Macau’s Hardships Continue, Despite New Plans to Reinvigorate the Economy (Part I)

Over the last year each month has seen Macau suffer a dip in revenues, however the leader of the gaming hub remains adamant they can prevail over the circumstances..

What is the one place that high-rollers nowadays go to when they feel like playing the tables and gamble away fortunes like it’s just peanuts? Macau is the answer, …or at least one would have though it to be until recently. The Asian gambling mecca has long ago surpassed Las Vegas as the world best gaming city, however as of lately it has struggled to maintain that strongly cultivated success.

• Macau has a new USD 20 billion project underway
• Financial figures not as good as last year
• Macau’s CEO believes positive results will come again

The head of the special administrative region believes that the performance figures do not represent the realistic picture of the overall state of affairs. The Chief Executive Fernando Chui expressed his views on the matter in an inaugural column, “Stay calm and peaceful to observe trends with wisdom.” These words would perhaps not align with the thoughts that were previously expressed by financial analysts, who are certain that Macau needs to add further quality to its existing services if they are to remain competitive in the coming years.

Financial results are not as good as last year

Gambling news reports that new gaming and entertainment facilities are under development in Macau, and they are rumoured to have a price tag of USD 20 billion. These projects were brought about in an effort to reinvigorate the economy, however some industry insiders remain sceptical about the effect it could have on the city. Uncertainty hinges over the ambitious undertakings, as they are not a guaranteed recipe for much needed success.

The current financial downturn comes in stark contrast with last year’s results, when the city recorded some impressive revenue figures. In February 2014, Macau’s earnings rose an incredible 40 percent from the year before, which unsurprisingly pleased all the major stakeholders in the luxury casinos and signalled a potential bright future ahead. However, now 12 months on, the gaming mecca finds itself struggling to keep the same level of customers.

The government provided financial statements that indicate gambling revenues have dropped an astonishing 37 percent in May from the same time in 2014. 12 months ago, the revenue figures were standing at 20.35 billion Patacas (USD 2.55 billion), while now they are a fraction of that number. And analysts predict that the bottom of the decline is yet to come, after which Macau will be able to assess its realistic position and then proceed forward accordingly.

The officials in Beijing have been advising Macau to forgo their gambling business, and orient themselves more towards tourism and hospitality. The Chinese gambling laws did not bode well with the former Portuguese colony, as they maintain different views for their great city. Last year, the Chinese government stopped urging them and instead issued policies which resulted in the closing down of some prominent gaming pursuits. High-rollers would often come to Macau in recent times, as the city was experiencing a boom with baccarat, however since Beijing’s order came about, that has all come to an end.

Casino operators remain wary of the mainland

After the Chinese government got more directly involved in Macau’s casino industry, gaming operators now find it rather hard to express their opinions on the business out in the open. That is why some of them focus on presenting other attractions like the replica Eiffel Tower and the Batman virtual-reality joy ride. At a recent annual casino conference, held in May, the keynote speaker was in fact an MGM Resorts International executive, however in his everyday joy he does not deal with the casino business at all. He is the head of the hotel joint venture that is being operated in mainland China.

Las Vegas is the most-well known gambling city in the US, where millions of tourists come in year after year. Macau, on the other hand caters to a larger area. The whole South East Asia serves as the market for the gambling hub, which sees many players will some very deep pockets fly in on a regular basis just so they can play their favourite games at the tables. And ironically, this is exactly the reason that saw Macau’s revenue streams drop in recent times.

China initiated large-scale corruption crackdowns in spring of last year, a fact that has reverberated to the gaming hub as well. Gambling revenues from the VIP tables scaled down, after many high-rollers got intimated by all the government inspections. In addition, Macau wasn’t aided by the fact that the junket system collapsed, which ceased further financial support to the city. According to mobile casinos, junkets are in fact the reason why high-rollers would come to Macau in the first place, as they would borrow money from them and then later pay back the debts from their local country of residence. So the end to junkets signalled an end to gamblers with deep pockets.