Strong gaming growth drives Macau’s GDP up 31.6% in First Quarter of 2008

macau gamblingAs local gaming industry continues to prosper, Macao registered a substantial GDP growth of 31.6 percent year-on-year for the first quarter of 2008, according to the figures released Friday by the city’s Statistics and Census Service(DSEC).

The figures indicated that major GDP components, private consumption expenditure in the period increased by 9.6 percent, but lower than the 9.7 percent growth in the fourth quarter of 2007.

Meanwhile, the city’s gross gaming revenue (GGR) for the period(excluding gratuities) surged by 61.8 percent in nominal terms compared with the same quarter of last year, and total visitor spending (excluding gaming expenses) rose slightly by 4.3 percent, according to the DSEC.

Despite the Special Administrative Region (SAR) government’s earlier decision to freeze the expansion of Macao’s gaming industry, Globalysis Ltd, a Nevada-based leisure industry consultancy, still predicted in its latest report that Macao’s GGRfor this year will experience approximately 28.8 percent growth to13.5 billion U.S. dollars.

“It now looks like Macao will bypass not only the Las Vegas Strip once again in terms of gaming revenue in 2008, but for the first time, also that of the entire metropolitan area of Las Vegas(Clark County),” said Jonathan Galaviz, partner at the consultancy, in a recent press release.

He also pointed out that SAR’s continuous growth in GGR is “a reflection of the generally strong macro-economic environment that Macao finds itself within Asia.”

According to the latest official figures, gaming revenues in Macao overtook those of Las Vegas Strip in 2006 and ballooned 47 percent to 10.6 billion U.S. dollars last year, while revenues at U.S. commercial casinos rose only 5.3 percent.

The construction of a number of mega casino-resort projects are underway currently in the city’s Cotai district, an area of reclaimed land, which include the Cotai Strip project launched by the Las Vegas Sands and the City of Dream built by Melco Crown Entertainment Ltd. Upon completion, the Strip alone will feature nearly 20,000 five-star hotel rooms, and a dozen casinos.

But the Globalysis report still highlights certain risks that the island city’s gaming and tourism sector may face moving forward.

Some of these include concerns over the effect of U.S. economic downturn on Asia, possible oversupply of casino-resorts in Macao, and outbound tourism visa rules for citizens of the Chinese mainland, who are the major customer sources for the SAR’s casinos.

Macao’s total investment in the private sector declined by 17.7percent year-on-year, which, DSEC said, was mainly attributable toa 20.5 percent decrease in construction investment and a 9.3 percent drop in equipment investment.

In addition, the social costs behind the city’s gaming boom is also an issue that can not be ignored.

In spite of Macao’s ever rising gaming revenues, “issues brought up by developing local gaming industry has possibly cost the society billions of patacas,” said local lawmaker Lee Chong Cheng at Friday’s plenary session of the SAR’s Legislative Assembly.

A U.S. survey showed that people living within 80 km of a casino are two times more likely to become problem gamblers than others, while 65 to 80 percent of a casino’s revenues come from problem gamblers that only take up 10 percent of the total casino-goers, said Lee.

He proposed that the SAR government should not only adopt effective policies in regulating the gaming market but also identify and offer specified assistance to the high-risk groups, such as the gaming sector’s over 30,000 employees.

“Only when the social costs are reduced to the minimum, will Macao’s gaming industry develop sustainably and healthily,” Lee noted.

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