Macau Casinos Suffer 35% Decline In August
September 1, 2015 12:16 pmChina’s only legal gambling resort has seen its monthly revenues slump on account of a slowing economy, and an anti-money laundering crackdown that has chased away many of its industry’s most lucrative customers, its high rollers. The month of August brought no relief for Macau, either, with revenues plummeting by 35.5% to $2.3 billion, representing 15 consecutive months of decline for the former Portuguese colony.
The Macau government also reported that following a 24.5% contraction of the island’s overall economy in Q1, revenues also declined by a further 26.4% in Q2. The shrinking demand experienced by Macau’s casinos has meant the local government has now been forced to cut public spending, and commenting on the downward trend, the Macau statistics agency explained:
“The economic contraction was mainly due to a decline in exports of services, of which exports of gaming services decreased by 40.5% year-over-year and exports of other tourism services dropped by 21.5%.”
Moreover, it would appear optimism that new Macau casino projects would stimulate demand may have been unfounded as Chinese visitors to Macau fell 6.1% in July. One such project was the two casinos opened by Galaxy Entertainment in May, and as Nomura Holdings analyst Richard Huang said, “the downward trend of gaming revenue has been remaining steady, which means incremental revenue brought by the new opening is basically zero. The tougher call is when the mass market can really offset the destruction of high-end demand.”
Consequently, the Chinese government has introduced a number of measures to help boost gambling revenues in Macau. This includes permitting Chinese nationals to stay longer at the resort, and considering a more flexible approach to an anti-smoking bill being discussed. Nevertheless, China’s recent currency devaluation is expected to also hinder recovery further, with analysts predicting a 10% drop in revenues next year, as a weaker yuan makes it more expensive for Chinese visitors to gamble. That’s because in Macau bets are made in Hong Kong dollars, and as Galaxy Entertainment CFO Robert Drake commented:
“It has been one thing after another. In the short term we are still assessing the overall impact of the yuan devaluation on the market and what it means for Macau.”