Online gambling a unique beneficiary of global health scare

Online Gambling Sites Open For Business As Coronavirus Panic Shutters Land-Based Casinos

The COVID-19 strain of coronavirus is the number one international news story at the moment.

The vast majority of victims have been in the area surrounding Wuhan, China where the virus first broke out. Confirmed cases have since popped up in dozens of other countries, however, spurring the World Health Organization to raise its threat assessment to “very high.”

Attempts by governments to halt the spread of the disease and public panic fueled by the media have taken their toll on the world economy. Though industries like air travel and tourism are naturally the hardest hit, few have been spared entirely. Most of the world’s stock markets have dropped by 10% or more over the past week.

As far as the gambling industry goes, the discussion about impacts has focused on land-based casinos in Asia. But the scale of the problem soon won’t be so limited.

The US saw its first confirmed COVID-19 fatality on Saturday and another on Sunday. On Tuesday, the first tangible effect on the US casino industry manifested. Wildhorse Resort & Casino in Oregon is now temporarily closed for “deep cleaning” due to a worker testing positive for the virus.

What impact, if any, the disease has on online gambling is another question. It’s even possible that it could benefit as casino-goers look for a safer way to scratch the gambling itch.

Outbreaks have a twofold effect on casinos

Even without special restrictions imposed by the government, people begin to avoid crowded public places during an outbreak. Attendance for events like concerts and sports matches falls, retailers in shopping malls see their sales suffer, and so forth.

Casinos are no exception. In fact, they can be particularly risky places for contagion.

Anything touched by many hands is a possible vector. You’re probably more likely to get sick after touching the door handle of a public washroom than you would be from licking the toilet seat. Casino chips and slot machine buttons also fall into this category of germ-ridden everyday items.

What’s worse, most larger casinos are paired with a resort hotel and rely on business from travelers. The fewer the people making trips, whether by choice or by travel restriction, the worse the casino business.

MGM, as an example, withdrew its 2020 guidance entirely in its latest earnings report because of the coronavirus. That’s largely due to the shutdown of its properties in Macau, but European casinos are feeling the effects, too — and soon US casinos will, as well.

Las Vegas casinos are already starting to take proactive measures against the virus. There has even been discussion about whether travel restrictions and player fears might lead to the cancellation of this summer’s World Series of Poker.

Viruses circulating at the WSOP are such a predictable annual occurrence that there’s a colloquial term for it: Rio Flu.

Online gambling is not a perfect substitute

It’s pretty safe to assume that the virus won’t negatively impact online gambling. Playing from home on one’s own device is pretty much risk-free in that aspect. It might, in fact, be a rare industry that actually benefits from the scare.

The markets for land-based and online gambling don’t overlap perfectly. Before the first legal online sites launched in the US, there was a fear that the option to play online would lead to fewer casino visitors. Things don’t work that way in reality, though.

In New Jersey, for instance, land-based casino revenues have actually increased since the advent of online gambling.

By the same token, we can’t expect that every potential casino visitor staying home because of the virus will play online instead. The business lost from out-of-state casino visitors obviously can’t be recovered by in-state sites. Likewise, anyone who visits a casino primarily for the ambiance and social experience won’t be able to get the same from an app.

However, some groups of casino-goers are more likely to be willing to switch over. Locals who are regular slots users might find online as a reasonable alternative, especially if their favorite game is available.

There could also be a bump not directly related to the loss of land-based casino business.

Online poker sites often see a small increase in traffic during periods of bad weather, as people cancel outdoor plans and look for entertainment at home. People staying home due to virus worries could have a similar effect, even if they wouldn’t necessarily have been visiting the casino otherwise.

POGOs see boost from Macau shutdown

Already we’ve seen such an effect in Asia, where gambling is particularly popular among wealthy Chinese. Land-based and online gambling are outlawed on the mainland, however.

The two main options are the casinos in Macau and offshore gambling sites. Many of those sites targeting Chinese players are located in the Philippines and known as POGOs, which is short for Philippines Offshore Gambling Operator.

Macau ordered all of its casinos shut down on Feb. 5. Although the government allowed them to reopen two weeks later, the number of visitors has been minimal. Revenues for the Macau gambling industry were down 88% in February as a result.

We may not have seen the end of Asian casino shutdowns, either. South Korea, for instance, ordered the closure of its Kangwon Land casino on Feb. 24 due to the virus.

POGOs, on the other hand, have been doing booming business. The Chinese New Year celebration always causes increased traffic, but this February saw business up 90% compared to last year’s holiday period.

Even though gamblers are now able to visit the Macau casinos if they choose to, it’s likely that land-based gambling will continue to suffer — and POGOs to prosper — until the outbreak is thoroughly under control.

Shift to unregulated online gambling is harmful

Chinese gamblers opting to play online with POGOs rather than traveling to Macau may simply be trading one danger for another.

Although many are licensed by the Philippines government, POGOs receive very little oversight. President Duterte opted to permit them because of the economic boost they’d bring, though he didn’t have much of a plan to control them. As a result, the industry has run amok and become a hotbed of organized crime.

Those playing on offshore sites run a high risk of fraud compared to playing in the Macau casinos. Although the latter is not perfect, regulations and enforcement have tightened over the years.

The damage done within the Philippines by the POGOs is even more extreme. The same organizations behind them are tied to more serious crimes like loansharking, human trafficking, and kidnapping.

China has attempted to crack down on these POGOs, which largely employ Chinese expatriates. The government stripped hundreds of POGO employees of their passports, leading to a wave of deportations.

However, these efforts at prohibition rarely do much to stem illegal gambling in the long run. If anything, they only increase criminal involvement.

What about US online gambling?

The US is currently in a time of transition, with some states taking a liberalized approach to online gambling while others remain in the dark ages of prohibition.

The situation in China should serve as a cautionary tale for state legislators, then. Demand for online gambling will always exist. And in the absence of a legal option, it is offshore sites that fill it.

States with legal online options may see a boost in tax revenue from those sites even as land-based casinos suffer due to coronavirus fears. Those without it will suffer the twofold harms of lost tax revenue and an increase in illegal online gambling.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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