Sands president William Weidner suggested last week Sands won’t invest more until the company sees how Beijing’s policies toward Macau shake out.
There may be a silver lining in the slowdown: a break from the furious pace of development and a chance for the industry to catch its breath. Given travel curbs and global economic weakness, the crowds packing Macau’s casinos might start thinning if more were to open.
“It’s good we’ve got a slowdown,” said analyst Billy Ng at JP Morgan Securities. “Ambitions were too big.”
Slackening economic growth in and around China is at least partly to blame for slowing revenue growth in Macau. Guangdong Province, a major source of Macau visitors, is reeling from job losses and factory closures as the global downturn cuts demand for the country’s exports.
Across China, falling stock markets and housing prices have caused a painful destruction of wealth. In Hong Kong, the economy slipped into recession last quarter.
The bigger reason for a drop-off that large may be gradually tightening visa rules that, among other things, now limit to once every three months the times Guangdong residents can go to Macau.
Chinese tourists are vital, accounting for more than half of Macau’s revenues. While the changes might be temporary, the impact already is evident. Tourist arrivals in September grew by a paltry 2 percent compared with the same period last year; by comparison, they grew by nearly 30 percent in September last year from 2006.
Never fully explained by Beijing, the restrictions are seen as an attempt by the government to control Macau’s galloping growth.
Though China has benefited from Macau’s rise — thousands of have found new jobs, and huge quantities of building supplies like cement and steel are sourced from mainland firms — officials may be worried about gambling’s effect on society, analysts says. Laundering by corrupt authorities and clashes over unpaid gambling debts are likely among the concerns.
With average salaries of China’s 1.3 billion people on the rise, there’s still huge growth potential for Macau and it casinos, even with the visa changes.
“You’ll see some weakness driven by the visa restrictions and the softening of the regional economies, but I think the long-term prospects are very positive,” said Gary Pinge of Macquarie Securities in Hong Kong. “Macau has just barely scratched the surface of China.”
Casino mogul Steven Wynn, whose company operates one resort in Macau and has another on the way, is taking the slowdown in stride: “We’re not having these huge increases, but who says that you’re entitled to that every few years? Where did that become a law of nature?”
He’s still bullish on the city’s long-term fortunes.
“I think the market is wonderful in China,” he said in a telephone interview. “Macau has always been a tourist kind of place, and it’s broadened ... its appeal. And I think that’s going to continue.”
Sheng Yaopeng, a 26-year-old TV camera operator from Beijing, isn’t concerned either.
He was calm as he talked about losing 30,000 patacas at the baccarat tables over several days in Macau. The losses wouldn’t keep him from returning. Neither would any of the other problems in and outside Macau.
“We only come a few times a year now ... but we will still come,” Sheng said.
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