13th month unlucky for territory
Gaming revenue Macau dipped to a near five-year low in June, the 13th consecutive month of decline in the world’s No. 1 gaming destination.
The ongoing slump may cause the government to institute austerity measures, according to Cardplayer.com. Lionel Leong, secretary for Economy and Finance, has said the belt-tightening would begin if gaming revenue dropped below 20 billion patacas ($US2.5 billion). In June, it reached that benchmark, falling 36.2 percent in June to 17.4 billion patacas, the lowest level since November 2010, according to Bloomberg News.
Macau historically has derived up to 80 percent of its revenue from gaming alone. The market started to unravel last year, when Chinese President Xi Jinping initiated a crackdown on corruption and money laundering.
June revenues are traditionally lower as the summer kicks off, but the news is especially discouraging this year, as it marked the first full month since the opening of Galaxy Entertainment Group’s two new resort projects on the Cotai Strip.
Making matters worse is the threat of a full smoking ban that could extend to the city’s casinos, including the VIP rooms. Deutsche Bank analyst Karen Tang wrote that “consensus expectation of a 2016 recovery is too optimistic as a full smoking ban should hurt VIP revenue by 10-25 percent.”
Casino operators have responded with an appeal to the city that appeared in the Jornal Tribuna de Macau. “We hope that the Legislative Council and the government departments concerned would consider conducting an in-depth study to evaluate the possible impacts on the economy,” said a joint statement from the operators.
The operators conducted a survey that concluded 66 percent of Macau casino workers support the retention of smoking lounges. But another poll by the University of Macau and commissioned by the Health Bureau said 58 percent of workers are against smoking in casinos and want the lounges closed. According to GGRAsia, investment analysts say banning mass-floor smoking lounges could cut 10 percent of mass-market gaming revenue and up to 15 percent of VIP revenue.
“The six casino operators fully support the government’s smoking control measures as the health and well-being of the public, our employees and customers are of paramount importance,” added the operators’ statement. “However, we believe that maintaining smoking lounges in casinos could be an alternative to the full smoking ban. Currently, all of the smoking lounges in the six casinos are well-constructed and independently ventilated.”
All this bad news could be balanced somewhat by a government decision to relax transit visa rules that were tightened last year, reported Bloomberg. Starting this month, Mainland China passport-holders traveling to Macau can stay seven days instead of five, and return within 30 days rather than 60 days. The government action could be seen as a sign that officials are also growing concerned about cascading revenues, and are acting to stem the decline.
Meanwhile, a report in Forbes magazine contends that Macau’s controversial 3 percent cap on table game growth could be “a blessing in disguise.” Union Gaming Research Macau says electronic table games deliver more revenue and profits than traditional live tables.According to the Macau rules, 55 EGT seats count as one live table against the cap. Union estimates that Macau’s mass-market table revenue in the first quarter was 23.7 billion Macau patacas (US$2.96 billion), with a daily win-per-table of roughly MOP70,000. EGT revenue was MOP537 million, with a win-per-table equivalent per day of about MOP90,400, or 29 percent higher.
Bloomberg Intelligence analyst Tim Craighead expressed hopes that the pending opening of additional resorts on the Cotai Strip, including Galaxy’s Phase II and Melco Crown’s Hollywood-themed Studio City “can be enough of a draw to catalyze a turn, along with other factors, later this year and into next.”
GalaxyVice Chairman Francis Lui told the Macau Business Daily that the industry and government officials have to work together “to go through this cycle without actually hurting too much.
“Over a longer period of time, VIP gaming will change to a different model. But to let it drop 50 percent, everybody will have the responsibility to look at it and see what we can do to smooth out the curve … and adapt to the new norm,” Lui said. “So I continue to pledge here to every stakeholder in the community—whether it’s the government, the operator, junket or labor union—I think there’s just a need to understand the situation and work as a team.”
