January 1, 2016 - 2:46 pm
The Macau gaming market fell to a five-year low in 2015, with casino revenue slowed by the sinking Chinese economy and government reform programs that crushed the high-end gambling business.
Macau’s Gaming Inspection and Coordination Bureau said Friday casinos collected $28.93 billion from gamblers in 2015, a 34.3 percent decline from 2014. The results marked Macau’s second straight annual decrease and the first time since 2010 the casino industry failed to crack the $30 billion figure. Macau recorded a record $45.2 billion in gaming revenue in 2013.
December marked Macau’s 19th straight monthly gaming revenue decline, with revenue falling 21.2 percent to $2.3 billion. The monthly dips began when the Chinese government started a crackdown on corruption that ensnared operators of high-end junket businesses tasked with bringing big spending customers to Macau’s private gambling salons.
Union Gaming Group principal Grant Govertsen, who is based in Macau, told investors he doesn’t see signs of the market improving in the new year.
“We continue to believe that (high-end play) will face an even tougher 2016 than 2015,” Govertsen told investors. “Our estimates contemplate continued demand weakness, which will likely be exacerbated by pressures on the regulatory front and on the operational front.”
The news comes as Las Vegas Sands Corp., Wynn Resorts Ltd., and MGM Resorts International, which operate casinos in Macau, are planning to open multi-billion dollar resorts this year. In October, Hong Kong-based Melco Crown opened the $3.2 billion Studio City development.
Wynn Resorts delayed its opening of the $4.1 billion Wynn Palace on Cotai until June because of construction issues. The Parisian, Las Vegas Sands’ 3,000-hotel-room, $2.7 billion development with a faux Eiffel Tower, is expected to open in the second half of 2016. MGM plans to open its $3.1 billion MGM Cotai by the end of the year.
Fitch Ratings Service predicted that Macau’s gaming revenue slowdown could “moderate” this year, but still expects revenues to decline by as much as 5 percent.
“Investors in Macau’s gaming sector are playing the long game,” Fitch gaming analyst Alex Bumazhny said in the agency’s 2016 outlook. “As Macau’s gaming revenues begin to stabilize next year, we’re starting to see its long-term potential on the horizon.”
Bumazhny said the overall Asia-Pacific gaming market is “under-penetrated.” Infrastructure projects in Macau have been delayed, but once completed, will make the region more accessible to the mass market. He warned that the new developments could “under-perform” initially and could take two to three years to ramp up acceptable business returns.
“Fitch believes Macau’s gaming growth prospects will remain dependent on travel policies and infrastructure, available credit for the VIP segment, perceptions about the mainland’s corruption crackdown, and domestic policies like the smoking ban,” Bumazhny said.
In recent months, concerns have grown over table game allocations authorized by Macau gaming regulators to new casinos. Studio City, for example, wanted 400 tables and received just 250. Wynn Resorts wants 500 gaming tables for Wynn Palace, but had not been told how many the resort would receive for the 1,700-room resort.
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Contact reporter Howard Stutz at firstname.lastname@example.org or 702-477-3871. Find @howardstutz on Twitter.