As Xi Jinping’s anti-corruption continues, Macau’s gaming industry is under a lot of pressure as its Chinese patrons are becoming cautious of placing their bets at casinos technically located within China—and thus within the reach of government supervision and scrutiny on corruption charges. Of course, gambling is one of the items on a highly publicized list of behaviors that may result in getting banned from tourism altogether. Although practically unenforceable, it presents prospective Chinese gamblers with another argument for buying casino tokens away from the watchful eye of Chinese authorities.
Tourism stakeholders in Macau have voiced their concerns as fears of a significant downshift in Chinese tourism to the Special Administrative Region (SAR) linger as a result of the recent slump in casino revenues. Macau tourism authorities, failing to calm its stakeholders, instead claim that Macau’s infrastructure can barely cope with its current number of mainland Chinese tourists as it stands, and that it is considering putting a ceiling on arrivals—similar to how Taiwan limits the number of Chinese tourists. In regard to Macau’s tourism industry’s heavy reliance on gambling, authorities have emphasized the importance of developing non-gambling attractions to draw a more diverse crowd of tourists to the SAR. Needless to say, Macau authorities have failed to instill a greater sense of confidence in the future of its tourism sector.
On the other hand, recent developments are not all bad news for casinos in Macau. Mass-market gambling has proven more profitable to casinos than VIP gaming as casinos pay substantial commission to gaming junkets who bring high rollers to the casinos. VIP gaming, normally with minimum bets of approximately USD$400,000 in Macau, is hit the hardest by Xi Jinping’s anti-graft policy. With its fast-growing middle class, China’s mass-market for gambling is only expected to keep growing—which only makes the threat of a ceiling on Chinese arrivals more worrisome for industry stakeholders in Macau.
As Macau is struggling to maintain its position as the foremost destination for gamblers in Asia, other destinations have been quick to leverage their geographic proximity to China in combination with lax gambling laws for foreigners to attract Chinese gamblers. Countries such as Nepal, Vietnam, Singapore, South Korea, and the Philippines are all seeing a boom in casino developments and policy reoriented to make room for a growing number of Chinese gamblers. In Nepal, all casinos were declared illegal in 2014, only to be made legal again as the country’s tourism industry was struggling to recover from the devastating earthquakes that shook the country in 2015. Political spats with India has driven Nepal closer to China, with Chinese tourists and casinos hoped to form two important engines for economic recovery.
Even Japan, the biggest winner in Chinese tourism (and Chinese shopping) last year, has been making moves to allow casinos to operate in the country before the Tokyo Olympics in 2020 as it’s looking for new opportunities to leverage its Chinese tourist boom. Even if concerns about the legal risks of gambling in Macau are proven false, they have—in combination with the overall growth of Chinese tourism—fueled competition in the Asian gambling market.
“Casino trading” is nothing new in Asia: you will find no Singaporean gamblers in Singapore’s casinos, and no South Korean gamblers in Seoul’s casinos—but many Singaporeans in Seoul’s casinos and vice versa. The legal environment in Asia more often than not prohibits locals from gambling, but welcomes foreigners to domestic casinos—with Macau being one of the few exceptions in the region in welcoming locals to its casinos. So in a sense, Chinese gambling shifting to destinations beyond Macau is in line with how the general market for casinos looks in Asia: the country where you gamble is not the country where you live.
The larger trend in Chinese tourism also spells trouble for Macau: Hong Kong has seen the number of Chinese arrivals decline as it is no longer seen as an exotic destination to visit, neither for sightseeing nor shopping as more “exotic” destinations such as Japan and South Korea also provide excellent (and tax-free) shopping opportunities within a few hours by air. As such, they have become objects for Chinese mass tourism—and may become objects for mass-market gambling.
In fact, South Korea has already begun to specifically court Chinese mass-market gamblers, with a large range of casinos catering to “low-rollers” popping up in Seoul and on Jeju island—the main destinations for Chinese tourists in South Korea. There, relatively cheap gadgets such as Korean rice cookers and Samsung smartphones are offered as giveaways to attract Chinese gamblers—putting them in marked contrast to the glamour and exclusive treatment promoted to Chinese gamblers in Macau’s casinos. If—despite a proposed cap on Chinese arrivals—mass-market gambling is deemed the future of Macau’s gaming industry, competition in this space has risen as well. With mass-market gambling more often than not combined with regular leisure tourism and typical itinerary items such as shopping and sightseeing, the perceived lesser exoticism of Macau than of its competitor will prove a challenge to attract these tourists as well.
The destination shift for Chinese gambling not only proves a challenge for Macau authorities, but also for luxury brands that seek to tap into Chinese gamblers’ wallets. As it may turn out, the next prime location for luxury boutiques could be adjacent to a Kathmandu casino rather than close by Macau’s luxury hotels.
Daniel Meesak is the chief operating officer of the China Outbound Tourism Research Institute (COTRI), and can be contacted at firstname.lastname@example.org.