Asia Economy

Macau gambling revenue grows 14 percent in 2018, shrugging off trade war fears

Key Points
  • Gaming revenue in Macau recorded a 16.6 percent increase year-on-year in December and rose 14 percent for the entire year, according to the local government.
  • The former Portuguese colony is trying to diversify its economy away from a heavy reliance on gambling and casinos are appealing to mass market visitors with broader entertainment offerings.
  • The growth in gambling revenue came amid some concerns that casino operators could be affected if the ongoing trade war between China and the United States cannot be resolved.
People walk on a water front near a strip of casinos in Macau.
Natalie Behring | Bloomberg | Getty Images

Asian gambling enclave Macau finished 2018 on a strong note, shaking off China's slowing economy and concerns over that the trade war with the United States will continue to drag on.

Gaming revenue in December recorded a double-digit increase — the biggest gain in four months — as the former Portuguese colony and now semi-autonomous Chinese territory near Hong Kong seeks to attract more mass market visitors in a bid to lessen reliance on bigger spending VIP customers.

Macau has about 650,000 people and in terms of per capita GDP is one of the richest places on earth. But the Chinese government has pushed it to diversify its economy and lessen reliance on gambling. Casinos are offering more entertainment options beyond simply roulette and slot machines at their resorts to appeal to mass market customers and families, with some success.

But gambling still dominates its economy and gross gaming revenue increased 16.6 percent year-on-year in the final month of last year to 26.5 billion Macanese patacas, the local currency, equivalent to about $3.28 billion, according to figures released Tuesday by Macau's Gaming Inspection and Coordination Bureau, which goes by the Portuguese acronym DICJ. That marked the biggest increase in four months.

For all of 2018, gaming revenue rose 14 percent to 302.85 billion patacas, the DICJ said on its website, marking the second straight annual increase.

Visits to Macau 'increasing modestly'

"The mass market remains strong," Grant Govertsen, analyst at Union Gaming said in a research note dated Tuesday, though he added that anecdotal evidence suggests VIP visitors in December rebounded after several months of weakness.

The Greater Bay Area: Bridging Hong Kong, Macau and mainland China

But a new bridge connecting Macau and Hong Kong with other parts of southern China that opened in October, part of a massive economic integration project known as the Greater Bay Area, appears yet to have had a major impact.

Govertsen said that visitor numbers to Macau have technically surged since the bridge opened — but that's largely due to tour groups transiting through Macau via the bridge rather than relying on ferries as before.

"In reality, we believe that true visitation to Macau is increasing modestly," he wrote, adding that spending per visitor was "also up nicely." Continued mass market growth "underpins the solid fundamentals we continue to see in Macau," he said.

Concerns that U.S. casino operators, which depend on licenses to operate in Macau, could get caught up in the trade dispute were voiced last year, including by famed short-seller Jim Chanos, but the scenario has yet to play out.

The gaming and entertainment environment in Macau, ruled by Portugal for 400 years until 1999, has changed dramatically since a government monopoly ended and foreign operators began to receive casino concessions from 2002. Big Las Vegas names MGM, Wynn and Sands now operate there.

Why is Macau so rich?