GGR levels in Macau to be well below expectations in 2021

businessman with revenue concept

Macau has already taken a nasty hit from COVID-19, with gross gaming revenue (GGR) levels at its casinos flatlining for parts of the year. The chances of making a quick recovery from the pandemic have been hampered by sporadic outbreaks of the virus in certain feeder markets for the city, and it has already been projected that Macau will need a couple of years to get back to where it was before COVID-19 struck. That prediction could be extended even further, however, and the Macau government believes that next year isn’t going to bring any major relief.

Macau has presented its budget proposal for 2021 and indicates that the “harsh” conditions brought about by COVID-19 are weighing heavily on the city’s casino industry. As a result, it anticipates that the GGR the gambling venues collect will only be around $16.28 billion, which is 45% lower than they were last year. With 2020 seeing months that brought GGR that was as much as 90% lower than in 2019, the chances of putting the gambling market back together quickly are weakened.

Macau’s government typically errs on the side of caution when presenting its budget proposals, but recovering 45% would be a difficult task. The city currently hopes to take in around $5.69 million in gaming-related taxes in the upcoming fiscal year, a figure that could be boosted by improved performance and the effective tax rate, which stands at around 40%. City leaders had that Macau is looking at the possibility of a “structural fiscal deficit” due to its “narrow tax base” and “increasing expenses but no rise in income” that will keep it in the red for the second consecutive year.

The weakened forecast could ultimately precipitate changes in Macau. There are already plans in the works to diversify the city’s tourism efforts, and these plans might be sped up going forward. Angela Leong, the co-chair and executive director of casino operator SJM Holdings, understands the necessity to alter the city’s paradigm to attract a wider range of international tourists and said during a gaming seminar this week, “We’re now seeing a certain increase in gambling revenue but under the current circumstances we can’t expect too much other than to strive for stability. I believe that all concessionaires are now thinking about switching their current development methods to strengthen the development of non-gaming elements. Some [gaming] measures also need to be changed.”

There’s also the chance – albeit just a slight one – that the COVID-19 situation will pave the way for Macau to become more amenable to the idea of online gaming. This is a topic that has been debated for the past couple of years without gaining any significant movement, but that could change as the city looks to find new ways to generate revenue. Lawmakers have already started pitching the idea this year, but there is still a lot that has to be done before the new segment could be authorized. With the Legislative Assembly set for elections next year, it’s unlikely that this would be a priority until afterward.

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