Declines should be less in coming months
Paulo Martins Chan, the newly appointed chief of Macau’s Gaming Inspection and Coordination Bureau or DICJ, says the city’s No. 1 industry needs stronger regulations and improved oversight as it struggles through its 18th straight month of decline.
According to GGRAsia, Chan, who was sworn in last Tuesday, promised the government would use the mid-term industry review as an opportunity to do “a comprehensive revision of gaming-related laws,” including regulations on junket operations. The goal is to “gradually establish a comprehensive legal framework and monitoring system for the gaming industry, in order to confer an image of credibility and boost the international competitiveness of the sector,” he said.
“If we could lay down the rules of the game, everyone would know what to follow,” he said. “If something went wrong, penalties would follow.”
Secretary for Economy and Finance Lionel Leong Vai Tac said he is “convinced” that the DICJ, “under the leadership of Mr. Paulo Chan, will fulfill its tasks and contribute to strengthening supervision of the gaming sector and improving related laws and regulations.”
Chan, a career law enforcer who speaks English, Chinese and Portuguese, succeeds Manuel Joaquim das Neves, who held the post for almost two decades before retiring in November. He takes the helm at a critical time in the city’s history. Gross gaming revenue dropped 32.3 percent year-on-year in November to MOP16.43 billion (US$2 billion), the lowest monthly level since September 2010, reported the Macau Daily Times.
Chan called the recession “a phase of adjustment after many years of rapid development.” The slump began last summer, when Chinese President Xi Jinping called for a crackdown on money laundering and graft. High rollers fled the jurisdiction in droves, and the junket operations that catered to them were forced to consolidate their operations and in some cases close casino VIP rooms.
This year, the city government put junkets in the spotlight amid concerns that they were funneling illegal funds from the mainland to Macau. According to Bloomberg News, last month China announced it had uncovered a massive “underground bank” that processed 410 billion yuan (US$64 billion) in illegal foreign-exchange transactions.
A softer Chinese economy and weaker currency contributed to the stubborn decline, which “shows that the ongoing pressure on the high roller business hasn’t been offset by mass market stabilization,” said Bloomberg Intelligence analyst Tim Craighead.
As Chan takes control, new casinos are opening and are planned for the Cotai Strip, but they have done little to move the needle. The Sydney Morning Herald reports that Studio City, the lavish $4 billion Melco Crown property that opened in late October, has had virtually no impact on traffic in the city. Notably, the Hollywood-themed resort developed by casino magnates Lawrence Ho and James Packer, opened with no VIP facilities and is focusing on mass-market customers.
Sanford Bernstein senior analyst Vitaly Umansky expects the declines to dip below 30 percent in the coming months. “From now until early next year, we expect no material rebound of market gross gaming revenue, although the year on year decline rate should taper to below 30 percent level and mass may reach positive year on year performance in early 2016,” Umansky wrote. “Investor sentiment towards stabilizing (and sequentially improving) revenue figures and any potential favorable government policies with respect to smoking ban and visas should improve.”
The Asia Gaming Brief reported that a survey on the Chinese mass market released by UBS Evidence Lab said only 46 percent of respondents were interested in visiting non-Macau destination. One-third of those surveyed said they may like to visit the United States. Malaysia, Singapore and Korea also were considered potential destinations, but there was no interest in casinos in Philippines and Cambodia, the report stated. Those destinations all hoped to welcome Chinese high rollers who no longer patronized Macau.
The Philippine Star reports that the gaming downturn in that jurisdiction “is expected to continue amid the prevailing slowdown in gaming activities in Macau.” The publication cited a report from First Metro Investment Corp., which said listed Philippine casino and hotel operators “have seen their share prices decline by more than 50 percent year-to-date despite consolidated gross gaming revenues in the country increasing by a fifth in 2015.”
The UBS report concluded that other Asian casinos “will unlikely be able compete with Macau for base mass gamblers until at least 2019, when quality products and critical mass might form in markets such as Korea.”
