Macau casinos were posting annual revenues above $45 billion as recently as 2013, but during the just-completed 2015 the former Portuguese colony’s three-dozen gambling houses failed to crack $30 billion for the first time since 2010, finishing at $28.9 billion.
The reasons for the slide are well known now – a weakened mainland economy, travel restrictions that are changed with little advanced notice and the anti-corruption scandal that has had the effect of discouraging high-end gambling and spending of all kinds.
December revenue declined 21.2 percent to $2.3 billion last year, a bit more than four times the $ 536.2 million earned by Las Vegas strip casinos in October, the most recent month for which there are complete figures. Its hard to imagine that Macau’s monthly numbers were more than seven times the Strip figures two or three years ago.
Don’t expect a return to the good old days any time soon. They are gone.
That’s the consensus opinion of analysts who see signs of moderating influences at work on Macau’s casino-driven economy, but the declines will probably continue through most of the new year. There are factors that could influence this, factors such as the three multi-billion resorts being opened on the Cotai Strip this year by Wynn, MGM and the Sands.
But there is no sign of government willingness to remove some of the roadblocks it has put in the path of new spending these resorts might generate.
Fitch Ratings Service said in the agency’s 2016 outlook, “Investors in Macau are playing the long game. As gaming revenues begin to stabilize, the long term potential will begin to take shape on the horizon.”
Fitch analyst Alex Bumazhny says the overall Asia-Pacific market is “under-penetrated but as infrastructure projects are completed over the next two or three years they will help Macau operators reach the so-called mass market with greater ease.
But in the meantime, casinos in Korea, Cambodia and elsewhere been aggressively courting Chinese customers who have been reluctant to maintain a high profile in Macau casinos.
This could change in a moment if Beijing’s approach to policy development encouraged it, but as a number of resort executives familiar with the business environment have pointed out politics and paranoia have a constant influence on Macau and its most important industry. These are factors that do not get addressed with visible exchanges of dialogue.
Macau does not appear to provide an environment that has policymakers in the governing asking, “What do you need?” Rather it is a place where the government says, “This is the way it is going to be.”
The travel and tourism business does not respond well to that kind of handling. Remember what happened when President Obama warned companies receiving bailout money seven or eight years ago.
Don’t go blowing it on trips top Vegas, the suddenly tone deaf president warned company executives accustomed to holding their biggest meetings and conventions in Las Vegas.
The city lost a lot of business, just as Macau has suffered at the hands of government policymakers who, on one hand, encouraged big investments, but on the other hand frowned at the passion displayed by consumers in search of a good time.
Phil Hevener has been writing about the Nevada gaming business for more than 30 years. Email: [email protected].