Macau, though a world leader in gambling, has no vision as to how to up revenues as their players flee.
Since summer 2014, casino revenues have been falling steadily in Macau. Last month, revenues fell 39% from what it was in 2013, to around US$2.4 billion. This means that for casinos like MGM Resorts International, it has had their first quarter earnings fall by 11%, with shares falling to 3% to $20.75 in pre-market trading.
However, in MGM’s case, growth in their Las Vegas casino has been helping to balance the weak performance in Macau. Until now MGM had been relying heavily on revenue growth in Macau operations to boost earnings. Similar to other casino operators icons in Macau, MGM has been losing clients because of the clampdown, by President Xi’s China-based government, on corruption.
Corruption crackdown in mainland China blamed
For over a year now authorities in China have been asking Macau to diversify their economy and to not rely on gambling alone to sustain it. High rollers come from China to Macau to gamble as that is the only Chinese territory where, due to Macanese gambling laws, gambling in casinos is legal. The crackdown on illegal money transactions and money laundering has resulted in VIPs unable or unwilling to play in Macau. Macau has lost 2/3 of its gaming revenue with the absence of high rollers, mainly due to fear, as the Chinese government widens its net.
For, as administrative changes take place, such as stricter transit visa rules being reinforced, VIPs and junkets can no longer travel so freely between Macau and the mainland. Before, they ware given visas based on claims that they needed to go to a third country, while in fact they planned to stay in Macau to gamble. Players are thus opting to visit or to fly to other destinations to avoid being under the spotlight of mainland authorities.
Not just a VIP problem
VIP play declined 42% in the first quarter of 2014 compared to the first quarter of 2013. Thus accounting for only 58% of total revenue in 2014, compared to the 6% more it had achieved in 2014 and the 8% more in 2013. For a while, mass market play, even overtook VIP play. Now even that has declined by 27% in the first quarter. In fact, even though the amount of visitors coming to Macau has risen, the amount of people Playing online casinos in Macau has declined.
According to analysts “Macau was getting more visitors at the lower end of the gaming spectrum as it cut table minimums and offered more incentives to players, while VIP contraction freed more tables and rooms for mass players”. This view has only left people thinking that in essence, Macau has an inflow of potential visitors to exploit.
Mass market spending for each player hasn’t dropped as much as everyone thinks
Recently, Macau has divulged information that it had lost revenues amounting to 13.5% year on year. This included a 17.6% fall in arrivals from mainland China. Union Gaming Research Macau even confirmed that according to their observations of Macau gaming floors, casino entries have fallen significantly, since October 2014. Hotel room occupancy rates have also decreased in the first quarter, and are likely to continue to do so.
So, Chinese travelers are choosing to visit Malaysia online casinos or to fly to other destinations, given that they can get visas more readily or there is a lower currency valuations, in other Asian destinations. This has not deterred more casino openings in Macau though. The new Broadway Macau, a sister company of Galaxy Macau is set to attract mass market customers which may just help to give Macau back its winning streak.