Macau, the gambling capital of the world, is getting a makeover backed by China

AAlthough the lights are still on along the popular Cotai Strip, the crowds of people who streamed in and out of Macau’s many hotels and casinos are gone. In the gambling capital of the world today, many tables stand empty, with entire sections of some casinos completely closed due to lack of business.

This transformation turned the lives of Macau residents upside down. Groov Kwok, 33, hasn’t had a full-time job in months. For seven years, he worked at a company managing VIP gambling halls in the city, where he earned about 40,000 patakas ($5,000) a month by analyzing customers’ win rates. But in December last year, the company announced via WeChat that it was ceasing operations with immediate effect. “It was unexpected,” he tells TIME.

Read more: Tourism is growing in the US and Europe. But in Asia, many destinations are struggling to come back to life

Kwok has taken a few side gigs but is now taking IT skills courses to try to improve his chances of being hired in an increasingly bleak local job market: the jobless rate for residents has steadily risen to 5.5% from pre-pandemic of 1.8%. He is considering leaving Macau, as many others have already done in the past year, in search of work elsewhere in the Greater Bay Area, a vast southern Chinese conurbation comprising nine major cities in Guangdong province as well as special administrative regions from Hong Kong. and Macao — so that he could support his younger brother and mother.

Empty gaming tables at the Londoner Casino resort on the Cotai Strip in Macau, October 20.  (Eduardo Leal—AFP/Getty Images)

Empty gaming tables at the Londoner Casino resort on the Cotai Strip in Macau, October 20.

Eduardo Leal—AFP/Getty Images

COVID-19 has hit the entire global economy, especially places dependent on tourism. Macau, a popular gambling destination commonly referred to as the “Las Vegas of the East,” welcomed some 39 million visitors in 2019, including Chinese high-profile players. But Beijing’s tough entry and exit measures from the pandemic have pushed Macau’s tourist numbers down to just 5.8 million in 2020, and a new push to diversify the semi-autonomous Chinese region’s economy away from gambling has not helped it recover .

Read more: The rising costs of China’s zero-sum fight against COVID

With game accounting for 80% of Macau’s tax revenue, the double whammy of China’s continued zero-spread COVID policy and tighter regulatory controls on the local gambling industry has locals and experts worried that Macau emerging from the pandemic may be a shadow of your old self.

Gambling is in Macau’s “DNA”.

For a city occupying a tenth of the area of ​​Las Vegas at 32 sq. km. With only about 680,000 residents, Macau generated six times more revenue than America’s gambling capital before the pandemic. In 2019, it brought in $36 billion. Today, the industry’s monthly revenue falls to 300 million dollarscompared to Vegas 659 million dollars.

The former Portuguese gaming colony’s history dates back to its founding as a trading post in the 16th century. Chinese immigrant workers gambled as entertainment with makeshift stalls for fan-tan occupying the streets of the city. Due to the popularity of gambling among workers, in 1847 the Portuguese government of Macao officially legalized gambling and taxed its revenue.

Macau’s gaming landscape has flourished since Portugal returned it to Chinese rule in 1999. In 2002, the city liberalized its gaming sector, opening up the market to multinationals such as MGM, Wynn and Las Vegas Sands. By 2006, Macau had become the largest gaming market in the world.

Read more: Can Asia’s gambling industry continue to thrive?

But revenues in the region are proverbially reliant on China’s high-end commodities, which in some cases include Government employees. VIP gamers in town contribute more than 43% of the sector’s profits, largely through junket operators – middlemen who facilitate gambling for wealthy Chinese players. Junket operators can handle everything from providing their customers with luxury accommodation and travel to offering loans to play with.

Gambling has been officially illegal on the mainland since 1949, but not in Macau, a fact that has helped shape the latter’s cultural identity while complicating its relationship with Beijing. Macau’s junket model remained somewhat untouched until late 2012, when Xi Jinping became China’s president. His administration launched a tough anti-corruption campaign that discouraged casino extravagance. Gambling income got hit.

Read more: As casino revenue plummets, what’s next for Tiny Macau?

In 2020, Xi launched a push for “shared prosperity” – a a vague policy-making principle of egalitarianism, which is used to control how the country’s wealthiest make and spend their money. Responsible gambling 1 trillion yuan ($147 billion) leaving the Chinese economy, it was only a matter of time before Macau was contained.

Last November, police arrested Alvin Chow, head of the city’s biggest tourism operator, Suncity Group Holdings, on more than 200 charges including operating casinos illegally, money laundering and running a criminal syndicate. The order seen by Financial Times reportedly ordered Chau’s arrest for “seriously harms the social order of the country.”

Hao Jidong, a professor emeritus at the University of Macau who writes about the city’s history and culture, said Chau’s arrest was a big deal because it affected “the way gambling has always been done.”

Read more: Will Hong Kong’s pro-democracy protests spread to its close neighbor Macau?

Chau’s arrest came shortly after Macau’s government proposed tightening laws on the city’s gaming industry. The government has since banned all special fast break rooms in casinos. It also halved the length of licenses granted to casino operators from 20 years to 10 years – subject to a review of their compliance with the treaty every three years – and required said operators to invest in local talent as well as initiatives outside of gaming, such as green technology, finance or entertainment.

As a result, the workforce has been decimated, with foreign workers, who typically make up a fifth of the region’s population, among the hardest hit.

“Gaming was practiced in Macau long before 1849 … so it’s in the DNA of the place,” said Andrew W. Scott, vice chairman and chief executive officer of Inside the Asian Games, a Macau-based gambling magazine. “And when that’s taken away,” he said, “it makes Macau, frankly, an empty shell of what it used to be.”

Economic diversification faces great odds

China has long pressed Macau to stop relying solely on gambling and diversify its revenue streams, but several factors stand in the way.

On the one hand, given its limited size, the region has there is no place to host new businesses. In September 2021, China offered 106 sq km. land in Hengqin, an island three times the size of Macau just across the river, to be jointly developed and managed by Macau and Beijing in the hope that it will spur investment in non-gaming industries (which will not be permitted there), such as metauniverse technology and traditional Chinese medicine (TCM).

An aerial view of buildings in the Hengqin New Area (top) and residential buildings in Macau (bottom) on August 17, 2021. (Chen Shuoming—VCG/Getty Images)

An aerial view of buildings in the Hengqin New Area (top) and residential buildings in Macau (bottom) on August 17, 2021.

Chen Shuoming—VCG/Getty Images

Macau’s existing talent pool is also ill-equipped for economic diversification. Ann IMF report points out that developed economies such as the US have a larger skilled population. But in 2021, almost 45% of those employed in Macau were clerical and service and sales workers, while about 24% held low-skilled jobs. Only 18.5% are considered professionals and technicians, which are necessary for the development of science and technology and TCM industries.

Read more: China plans to turn Hong Kong and Macau into a Silicon Valley rival

In a case of mixed messages, officials say they want to attract “high end” to “senior professionals” overseas talent, which could help Macau branch out into other non-gaming industries. Under investment residence scheme, foreign professionals can apply to live in the region if they can help diversify local industries or improve their competitiveness. However, in 2021, only one in 33 applications for “management or technical staff” was approved.

“We haven’t achieved anything close to diversification,” says Ben Lee, founder of gaming consultancy iGamix in Macau. “With this drain of talent, our ability was further away from that vision, not closer.”

The Future of Asia’s Gambling Mecca

All this will not necessarily mean the end of gaming in Macau. Despite losses running into the millions, the city’s six gaming concessionaires — Las Vegas Sands, Sands China, Wynn Macau, Galaxy Entertainment, Melco Resorts and SJM Holdings — have no plans to leave anytime soon. “They have already reduced their interest in Macau,” says Lee. “For them to try to get a new concession means less commitment [on] their role than someone coming in completely new.

Hao, the professor emeritus, said Beijing’s crackdown may have ended the lucrative VIP gambling the city was known for, but mainstream table games could still generate plenty of profits. Before the pandemic hit, table and slot games brought in more than 141.5 billion patacas ($17 billion) in revenue for Macau. This market is likely to get another boost as Macau plans resume group tours this month, and China aims to issue e-visas for domestic travel there.

But the established six may need a stronger commitment to show the Macau government before their licenses expire at the end of the year. A seventh company linked to Malaysian multinational Genting Group, which does not currently operate in Macau, is also vying for one of the six operating licenses. Genting is led by billionaire Lim Kok Tai, and the conglomerate’s involvement in non-gaming industries and theme parks makes it a valuable competitor – in line with China’s drive to diversify Macau’s economy.

Pedestrians walk past Casino Lisboa in Macau, October 20.  (Eduardo Leal—AFP/Getty Images)

Pedestrians walk past Casino Lisboa in Macau, October 20.

Eduardo Leal—AFP/Getty Images

And junkets aren’t totally outdatedwith 46 operators still licensed, of which at at least 37 were in operation as of March. The new gaming law imposes stricter restrictions on them, but for Hao, how these skit operators will continue is less a matter of law and more of how much risk people are willing to take to fill the vacuum in the VIP market. which they will ignore. The trips that made Macau what it is now may find a new boom underground. “When you have a policy from the central government, there’s always a way around that policy,” Hao says.

China’s push is pushing Macau’s gaming market to find new hubs in nearby Singapore and the Philippines. But it won’t be easy for Macau to make a new name for itself outside of gambling. With other bustling Chinese hubs such as Shenzhen and Hong Kong already excelling in areas such as technology, financial services and trade, Macau is unlikely to abandon its “troubled” but differentiated and undeniably popular industry.

“They have to keep the gambling industry in Macau, there’s no doubt about that,” Hao says. “But they won’t defend it or brag about it.”

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