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Even Macau has slipping casino revenues in 3rd quarter

Oct 21, 2008 5:00 PM

by GT Staff |

Macau’s gaming revenues slipped 10 percent in the third quarter as Chinese travel curbs and slowing economies cooled the gaming haven’s three-year boom.

Analysts say the credit crisis will further dampen gambling appetite and stall several high-profile casino projects.

Casino revenue fell 10 percent to 25.99 billion patacas ($3.2 billion) in the July-September period from the second quarter, according to figures released by the Macau Gaming Inspection and Coordination Bureau on Monday.

This was the second successive quarter that casino revenues had slid when compared with the previous three-month period, after a near-uninterrupted growth streak since 2005. Macau raked in 28.89 billion patacas from April to June.

Revenue from VIP baccarat – known as the game of choice for many Chinese gamblers – suffered most, sliding 2.84 billion patacas. But takings from slot machines showed a slight rise.

Gambling revenues often peak during Chinese holidays, and there were fewer in the third quarter. Beijing also hosted the 2008 Summer Games, which kept many glued to their TV sets.

Still, analysts say, restrictions on visa approvals for Chinese travelers to the former Portuguese enclave, the only place in China where casinos are legal, had been smothering Macau’s major source of revenue even before the financial crisis intensified.

"The credit crunch could delay project developments in the pipeline," Morgan Stanley analysts Praveen Choudhary and Corey Chan wrote.

Beijing has become increasingly nervous about Macau because of gambling’s perceived negative social impact and its use by corrupt officials to launder money, analysts say. Macau slapped a moratorium in April on the issuance of new casino licenses and imposed a land freeze on the building of new casinos.

Macau’s casino revenue had been growing at break-neck speed since 2003, when it allowed foreign operators to compete with former monopoly-holder and billionaire Stanley Ho.

Now, the global credit crunch, visa restrictions, and stiff competition from over-capacity are dampening the boom.

Longer term, analysts warned that the scarcity of credit might stall several high-profile expansion projects in Macau.

Las Vegas Sands chairman Sheldon Adelson told Reuters last month his firm was reconsidering efforts to obtain $5.25 billion in financing for the Cotai Strip and was likely to instead seek smaller-scale financing for individual projects.

Analysts say the firm needs about $1.5 billion to complete projects on two plots of land on the Cotai Strip, and is likely to find refinancing of its Macau debt difficult, or at least expensive.

"I know that funding is an issue, and we’re sorting it out as a group," David Sylvester, the company’s head of retail in Asia, told Reuters in an interview last week.

Not all firms say they are hurting. Melco Crown Entertainment said the opening of its flagship casino-hotel resort in Macau was unaffected by global financial turmoil.

"City of Dreams remains fully on target to open to the public during the first half of 2009," the firm said in a statement.

"Our projected budget for phases one and two of City of Dreams also remains unchanged."