Gaming revenue in Macau dipped to a near five-year low in June, the 13th consecutive month of decline in the world’s No. 1 gaming destination.
The ongoing slump may cause the government to institute austerity measures. Lionel Leong, secretary for economy and finance, has said the belt-tightening would begin if gaming revenue dropped below 20 billion patacas ($2.5 billion). In June, it reached that benchmark, falling 36.2 percent to 17.4 billion patacas, the lowest level since November 2010.
Macau historically has derived up to 80 percent of its revenue from gaming alone. The market started to unravel last year, when Chinese President Xi Jinping initiated a crackdown on corruption and money laundering.
June revenues are traditionally lower as the summer kicks off, but the news is especially discouraging this year, as it marked the first full month since the opening of Galaxy Entertainment Group’s two new resort projects on the Cotai Strip.
Making matters worse is the threat of a full smoking ban that could extend to the city’s casinos, including the VIP rooms. Deutsche Bank analyst Karen Tang wrote, “Consensus expectation of a 2016 recovery is too optimistic as a full smoking ban should hurt VIP revenue by 10 percent to 25 percent.”
Casino operators conducted a survey that concluded 66 percent of Macau casino workers support the retention of smoking lounges. But another poll by the University of Macau and commissioned by the Health Bureau said 58 percent of workers are against smoking in casinos and want the lounges closed. Investment analysts say banning mass-floor smoking lounges could cut 10 percent of mass-market gaming revenue and up to 15 percent of VIP revenue.
All this bad news could be balanced somewhat by a government decision to relax transit visa rules that were tightened last year, reported Bloomberg. Starting this month, mainland China passport-holders traveling to Macau can stay seven days instead of five, and return within 30 days rather than 60 days. The government action could be seen as a sign that officials are also growing concerned about cascading revenues, and are acting to stem the decline.
Meanwhile, a report in Forbes magazine contends that Macau’s controversial 3 percent cap on table game growth could be “a blessing in disguise.” Union Gaming Research Macau says electronic table games deliver more revenue and profits than traditional live tables. According to the Macau rules, 55 EGT seats count as one live table against the cap. Union estimates that Macau’s mass-market table revenue in the first quarter was 23.7 billion Macau patacas ($2.96 billion), with a daily win-per-table of roughly MOP70,000. EGT revenue was MOP537 million, with a win-per-table equivalent per day of about MOP90,400, or 29 percent higher.
Bloomberg Intelligence analyst Tim Craighead expressed hopes that the pending opening of additional resorts on the Cotai Strip, including Galaxy’s Phase II and Melco Crown’s Hollywood-themed Studio City, “can be enough of a draw to catalyze a turn, along with other factors, later this year and into next.”