Macau casino revenue sunk to the lowest level in five years as Chinese high-rollers stayed away last year, narrowing the world’s largest gambling hub’s lead on Las Vegas.
Gross gaming revenue fell 34.3 percent to 231 billion patacas (US$29 billion) last year, according to data released by Macau’s Gaming Inspection and Coordination Bureau.
That compared with the median estimate of a 35 percent decline from nine analysts surveyed by Bloomberg.
While casino takings dropped 21.2 percent last month — falling for the 19th straight month — that represented the smallest year-on-year decline since January last year.
Macau’s six gambling houses have seen about US$45 billion in market value wiped out this year amid a free-fall in casino receipts, as China’s corruption crackdown scared off high-stakes players and a slowing economy hurt mass-market gambling.
Stricter government policies and key personnel changes, including a new regulator and adviser to oversee gambling, could further impact the hard-hit industry.
“Macau has seen much greater pain in 2015 than everyone expected at the beginning of the year,” Aaron Fischer, head of consumer and gaming research at CLSA Ltd, said before the data was released. “It would be difficult for the first half of the year for sure because there’re not so many catalysts to drive a rebound.”
Macau’s casino industry, which raked in gambling revenue about seven times more than the Las Vegas Strip in 2014, has seen its lead on the US casino district narrow to 4.6 times last year amid the slump.
The high-valued punters known as VIPs, typically measured via their favorite card game, baccarat, have led the downturn.
VIP revenue, which accounted for more than half of Macau’s total gambling receipts, saw a 41 percent drop in the first nine months of last year compared with a year ago.
Macau’s VIP gambling segment is set to fall another 13 percent this year, compared with a 6 percent rebound for the mass market, according to the median estimate of analysts surveyed by Bloomberg.
High-stakes gambling will only recover next year, rising by 1 percent versus 11 percent growth for the mass market the same year, the survey showed.
Analysts are forecasting another 5 percent decline this year before rebounding 7 percent next year. A continued liquidity squeeze in the junkets industry — middle-men operators who bring in high-rollers and lend them money to gamble with — is expected to cause further pain to the VIP segment.
The case of an alleged theft in September by an employee of junket operator Dore Entertainment prompted some investors to withdraw funds from the company and other junkets, causing a liquidity shortage and curbing high-rollers, according to Nomura Holdings Inc, which cut its revenue estimate for this year to a 9 percent drop from 5 percent growth as weakness in the VIP segment may persist.
“Conversations with casino operators don’t give us confidence that junket volumes improve in the New Year,” Union Gaming Group LLC analyst Christopher Jones said. “Most seem preparing for further moderation in junket VIP in 2016.”
Potential bright spots could come from new casino resorts by three Las Vegas-based operators due to start this year, after projects opened by Galaxy Entertainment Group Ltd (銀河娛樂集團) and Melco Crown Entertainment Ltd (新濠博亞娛樂) last year.
Wynn Macau Ltd will have a new resort surrounded by cable cars and Sands China Ltd’s (金沙中國) features a half-size Eiffel Tower replica, while MGM China Holdings Ltd (美高梅中國控股) designed one to look like a stack of jewelry boxes.
While Melco’s October opening of the Hollywood-themed Studio City has not translated into much of a boost for the industry, Fischer said he sees the addition of more new resorts helping improve customer traffic to Macau, with individual owners gaining market share when their projects start operations.
Any recovery could still be hampered by stricter government policies, such as tougher restrictions on smoking, junkets and gaming tables, as well as closer scrutiny on the use of China UnionPay Co (中國銀聯) debit cards. The cards are commonly used by patrons to purchase luxury items in exchange for cash to gamble with.
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