The Macau gaming industry declined by about 37 percent in May, as the continued dearth of VIP gamblers in the territory’s casinos extended a downturn in revenues into its 12th straight month. Gambling revenue fell to 20.3 billion patacas ($2.5 billion) in May, down from about 32.4 billion patacas ($4.06 billion) in the same month during 2014.
At this point, there’s no secret about what is driving this massive free fall in China’s only legal gambling hub. Ever since the Chinese government began cracking down on corruption last summer, it has been harder for junket operators to get money into Macau, which has made it harder in turn for the whales who were the heart of Macau’s business to continue spending millions at the baccarat tables and other gaming offerings in the city.
Some in Macau had hoped that mass market gamblers could help pick up some of the slack, but this has yet to happen in any meaningful way. That means that it may take many years for Macau to fully reverse the current trends.
Second Half of 2015 Should See Stabilization
Exactly how much work will have to be done should become clear in the next few months. Starting in June, the new figures in Macau will be compared to months from 2014 after the downturn began, meaning that the scary headlines proclaiming incredible year-over-year declines should be a thing of the past.
On the other hand, that doesn’t mean that Macau will see growth again immediately, either. And with lowered revenues now the new normal in the Chinese territory, that could mean struggles for some gaming firms that rely heavily on the Macau market for profits.
For instance, Wynn Resorts has relied heavily on Macau to drive its profits in recent years. Last year, 70 percent of all revenue for Wynn came from its two Macau casinos, and it is expecting to open another casino on the Cotai Strip (Wynn Palace) next year.
Despite the downward trend, however, Wynn Resorts Chairman Steve Wynn has appeared to be more concerned with the future in Las Vegas than with what’s happening on the other side of the world.
“If you were to ask me, since we’re making forward-looking statements, what will the second quarter look like in Las Vegas? Weak,” Wynn said in late April.
That hasn’t seemed to play out in Las Vegas, which recently reported the best April revenues for the city’s gaming industry in eight years. That echoes the news across Nevada, which has seen modest increases in revenues throughout the state.
Macau Still Key for Most Major Casino Operators
Even in its weakened state, however, Macau’s gaming revenues are close to triple those in Nevada (the state’s casinos won about $898 million from gamblers in April), so it is easy to understand how some executives might still be more pleased by their balance sheets in China than the figures they see in Las Vegas. Still, the massive declines in Macau’s industry have hurt stock prices and expectations across the industry.
The Las Vegas Sands, for instance, has seen their gross gaming revenues decline by double-digits for the past eight months in a row, largely due to reduced revenues in Macau. This caused the company’s stock to hit a 52-week low in late May.
It’s not just American companies that are feeling the heat, either. Melco Crown, which is partially owned by Australian casino magnate James Packer, has seen net revenues fall by 22 percent in the first quarter of 2015 because of declines at Macau casinos. Melco crown already operates two casinos in Macau, and is hoping to open a third one, known as Studio City, later this year.