De-market Corporate Macau to Remove the Bad
by Desmond Lam
The Macau government has recently implemented new measures to curb the growth of Macau’s ever-increasing casino gaming market. These measures include 1) reducing transit mainland Chinese visitors from 14 to 7 days and punishing them for not going to a 3rd destination, and (2) mainland Chinese who hold entry-exit permits for traveling to and from Macau and Hong Kong, will no longer be able to enter Macau from Hong Kong. Some observers have publicly declared that the Macau government has finally bowed to the pressure from Chinese central government to reduce its gambling harms. In the past years, there was a sense that Macau has grown at the expense of its Chinese neighbors. It has gained international popularity and its economy has ballooned. While Macau has acted to protect its own residents, there are few measures to protect mainland Chinese gamblers who make up almost 60% of Macau’s visitors each year. The new measures are tools to stop the mainland Chinese from abusing the system. They are measures to filter the good from the bad, the responsible from the irresponsible gamblers.
Along with recent visa policy changes implemented by the Chinese central government, the new measures may have a significant impact on Macau’s casino gaming market; in particular, the VIP segment. In fact, the latest Q2 gross casino gaming figures recently released showed a drop in casino gaming revenue from the previous quarter (Q1). Casino gaming (Games of Fortune) revenue has dipped by around US$117 million from Q1, with VIP baccarat accounting for 75% of this dip (or >3.3% drop from Q1). Frankly, the full impact of these policy changes has yet to be felt. I think the new measures may be effective in targeting those Mainland Chinese executives and managers who used the excuses of visiting Hong Kong for leisure/business to gamble in Macau. Together, they sent a powerful message to those who abuse the system. I also think they would be effective against Mainland Chinese who claimed to transit through Macau on the way to visiting distant countries (like Japan) for leisure or business. If any, the new measures may curb irresponsible gambling – executives and managers who used corporate funds, time and other resources to gamble.
It is easy to see why the Chinese central government is so wary of Macau’s relentless growth. There is a significant and growing number of Mainland Chinese gambling in Macau’s 30 casinos. Some 27 million visitors travelled to Macau from all over the world. In 2007, around 55% of these visitors were from mainland China. Surveys by Macau’s statistics department revealed that about 55% of visitors interviewed gambled while in Macau. These figures would very roughly yield around 8 million visits made by Mainland Chinese to Macau’s casinos (i.e. those who came and gambled)
Problem gambling prevalence rate studies in Singapore, Hong Kong and Macau revealed that probably around 2% of the population experienced problem gambling and probably another 2% are serious ones (i.e. pathological). On average, each problem gambler could potentially affect around 4-5 people. The 8 million visits made by mainland Chinese gamblers each year would comprise new and repeat Chinese visitors. Even if one assumes all 8 million visits were made by mainland Chinese gamblers who traveled to Macau once a month (which was most unlikely the case), it would equate to around 670,000 gamblers each year. At 4% problem and pathological gambling rate, this would give 26,800 probable problem/pathological Mainland Chinese gamblers. When they returned, these problem gamblers could potentially affect more than 100,000 Chinese people each year. This is certainly a simplistic way of looking at things but it could be much worse. The economic and social costs can be enormous if left unchecked. The truth is: we don’t know how far reaching this problem is. We are talking about people who gamble out of control despite causing harms to themselves, their jobs and people around them. It includes those who used family and corporate monies to fund their gaming adventure.
These numbers, while simplistic, show why the Chinese central government is so wary about Macau’s recent explosive growth in casino gaming without checks. Simple analysis showed a big group of mainland Chinese who may potentially experience problem gambling and remain undetected within the current system. Yet, the Macau government has until now implemented very few effective measures that help resolved this cross-border problem. Understandably, to be fair, it is hard to monitor gambling problems across border.
Macau needs responsible gamblers from all over the world; gamblers who know how to have fun and know when to stop. Casino gaming can be a healthy activities for all Chinese. Yet, time and time again, Macau has encountered irresponsible gamblers – gamblers who come to make a killing using funds that are dubious at best and using techniques or rules that escape the radar of the taxation office. Some casino VIP hosts are adding to the fuel by ignoring their irresponsible Chinese mainland gamblers and allowing them to gamble despite them causing harms (even to the dealers serving them).
The healthy, sustainable development of Macau’s casino gaming industry requires good socially responsible casinos, a committed and rational government and, most importantly, responsible gamblers. The new policies target the irresponsible and show a more strong-handed Macau government that is concerned about cross-border issues. While the new measures may likely affect overall sales especially in VIP gaming segment, they will filter the bad from the good. These are all good news for Macau’s casino operators, its local community, and international investors.
Date Posted: 01-Aug-2008
Desmond Lam is a visiting senior research fellow at Ehrenberg-Bass Institute for Marketing Science, School of Marketing, University of South Australia. He can be contacted at DesmondL@hotmail.com
