Singapore, Philippines both benefiting
Who will be the big winner in the race to claim Macau’s defecting VIP gamblers?
The contenders are many, from the Philippines, Singapore and Vietnam to Australia, South Korea and possibly even jurisdictions in Europe and North America. All of them undoubtedly would welcome the high-rolling gamblers who have shied away from Macau in the wake of a government crackdown on corruption.
Other Asian markets have been buoyed up by an influx of wealthy Chinese gamblers: Cambodia saw VIP revenues rise 32 percent in the second half of 2014; and the Philippines saw a 92 percent jump during the same period, according to the International Business Times. But that doesn’t begin to account for all of Macau’s VIPs, who often wager millions of dollars during a single casino visit, and were responsible for an estimated $12 billion in lost revenue in Macau last year.
“If you look at the VIP revenues in the Philippines and Singapore and Australia and South Korea, the growth rates are all very high,” CLSA gaming analyst Aaron Fischer told the Times. “But in absolute terms, the numbers are tiny, because $12 billion is a huge amount of money. I think that at the margin, some of these other destinations are benefiting from the slowdown that we’re seeing in Macau, but we’re not seeing the full offset.”
So where have all those missing VIPs gone? Perhaps some are simply being discreet, laying low until the crackdown Sheldon Adelson called a “witch hunt” eases up. Others may no longer be adequately served by junket operators, who have lost some financial incentives to arrange casino visits and credit for their wealthy patrons.
“Junket operators expected the Macau crackdown to end, and business return to normal. … It is only now that they are looking to provide services for Chinese gamblers elsewhere,” said Warwick Bartlett, CEO of the U.K.-based Global Betting & Gaming Consultants.
But that presents other problems. Destinations such as the Philippines and Vietnam lack high-quality transportation, and high crime rates in some jurisdictions may also be a disincentive for high rollers accustomed to only the best.
In February, Macau saw casino revenue fall by 49 percent to $2.4 billion, compared with a year-on-year rise of 40 percent to $4.8 billion last year. The decline is expected to continue for most of this year, though optimistic analysts say the gaming hub could see a turnaround starting later in 2015. Thus far, the city, which is the only place in China where gambling is legal, has seen 10 consecutive months of historic decline.
“In 2013, the VIP revenues in Macau were U.S. $30 billion,” Fischer said. CLSA’s 2015 report on Macau, with the grim title “Death Spiral,” predicts that gaming revenues in Macau will drop 17 percent to 28 percent this year.
That’s a lot of missing high rollers, and a lot of lost revenue. Glenn McCartney, assistant professor of hospitality and gaming management at the University of Macau, says the city “is still in a very strong leadership position,” and will not be easily supplanted by lesser markets.
“Macau is like Las Vegas. You can go to all the casinos you want to in the U.S., but if you haven’t been to Vegas, you haven’t seen anything,” he said.
