Macau’s VIP industry is showing signs of resurgence, as Chinese high rollers return to the high stakes baccarat tables of the world’s gambling capital.
VIP gaming rose 13 percent in the final quarter of 2016, according to Macau’s Gaming Inspection and Coordination Bureau (DICJ). Mass market, meanwhile, improved 7.3 percent, the second consecutive quarter of growth.
The disappearance of the high rollers in 2014 precipitated 25 months of nose-diving revenues for the gambling hub, which had previously been one of the world’s fastest growing economies. Beijing, concerned about capital flight and corruption among Communist Party officials, launched an unprecedented crackdown on the money flowing into Macau.
The initiative targeted the multi-billion-dollar junket industry, whose job it was to maintain the stream of rich Chinese gamblers into the enclave.
The VIPs were sufficiently spooked to stay away and by September 2015, the junket industry was “broken,” according to Rob Goldstein, LVS president.
Mass Market Reinvention
Macau’s slow rebirth, beginning in August last year, has been fuelled largely by mass market growth, as the enclave reinvented itself as a destination for the Chinese middle classes, with a new emphasis on family-friendly attractions.
Three new casino resorts have opened in the last 12 months, most recently Sheldon Adelson’s lavish $2.7 Billion Parisian Macao on the Cotai Strip.
Meanwhile, Lawrence Ho’s Studio City, Steve Wynn’s Wynn Palace, and Galaxy Entertainment’s recently completed phase 2 on Galaxy Macau, have all added to Macau’s skyline, each with a heavy focus on non-gaming attractions and amenities.
Why VIP’s have chosen to return now is unclear, and Union Gaming Group analyst Grant Govertsen told Bloomberg this week he believed the figures may be misleading.
The increase in VIP revenue may be overstated, he said, as some casinos had reclassified higher-end mass market tables as VIP to dodge smoking restrictions in late 2014.
Nevertheless, Govertsen believes the health of the mass market segment is more important than the VIP sector because this is what will make Macau’s recovery sustainable.
“The strength seen in the fourth quarter was not primarily driven by VIP. It was driven by mass,” he said. “This is very important in the context of what we see as a sustainable mass market led recovery.”
“While we are very happy to finally see VIP turn positive, we remain cautious on the outlook for this segment, which is driven by increasing concerns on Beijing’s stance on capital flight,” he added.
The VIP segment accounted for 53 percent of the gambling hub’s overall gaming revenue throughout 2016, according to the latest figures, whether they are accurate or not.
That’s a definite improvement on the previous year but still some way short of its 73 percent peak in 2011.