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Howard Stutz

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Macau gaming revenue declines for sixth straight month

1 Dec 2014

By Howard Stutz
Macau’s casino industry suffered its sixth straight monthly gaming revenue decline during November with analysts predicting another double digit drop this month.

The Macau Gaming Inspection and Coordination Bureau said Monday casinos in the Chinese gambling market collected $3.04 billion in gaming revenue during the month, down 19.6 percent from a year ago.

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

November marked the third straight double-digit gaming revenue decline in Macau.

Macau produced a record $45.2 billion in gaming revenue in 2013. Through November, Macau gaming revenue is flat compared to a year ago. December is expected to produce another double-digit drop.

Analysts are expecting Macau’s downward trend to continue into 2015 as high rollers ditch the market.

“Given the timing of Chinese New Year this year — February 19 versus January 31 — we would expect total gross gaming revenue in January 2015 to be much like the final months of 2014, down 13 percent to 17 percent,” said Union Gaming Group Managing Director Grant Govertsen, who is based in Macau.

The Chinese government has been cracking down on corruption which is hurting the junkets that bring high-end customers into 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 this month, which may also affect high-end visitation.

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.

“We believe a majority of this softness is related to tighter domestic liquidity as total credit growth in China has contracted significantly since its mid-2013 peak,” Wells Fargo Securities gaming analyst Cameron McKnight. “Furthermore, we believe the recent decline in inflation has effectively acted as monetary tightening, and this rate cut helps alleviate some upward pressure on real interest rates.”

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

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

At $3 billion, one month of revenue in Macau is almost 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 February was a single-month record $4.8 billion, fueled by Chinese New Year.

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