The global gambling space grew considerably in 2019. Several countries adopted healthy regulations, thus allowing companies to operate and thrive easily. Gaming Revenues for the global gambling industry was estimated to be about $495 billion, and expectations for growth in 2020 are high.
The Coronavirus Continues to Spread
But, if there’s one thing that 2020 has taught everyone, it’s that curveballs will be experienced. One of those curveballs has been the coronavirus, a deadly epidemic that has spread across China.
The death toll for the coronavirus has surpassed 250 in China at press time. And while there’s progress containing the virus, over 11,000 Chinese residents have been infected. The death toll is expected to rise in the coming weeks.
The virus started in Wuhan, the capital of Central China’s Hubei province, and this has had disastrous effects on the gambling fortunes in Macau. While China doesn’t support gambling in any form, Macau, a special administrative region of the country, is seen as the biggest gambling hotspot in the world.
Wuhan is just 936 km from Macau, and given that we’re just about a week into the Chinese New Year, it’s expected that most Wuhan residents and tourists would have made their way to Macau to gamble and enjoy some of the region’s finest tourist attractions.
This presents the problem the gambling space is experiencing. The coronavirus has affected Macau’s gaming numbers due to its proximity to China. The financials are discouraging for an infection that started last month.
Macau’s Land-Based Casinos Could be Too Far Gone Already
According to a recent report from the Financial Times, the coronavirus and its effects have already wiped out $18 billion from the values of the Macau operations of major American gambling houses, including Wynn, MGM, and Las Vegas Sands.
Citing statistics released by New York-based investment banking giant AllianceBernstein, Financial Times reported that up to 80 percent of gambling visitors in Macau are Chinese residents. However, the emergence of this virus has forced authorities to ban new arrivals from mainland China, essentially shutting down the overwhelming majority of these casinos’ revenues.
- Casino Lisboa in Macau, Image from Shutterstock
Now that Macau is in a crisis, it’s worth looking at how bad things are for U.S. companies that operate in the region’s gambling space. As FT noted, Wynn earns about $6.7 billion annually, with about 75 percent of that coming from Macau. The same could be said for Las Vegas Sands, a company that reportedly earns 60 percent of its $13.8 billion revenue from Macau.
Things could get even worse for U.S. gambling houses, as cases of the virus circulating in the Bay Area intensifies. However, the spread of the virus in the U.S has been contained. At press time, only 11 cases have been reported nationwide, with 6 of them based in Northern California. The effects of this on the state’s land-based casinos are yet to be seen.
A Boost for Online Gambling?
As terrible as the coronavirus epidemic is, it presents opportunities for the online gambling space. The benefits of online gambling over land-based casinos are evident.
It’s more convenient, faster, and you get to enjoy playing a wider selection of games (of course, depending on the service you’re gambling on). However, the primary benefit is the comfort of placing bets without a physical restriction. It effectively eliminates the need to bet in a room filled with people, essentially reducing the risk of infection.
The relative privacy that online gambling provides is an underrated one, but as it turns out, it could be the saving grace for land-based gambling outfits in this perilous time.
This is particularly important in regions where there’s a high infection rate of the virus. Gambling companies need to switch to online channels and highlight the benefit continuously to convince their customers to continue splurging on their favorite games.
As it turns out, gambling companies have started to see this, and are making the switch. Speaking in an interview with CNBC’s Squawk Box on Tuesday, Jason Ader, the Managing Partner at SpringOwl Asset Management and a former board member at Las Vegas Sands, explained that the evolution of the coronavirus had pushed a lot of gamblers to the online space.
For Chinese players, who can’t bet in their country, they’ve been forced to gamble more on illegal platforms from countries like the Philippines.
“Daily online gambling is up 90% over the Lunar New Year holiday compared to last year. That’s an unbelievable number, and it raises the issue of should land-based operators be converging around the world with online operators. That’s really the growing trend,” he explained.
He also pointed out that the lack of regulation in the country has been a significant stumbling block, as while land-based operators enjoy the pleasure of operating in a regulated environment, their business has been hit by the virus. So, operators have been forced to gamble elsewhere, and this means significant revenues flowing out of the country.
“I think it’s a wake-up call, not just in Asia but in the U.S. … The European companies are in leading positions,” he added.
Whether or not this virus will spell the end of physical gambling is still to be seen, but one undeniable fact is that it will leave a dent that won’t be remedied quickly or easily. To survive, gambling companies will need to look to the online space and row their presence there- at the very least, for the period that this virus continues to spread.