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Macau Govt Sets a Cap on Gaming Tables, Machines, and Income
By Jeff Osienya Aug 29, 2022 IndustryMacau has announced new friendly limits for its licensed casinos. The revenue threshold for next year is the same as that of 2022, meaning that operators can breathe a sigh of relief as they try to recover from the Covid-19 losses.The Macau government has announced new gaming industry limits that operators have to abide by beginning the first year of the upcoming licensing period. So, in 2023, China’s Special Administrative Region (SAR) will allow licensed gaming companies to operate up to 6,000 gaming tables and 12,000 slot machines.
With the said caps, the minimum gross income expected from each gaming table stands at MOP 7 million (~$886,100) per year from each table and MOP 300,000 (~$37,100) from each slot machine. Therefore, from Next year, operators in the gaming mecca must meet a revenue threshold of at least MOP 45.6 billion (~$564 million) – similar to the levels set in 2022, according to a recent report by Bloomberg.
Given that the future is still uncertain as the economy plunges deeper into a depression, the low thresholds are a welcome surprise for operators. This is the first time for such limits to be imposed on the market stakeholders and comes as the region faces one of the most challenging times ever recorded in its history. As the deadline for submitting bids is drawing closer, the six current licensees are among those who have expressed interest in being able to offer gaming services over the coming licensing period.
The Threshold to Ensure “Orderly and Healthy Development”
The revenue caps are part of the recent gaming bill, which seeks to grant authorities more power to effectively oversee gambling operations across Macau. With a minimum tax revenue already set in advance, all operators who do not meet the threshold will be required to make up for it by paying the surplus tax.
These new rules are designed to nudge gaming operators to manage their resources better and come up with ways to generate more income from the approved tables and slots. The current tax rate of 40% is among the highest in the global gaming industry, and there had been earlier speculation that the caps may be too high for Macau’s crumbling gaming scene.
Macau’s Revenue on a Downward Slope Since the Pandemic
The Macau gambling revenue has been slumping ever since the start of the Covid-19 pandemic. And just as most markets, including Macau, were beginning to recover from post-pandemic losses, the Chinese government started a crackdown on the industry. Some of the strictest rules in the worldwide gaming sector were imposed on operators, a move that ended up costing Macau billions in revenue losses.
Furthermore, the SAR’s government has been implementing measures aligned with President Xi’s reform agenda and the zero-Covid policy. The recent outbreak of a new Coronavirus strain did not help as casinos were forced to shut down for 12 days following a lockdown mandated by the government to curb the virus. A report on the Macau Q2 2022 gross gaming revenue revealed a 52% quarter-on-quarter decrease and a 67% year-over-year drop compared to 2021. H1 2022 also saw a 38% year-over-year drop.
Travel restrictions on tourists crossing the border from Mainland China to gamble and a new bill zeroing in on junket operations have also greatly influenced player turnout. As a result, the entire gaming revenue stream has also taken a hefty blow.
Experts have estimated that the earliest recovery period for the Southern Chinese territory may be some time towards the end of Q3 or Q4. However, some have even predicted that it may take much longer, with a possible date being 2023 when operators with permits will be required to meet the set goals. As we speak, reports indicate that Macau casinos have been bleeding in the millions, with an estimated $600 million being blown monthly in a bid to stay afloat.
The Future is Rather Shaky for the Former World Champion
To make the game fair for Macau concessionaires, the ultimate amount to be paid out to the government would be calculated based on how many tables and machines were in use throughout the year. However, operators who will not be able to meet the minimum GGR will have their tables and/or machines taken back by the secretary of economy and finance.
Either way, from the look of things, the market is fighting hard to reclaim its title as the world’s capital of gambling. But on the other hand, investors are still debating whether it would be worthwhile to invest now or wait a little longer for the currently bearish market to show signs of recovering once more.
Nevada’s Sin City, whose GGR before the pandemic was just a fraction of Macau’s, has now overtaken the ‘Las Vegas’ of the East, and its reported profits don’t seem like they’ll be slowing down any time soon. However, seeing as the government has proved time and again how unpredictable it can get, the decision remains in the hands of potential investors.
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