For years now, the Macau casino industry has been heralded as the Gambling Capitol of the Eastern Hemisphere (as opposed to Las Vegas, Nevada in the west). For more than a year now, though, China’s only legal gaming destination has seen its revenues fall with each passing month. According to the most recent gaming reports, another severe drop of 35.5% hit the market in August.
Macau Casinos – photo courtesy thetimes.co.uk
The deterioration of earnings at Macau casinos has been greatly attributed to two factors. A drudging economy has resulted in most casual gamblers no longer being able to afford a trip to the casino wonderland. Likewise, heightened efforts by the government to thwart money-laundering has resulted in a sharp decline in action from the industry’s most profitable high-roller clientele.
The region’s economy has suffered immensely in 2015. Q1 reports indicated an economic decline of 24.5%, with an even more staggering drop of 26.4% in Q2. Due to the extreme collapse in revenue generated from the nation’s casino sector, Macau’s government has been compelled to enforce major cutbacks in public spending.
“The economic contraction was mainly due to a decline in exports of services,” explained the Macau statistics agency. “Gaming services decreased by 40.5% year-over-year and exports of other tourism services dropped by 21.5%.”
Adding to the problem was the grand opening of Cotai Casino Resort in May. The first new casino in Macau in the last three years, Cotai’s owner, Galaxy Entertainment Group Ltd, was projecting the new resort to stimulate a new wave of tourism in Macau, but that clearly hasn’t been the case.
Galaxy reported in June that business “is satisfactory, but not as good as we expected”. Subsequently, the entire Macau casino industry lowered its revenue predictions for July as the previous month’s revenues were (once again) disappointing across the boards.
Market Looking Much Better in Las Vegas
Over on the other side of the world, Nevada also reported an overall decrease in revenue for July, but it wasn’t nearly so traumatic as that felt by casinos in Macau.
Nevada’s Gaming Commission reported a 1% drop to $923 million on the month compared to July 2014. In contrast, however, the collection of taxes from gaming rose 7% from the same time period, up to $52 million.
Ironically, the declination of revenue in Las Vegas is also being attributed to the economic downfall and money laundering crackdown in China. Nevada’s biggest spenders are Asian high rollers, who are avoiding Sin City for the same reasons they’ve stopped visiting Macau casinos.
The largest descent in revenue came from the baccarat tables—a high roller favorite—where Nevada casinos reported a drop of 23% to $104 million, and a coinciding drop in wagers of 35%. In fact, much like its eastern rival, Nevada’s baccarat tables have experienced a steady drop in revenue across 10 of the last 12 months.
Helping to maintain a relatively healthy status, however, Nevada made up for its truncated gambling revenue with slot machine yield, which rose 5.5% year-over-year to $600 million in July.