Falling casino revenues in Macau, the world’s biggest gambling hub, are taking a heavy toll on the economy, forcing hundreds of businesses to close and driving unemployment to the highest level since 2009.
The former Portuguese colony on Wednesday recorded one of its worst monthly gambling revenues since September 2020, a week after the local government warned that growing job losses and financial problems could trigger social unrest and destabilize the security.
China’s special administrative region is the only place in the country where gambling at casinos is legally permitted. Heavily dependent on local taxes, which account for over 80% of government revenues, Macau has had little success in diversifying its economy.
“We are the most tourism-dependent city in the world. Of course, we didn’t have other industries to turn to,” says Glenn McCartney, an associate professor at the University of Macau. “If we don’t diversify in 20 years, it won’t happen tomorrow. There is no quick fix.”
Macau’s reliance on gambling has been exposed since the start of the coronavirus pandemic, with Q1 visitation rates dropping by more than 80% compared to the same period in 2019 due to Covid travel restrictions. More than 90% of Macau visitors typically come from mainland China, which continues to follow a zero Covid policy.
Gaming revenues in May fell 68% year-on-year, to 3.3 billion patacas –name of the local currency–, something around R$1.9 billion. Although the figure is 25% higher than in April, it is still far from the 26 billion patacas reached in May 2019.
Macau’s six casino operators are facing daily revenue losses and accumulating debt as liquidity continues to dry up. China’s moves to stem capital outflows and clamp down on the opaque gaming industry, which is tasked with bringing high-rollers from the mainland, also hurt gaming revenue.
Cost reduction and growing economic losses are evident throughout the small territory, which is home to more than 600,000 people, extending to sectors such as retail, industrial and commercial services.
The unemployment rate for residents rose to 4.5%, according to the latest government figures, up from 1.8% in 2019.
Citing a difficult business environment and bleak prospects for the high-end gaming segment, Emperor Entertainment Hotel said in April that it would close its casino from June 26. At least seven other casinos are expected to cease operations by mid-year, local media reported.
The Macau Economic Association said the business climate index will remain “bad” for the next three months. In an April report, the International Monetary Fund (IMF) warned that it will take several years for Macau’s economy to return to pre-pandemic levels, with the sharp contraction in activity exposing the city’s vulnerability.
The Macau government has urged casinos, which employ tens of thousands of residents, not to lay off workers. Some operators, instead of giving full salaries, chose not to renew contracts, or offered unpaid leave or stock bonuses.
Cloee Chan, an activist with a labor group in Macau, said the lack of gamblers, along with the closure of VIP lounges and some casinos, poses a major challenge for the local job market. “Many workers in the gaming industry are now underrepresented or have been laid off.”
