As Galaxy Entertainment gears up to open two massive new resorts on Macau’s Cotai Strip, the publication Business Insider warns they could end in “disaster” if the government does not allocate enough gaming tables to the casinos.
Galaxy Macau Phase II and Broadway Macau represent a collective investment of $3 billion. But the government still has not disclosed how many table games will be permitted for each resort.
Fewer than 150 tables could prove negative for the company and the jurisdiction, wrote analysts from UBS. “Recently there has been busy activity on the existing Galaxy Macau main floor in re-positioning tables, slots and ETGs which could be in preparation for the reallocation of some tables to phase 2 from phase 1. We also expect a few junkets (less than 3-4) to have the appetite to open new VIP rooms in Galaxy phase 2.”
As the Chinese government under President Xi Jinping continues a wide-ranging crackdown on corruption in Macau, the world’s No. 1 gaming hub has lost billions in value; analysts at Wells Fargo say gaming revenues could decline up to 36 percent this month, and Galaxy stock could tumble 20 percent for the month year-on-year.
Lawrence Ho, CEO and co-chairman of Melco Crown expects the allocation of gaming tables to be an indicator of the future, according to the Macau Business Daily. “Unfortunately, we are in the government’s hands,” Ho said. “But we’re hopeful the Macau government will really reward us with the contribution we have made over the years.”
Meanwhile, the government continues to weigh the impact of a full smoking ban in the city’s casinos. “It is a total ban that comes without any smoking lounges,” said Secretary for Social Affairs and Culture Alexis Tam. “We have to consider the medical cost of smoking for the public.”
And a drop in mass-market spend is another cause for concern, wrote Karen Tang of Deutsche Bank AG in a note to investors. “Not only is spend per visitor falling, Macau’s visitor arrivals had also fallen 4 percent year-on-year in the first quarter of 2015, the worst decline since Mainland visa restrictions in 2008-09,” she wrote. “Disappointingly, the weakness was most pronounced for overnight visitors (-10 percent year-on-year).”
Operators had been hopeful that new integrated resorts on Cotai would increase mass-market visitation and help to compensate for the loss of VIP play, on which the jurisdiction has relied for years.
“Both VIP/mass are sequentially weakening in the second quarter versus the first quarter,” wrote Anthony Wong and Angus Chan of UBS Securities Asia Ltd., according to GGRAsia. “We estimate mass revenue in May to drop 20 to 25 percent year-on-year, and VIP revenue to drop 42 to 47 percent year-on-year.”
Macau residents are also feeling the pain, according to the Macau Business Daily. A new survey conducted by Macau Economic Association says inflation in the territory is “serious,” and income has “barely” kept pace in the past few years.
