The island of Macau has become the largest casino market in the world and often referred to as the “Las Vegas of Asia.” The island, located right off the Chinese mainland, is the only legalized casino market in China and attracts wealthy gamblers from the mainland as well as other parts of Asia.
However, Macau’s focus on gambling may be changing in the coming years. A major slowdown in gambling revenue has led to China’s leaders to rethink the island’s focus on casino gaming and some are looking to diversify the economy.
"At present the overall situation in Macau is stable, but the internal and external environment is undergoing profound changes," Chinese President Xi Jinping said during a celebration in December celebrating 25 years of Chinese rule. "Efforts should be made to promote moderate economic diversification ... focus on cultivating new industries with international competitiveness."
History of Macau
Macau had been part of China through the 16th Century, but Portugal began leasing the island as a trading post in 1557 as a key point for merchants shipping from west to east. The country eventually began treating the island as a de facto colony before finally reaching a deal with China in 1887 officially making it part of Portuguese territory.
AfterHong Kong became a British territory in 1842, that island became a more important trading region. Macau responded by legalizing gambling in 1847 and the industry flourished on the island, becoming a key source of revenue.
“By the 1850s, Macao had over 200 ‘fan tan’ [a Chinese gambling game] stalls in operation,” the Association of Certified Gaming Compliance Specialists notes. “The gaming industry began to thrive in the late 19th Century, and gaming taxes became the government's primary source of revenue. Since then, Macao has become well-known for its casino industry, earning the nickname ‘Monte Carlo of the Orient.’”
Several companies were granted monopoly considerations to operate full-scale casinos for much of the 20th Century with the legislative assembly noting in a 1986 law that “the number of concessions granted shall be limited to a maximum of three.Despite that, underground gambling remained and in the 1990s, the island saw rival gangs battle over the island’s underground gambling market with more than 100 people killed in the violence.
That monopolistic approach to gaming changed after the island was officially handed back to China in 1999. The area was treated as a special administrative region (SAR) in a similar way as Hong Kong – a “one country, two systems” approach.
In 2001, the island enacted new laws to expand the industry on the island, allowing for multiple casino operators and large gaming resorts.
Macau and Casino Gambling
After approving a law for casino bids, Macau received proposals from major gaming operators from around the world including American-based gaming giants like MGM Resorts, Las Vegas Sands, and Wynn Resorts as well as Asian-based firms like SJM Holdings and Galaxy Entertainment Group.
Numerous casino resorts then began being built around the island throughout the 2000s, with the island reaching 42 casinos by 2021. Players could easily hit the roulette wheel or practice their blackjack strategy, Gambling has not only been a boon to the island, but also to the overall Chinese economy.
Once a quiet island, Macau has seen some huge changes over the last 25 years and has become a major tourist destination. The casino industry has led to an economy valued at about $6.5 billion in 1999 to $46 billion in 2023, according to the Associated Press. Many locals have found jobs in the industry and others appreciate the $1,240 annual payments made to residents from gaming taxes.
However, things certainly took a downturn during the COVID pandemic, when China limited travel to the island. Revenue dried up almost overnight on the island. Chinese authorities also began cracking down on junket operators that provide services for the country’s wealthy high rollers to gamble.
Gamblers on junkets regularly use borrowed funds to gamble and then repay these loans on mainland China. The industry has faced more scrutiny in recent years. Chinese officials alleged that some operators became involved in operating or owning part of overseas casinos outside of the country.
Revenue Revival After COVID
Travel and junket restrictions led to major revenue declines and the industry struggled. Things began to finally change in 2023. By December of that year, the island saw casino gross income numbers totaling $2.3 billion, an increase of 433% from December 2022, according to the island’s Gaming Inspection and Coordination Bureau.
This marked the industry’s second-largest total since before the COVID pandemic and began what would slowly become a return to normal.
In December 2024, the Macau casino industry accounted for $28.4 billion in gaming revenue, up almost 24% from 2023 levels. This was another good sign as that topped government estimates of almost $27 billion.
That still was short of the pre-pandemic level of $36.5 billion from 2019. The pandemic showed just how reliant the island of just over 700,000 people had become and the Chinese government has set out to make changes.
Transitioning Economy
The first part of that was seeing new leadership on the island. Former judge Sam Hou Fai was elected in an uncontested vote as Macau's chief executive-designate in 2024 and became the island’s first leader born on mainland China. Fai is determined to diversify the island’s economy.
The new leader hopes to do this by improving the island’s overall business conditions and supporting small business, including using public funds to stimulate business sectors outside of gaming.
“Sam has promised to accelerate the current government’s plan to boost tourism and other sectors such as traditional Chinese medicine, finance, exhibitions and commerce,” the Associated Press reports. “However, the city will still need to rely on the gambling industry for government revenues to support the city’s welfare and accomplish other goals laid out by Beijing.”
Xi has said that Macau must move away from being so heavily reliant on the casino industry, which accounts for about 80% of regional tax revenue.
“At present the overall situation in Macau is stable, but the internal and external environment is undergoing profound changes,” Xi said. “Efforts should be made to promote moderate economic diversification… focus on cultivating new industries with international competitiveness.”
However, the gaming industry will remain a major part of the island’s future. More and more Chinese gamblers continue flocking to the island, but recent reports note that the island has seen some changes in who heads to the casinos. Post-COVID, the properties are relying more on middle-income gamblers than well-heeled high rollers. But some headwinds still remain for the island’s gaming industry.
“In a note, analysts Praveen Choudhary, Gareth Leung and Stephen Grambling (with Morgan Staey) said they maintain their mass GGR (gross gaming revenue) forecast assumption at 118% of 2019 levels, representing a 5% increase over 2024,” Inside Asian Gambling reports, “but expect lower EBITDA (earnings before interest, taxes, depreciation and amortization) than originally expected due to increased reinvestment costs, including in non-gaming capex requirements under operators’ current 10-year concession deals.”
Things are definitely looking up for Macau since the pandemic. The analysts project “slight but steady growth” for the rest of the year.
