A modern version of Captain Hook in the crocodile’s belly is currently playing out in Macau. For a variety of reasons, Macau is now back in the news. Business is not better there just yet, but hope lurks, with a bit of luck, somewhere just over the horizon. China has announced a return of the normal visa process for its citizens to visit Macau. Residents of some cities in Guangdong Province were allowed to start applying on August 12th, with the rest of the province having the option beginning August 26th and the remaining areas of China by September 23rd. That is welcome news for the casinos in Macau.
Incidentally, the casinos are open and have been for a while. In fact, Macau’s casinos were only closed for a couple of weeks in February. The potential customers, however, were locked down in China, and even those that could get to Macau were quarantined in the city in special hotels for 14 days before they could go to the casinos. The situation has obviously not been good for gambling revenues; monthly casino revenues have been down over 90 percent from last year. Casinos have reduced expenses as much as possible, but the lifting of the visa restrictions has been considered by most observers to be the most important development since the beginning of the pandemic. But no one expects the recovery to be instantaneous. There are complications at hand.
Masked-up Venetian Macau customers
Roughly 90% of Macau’s gaming revenue comes from Chinese gamblers, and the Chinese economy, like every economy in the world, is challenged. People are spending money, but not necessarily the same way they did before the pandemic hit. Recreational spending is down, and people are more cautious about traveling and being in public places, like casinos. Surveys suggest that most people are planning to put off trips and vacations until at least 2021. The high-rollers that once drove the market in Macau are not so important now as five years ago, but they’re still important, and they’re also likely to be among the most conservative in the wake of the coronavirus. One lesson we can take from the virus is the value of cash: people and businesses are more concerned about their cash reserves, and, given the inherent and ongoing societal uncertainty, VIP gamblers are likely to continue to guard their cash more carefully than before.
The trade war between China and the United States has had implications for Macau, but until recently it was all theoretical. Until the TikTok affair, that is. For the uninitiated, TikTok is a video-sharing social networking service developed by ByteDance, a Beijing-based company. In just four years, it has become a worldwide force with 500 million monthly users. The lockdown has boosted its popularity as people attempt to deal with loneliness and isolation. The President of the United States says that TikTok is a potential vehicle for espionage and political interference and is attempting to ban the app in the U.S. and prohibit any financial dealings with TikTok, ByteDance, and its subsidiaries after September 15th. Among those subsidiaries is WeChat, a social media and instant messaging service with roughly a billion active users a month – about 12 percent of the world’s population. In other words, a lot of people.
As one might expect, a great many of those users live in mainland China – and, not surprisingly, a large percentage of Macau’s gamblers, both large and small, are on WeChat. The South China Morning Post says WeChat is the primary method that casinos in Macau use to chat with their customers in China. If and when the ban goes into effect, it will be illegal for American companies like Wynn, Las Vegas Sands and MGM to use WeChat. A kind of radio silence. So, just when it becomes possible for Chinese gamblers to get a visa to Macau, the casinos cannot talk to them; no special offers or promotions, no happy birthdays or anniversaries, nothing. Not a word.
So if this ban goes through, the casinos will have to find another way to communicate. ByteDance will certainly search for ways around the boycott; the company has too many businesses that depend on American customers to just roll over and play dead. In the meantime, however, the casinos in Macau have been dealt with one more bad hand. The observers and analysts covering Macau, believe to a man (and a woman), that Macau will recover from the pandemic and other challenges. China is still sitting right next door with its roughly 1.4 billion people, after all, and the Chinese economy and the disposable income of its citizens are still in a long growth trend. Having access to the Chinese population is a guarantee for success, or so most corporations in the world seem to be believed.
The problem for Wynn, Sands, and MGM in Macau is largely political. Those three corporations have to please what amounts to two different masters: American law and Chinese law. Chinese law regulates day to day activities, but when the United States and China are at loggerheads, American law also becomes important. It will be months before the effect of the TikTok ban if it happens, will be visible in Macau, and there’s no way of knowing now what impact, if any, it will ultimately have. It may blow over like a summer storm cloud. Regardless, it is a fascinating situation. It is fascinating more for the irony of the situation than its importance. A product that appeals particularly to people under 25 years old has suddenly become a factor in the gaming industry in Macau. Those TikTok users were having so much fun fooling around that they captured the attention of the President of the United States, who has elected, in an unprecedented move, to attempt to ban it in the U.S. That ban in turns hits American casino companies operating in Macau in the pocketbook. And that pesky tick-tock sound is driving more people to distraction than a poor old one-handed pirate captain could ever hope to manage.
