requirement they established previously. Shares in U.S. and Hong Kong based casino operators have jumped on this news, but should there be another spike in COVID cases, it could be possible to see this decision reversed.

Why Not Make the Switch to Online Gambling?

With tourism numbers at an all-time low, why doesn’t the Chinese city just switch their efforts and open up the market to online gambling? American casinos have been doing this for years, so why not China?

The answer is not as simple as it sounds. While it is true, online gambling has skyrocketed during the pandemic, it is not without its own problems.

Gambling in China has been illegal under Chinese law since the Communist Party came into power in 1940. Outside of Hong Kong and Macau, Chinese citizens can participate in one of two state-run lotteries. But even with these exceptions, online gambling remains illegal. With these restrictions in place, and without access to the casinos in Macau, Chinese citizens have been driven in staggering numbers to illegal online gambling and the sole Asian country where online gambling is legal: the Philippines.

It’s no surprise to hear China keeps a strict watch over its citizens. Just last month, the government imposed a crackdown on online video game use for minors. Children under the age of 18 are now only allowed to play games between 8pm and 9pm on Fridays, weekends, and holidays. With restrictions like this, it’s easy to see why online gambling probably won’t be allowed anytime soon.

 

What Does This Mean For Other International Casinos?

In this day and age, the casino industry is as interconnected as the world economy. Many U.S.-based operators rely heavily on the Macau gambling industry. While many stock values are on the rise, they still fail to make up for the net loss these casino operators have sustained since early 2020.

Wynn Resorts, based out of Macau and Las Vegas, has seen an incredible spike in stock values. The operating revenues rose to $990 million for the second quarter of 2021 (compared to $86 million for the same quarter the previous year). With that said, the company has still yet to regain their net loss of $131 million.

Other smaller destinations in Asia offer potential competition to Macau should those nations choose to impose lesser travel restrictions than their Chinese neighbor. Singapore, the Philippines, Malaysia, and South Korea all offer attractive alternatives for the traveling gambler to explore. And the options continue to increase. Vietnam and Japan may soon be the next Asian countries to exploit this lucrative business.

In addition, As more people seek to switch to online gambling, as has been the trend the past couple of years, you can expect to see a shift toward those casinos and countries that allow for online-based play.

What Does the Future Look Like for China and Their Gaming Industry?  

It has been a bumpy ride this past year and a half for the casinos and gambling operators of Macau, but there could be hope for a future recovery. Since February, gaming revenue has increased each month, compared to 2020, earning a 64% growth over last year. If the pandemic continues to subside, this growth trend may continue. But with overall COVID case numbers on the rise yet again, it is unsure what the next year holds.

Will there be another outbreak? Will China ever open up to the idea of online gambling? Will diminished profits continue to impact the international economy? The answers to these questions remain fuzzy at best. Right now, the world can but wait and see what happens next as it unfolds. It is an ever-evolving situation, and one greatly at the mercy of the pandemic.