Macau has been the world’s most popular and profitable gambling destination for some time now, annually generating billions of dollars in revenue. The city is the only Chinese territory where casino gambling is legal. It has more than 35 casinos, managed by six international gambling operators. Despite the numerous gaming and entertainment options the venues offer, Macau has seen its revenue plunge significantly over the past 18 months and experts believe that the slump is likely to continue in 2016, as well.
The city’s gambling venues generated gross gaming revenue of MOP212.5 billion ($26.6 billion) in the eleven months ended November 30, 2015, down 35.3% as compared to the figures posted for the same period a year ago. Gambling experts attributed the decline to several reasons.
In the first place, the overall economic slowdown in China has imminently affected the popular gambling hub and the operations of its casinos. In addition to this, Chinese President Xi Jinping launched a massive anti-corruption campaign in 2013, which resulted in fewer high rollers from Mainland China making the short ferry ride to Macau and playing at local casinos.
Wealthy Chinese have always been among the most desirable gambling customers due to their willingness to spend large amounts of money on high stakes casino games. With Macau’s gambling facilities losing the biggest spenders among their players, gross gaming revenue at the gambling hub imminently went down.
In July, city lawmakers voted in favor of a proposed bill for the introduction of a full smoking ban at local casinos. Currently, smoking is allowed in VIP rooms and in special lounges on mass market floors. If approved, the bill would prohibit smoking anywhere within the premises of the city’s gambling venues.
The proposed legislation is likely to be voted on and introduced sometime next year. However, the six gambling operators providing their services in Macau have already voiced concerns that a full smoking ban would lead to further decreases in gross gaming revenue.
A study, commissioned by the six casino companies and conducted by experts for consulting firm KPMG, showed that once implemented, the full smoking ban would result in a 16% drop in the city’s gross domestic product. In addition, according to KPMG analysts, 71% of Macau’s regular gambling customers and 66% of the people employed at casinos expressed support for the retention of smoking lounges at gambling venues.
Macau’s junket operators, companies that are known for bringing VIP customers from Mainland China as well as from other countries in the Asia-Pacific region, also expressed concerns that a full smoking ban may encourage wealthy players to travel to other popular casino destinations.
Speaking of junket operators, gambling experts have partly attributed Macau’s casino industry decline to their activities. Reports that some of the city’s junket companies have been involved in illegal activities and have had ties to people with criminal background also influenced high rollers’ willingness to travel to the popular gaming hub.
Despite the fact that last year Macau posted its first annual drop in gross gaming revenue in many years and is likely to report a full-year decline for 2015, as well, gambling operators seems to be determined to further expand their operations in the city. However, the government of the administrative region has said that it needs to reduce its dependence on its gambling industry. This is why casino companies have invested billions of dollars over the past years to create a wide variety of entertainment options in a bid to attract non-gaming customers, too.
For instance, Melco Crown Entertainment launched in October the $3.2-billion Studio City. The expensive integrated resort features not only a number of gambling options but also family-oriented entertainment ones.
The casino concessionaires and sub-concessionaires that provide their services in Macau are to invest more than $27 billion in new projects in Macau in the next several years. Those would result in the addition of 14,000 hotel rooms and more than 9,700 slot machines, as well as a number of exciting new entertainment options.
It is still too early to tell whether the new developments would help Macau’s gambling industry and economy as a whole or would result in further declines. One thing is for sure, the administrative region has had a difficult year and is likely to face some more challenges in 2016. Yet, analysts expect that the revenue drops would not be that sharp next year or in other words, the city is likely to see some light at the end of the tunnel.
