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Macau casino revenue dips record 23.2 percent in October

5 Nov 2014

By Howard Stutz
Macau’s casino market experienced a 23.2 percent decline in gaming revenue during October, the largest single-month drop since American-owned casinos began operating in the Chinese market in 2004.

Total casino revenue was $3.5 billion in October — Macau’s fifth straight monthly decline, the Macau Gaming Inspection and Coordination Bureau said Tuesday.

Analysts now expect Macau’s downward trend to continue into 2015 as high rollers skirt the market because of a government crackdown on corruption.

Through October, Macau gaming revenue is still up 2.3 percent over 2013. But analysts predict double-digit declines in November and December.

“We currently see no reason that trends should materially improve in the first quarter of 2015, relative to current levels,” said Macau-based Union Gaming Group principal Grant Govertsen.

Macau produced a record $45.2 billion in gaming revenue in 2013

At $3.5 billion, one month of revenue in Macau is greater than half of the Strip’s $6.5 billion in gaming revenue collected in all of 2013.

Also, the gaming revenue produced by the 35 casinos in Macau in October 2013 was $4.6 billion, the market’s second-highest single month total ever. In February, Macau’s casino market produced a record $4.8 billion, fueled by Chinese New Year.

The government’s crackdown on corruption is hurting the junkets that bring high-end customers in the casinos. International law enforcement has long suspected the junkets are influenced by organized crime triads.

China President Xi Jinping is expected to visit Macau in December, which may also affect high-end visitation.

“Trends (are) expected to remain rocky through year-end,” said Wells Fargo gaming analyst Cameron McKnight. “Chinese macroeconomic data remains soft.”

The crackdown has been just one factor slowing Macau’s gaming growth. Other issues include political unrest and pro-democracy demonstrations in Hong Kong, economic concerns, and visa restrictions that curtailed visitation by mainland Chinese citizens.

Analysts said the effect of a smoking ban implemented on mass market gaming floors last month has been negligible.

“Most operators cite only a small negative impact to date from the change,” said Sterne Agee gaming analyst David Bain.

MGM Resorts International, Las Vegas Sands Corp. and Wynn Resorts all operate casinos in Macau and are adding to those holdings.

Las Vegas Sands is building the $2.7 billion Parisian development on Macau’s Cotai Strip. Wynn Resorts is building the $4 billion Wynn Macau Palace on Cotai, while MGM Resorts is building the $2.9 billion MGM Cotai. All three projects are expected to open in 2016.

Govertsen worried an office being set up by the Chinese government to focus on the country’s anti-corruption efforts could slow any high-end gambling recovery.

In a research note, Govertsen said a government office represents the institutionalization of the anti-corruption drive.

“This, in turn, suggests to us that the anti-corruption drive is far from over and is likely to continue to impair Macau’s VIP market for a significant period of time,” Govertsen said.

He said the anti-corruption effort could help other countries with casinos, including Cambodia, the Philippines and South Korea.

Tuesday’s gaming results in Macau may have affected the stock prices of Nevada-based gaming companies.

MGM Resorts closed at $22.33, down 69 cents or 3 percent. Las Vegas Sands was off $2.70 or 4.33 percent to close at $59.67. Both companies are traded on the New York Stock Exchange.

Wynn Resorts closed at $185.26, down $4.25 or 2.24 percent, on the Nasdaq.

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