Macau’s winning streak is over, as revenues decline for the first time in more than four years.
Located in the perfect spot to attract gambling-thirsty Asian players and offering all the luxury you can ask for, it only took Macau a few years to surpass Las Vegas and become the world’s most popular gambling destination.
Up to this day, Macau is generating unbeatable profits, but for the first time in the last few years the casino kingdom is shaking. According to the latest financial reports, gambling revenue fell 3.7% in June compared to last year’s figures.
This marks the first year-on-year decline in more than four years and analysts blame it on the FIFA World Cup, claiming that the football madness diverted gamblers away from casino games.
Casino profits drop
The evolution of Macau revenues over the past three months:
•April – MOP$ 31.3 billion
•May – MOP$ 32.3 billion
•June – MOP$ 27.2 billion
Despite being huge fans of casino games, Chinese players are not allowed to gamble anywhere in the country, apart from the special administrative regions on Macau and Hong Kong.
Since Macau gambling laws opened new doors for investors, the area has been turned into a casino kingdom and hundreds of thousands of players from all over the world choose Macau as a destination for their gambling escapades. With 35 casinos in the area, they certainly have a lot of options.
But after years and years of continuous success and profit growth, Macau seems to have hit a rough patch. According to a report released by the local government, this June total revenues dropped to MOP$ 27.2 billion, a significant drop from last year’s MOP$ 28.3 billion.
With all eyes on this year’s football event – the 2014 FIFA World Cup – analysts were expecting a profit decrease of 4 to 6%. And they got it right.
Will Macau recover?
This time of the year, gamblers all over the world are spending their money wagering on the soccer tournament in Brazil. Predictably, local players have also directed their attention to betting shops and online sportsbooks in Macau.
June brought the first revenue decline since the Macanese government first started publishing financial reports in 2010, but analysts say profits will grow again over the coming months.
But with recent regulatory changes, the local industry might be facing new challenges. Investors are concerned that measures such as restrictions on the use of state bank card UnionPay will slow down revenue growth, although so far it has not been the case.
Macau’s jewelry stores are not allowed to use UnionPay terminals anymore and many of these shops belong to well-connected local businessmen and junket operators.
Plans to diversify
According to public financial records, Macau typically generates Las Vegas’ annual profit in less than two months. In 2013, the special administrative region made a record $45 billion.
Restrictions on UnionPay are unlikely to have a significant effect on profit growth, but industry experts say a smoking ban which could be introduced this October, as well as restrictions on transit visas could have a significant impact on the number of visitors.
Gambling is definitely the main thing Macau is known for, as the area managed to build as a reputation as the world’s most popular and successful casino destination. Eight new resorts are scheduled to open over the next three years and authorities are looking to improve the infrastructure and shorten travel time to the area.
But officials are also pushing to diversify, to reach a point where Macau doesn’t rely solely on gambling. Authorities are hoping that shows like Melco Crown’s House of Dancing Water or Sands China’s boxing events will attract a wider range of tourists, namely the kind looking for leisure and not just for casino games.