Macau Casino Revenues Fall For First Time In 5 YearsJuly 1, 2014 11:57 am
For the first time in five years Macau’s 35 casinos experienced a downturn in business as total gross gaming revenues fell 3.7% to $3.4 billion in June. The Chinese enclave’s last decline was way back in June 2009, and this time around the dramatic reversal of fortunes was blamed squarely on the 2014 FIFA World Cup football tournament currently taking place in Brazil. As Bank of America Merrill Lynch analyst Billy Ng, explains:
“We expect gross gaming revenue growth to return to positive in the second half of 2014 after World Cup in June and July.”
In addition to World Cup action diverting some gamblers away from the Chinese casino resort, growth in Macau’s VIP segment also slowed in response to the country’s cooling economy which only expanded by 7.4% in Q1 2014, the slowest pace since 2012.
Another factor explaining Macau’s contracting revenues in June is a nationwide clampdown on corruption currently being waged by China’s President and Communist Party chief Xi Jinping, and as Edmund Lee from PricewaterhouseCoopers, explains:
“Everybody wants to lay low..[high-stakes gamblers] don’t want to draw unnecessary attention amid China’s anti-corruption campaign.”
The effects of a recent casino smoking ban, as well as authorities clamping down on gamblers using debit and credit cards to circumvent China’s 20,000 yuan ($3,200) per day money control law has also had its toll on June’s revenues. Analysts, however, remain confident the downturn will be just a temporary blip. Already this year Macau’s casino revenues have hit $24 billion, a 12.6% improvement over the same period last year, and commenting on the situation, Barclays analyst Phoebe Tse, said:
“We expect the smoking ban to have a limited impact; the World Cup impact will also be transient. We expect growing penetration supported by new casino openings and infrastructure improvements to drive long-term growth.”
Macau was a Portuguese colony until 1999, but after embracing casino gambling the enclave subsequently overtook Las Vegas as the world’s biggest gambling hub in 2006. Last year, its gambling revenues reached a record $45 billion, but now local authorities are trying to diversify away from a reliance on just gambling and attract a wider leisure and tourism visitor base.