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Macau Momentum

The growth in Asian gaming

Macau Momentum

The revenue report for the 2012 gaming numbers in Macau was once again impressive. Coming on the heels of a year where the Chinese SAR posted revenue increases of 42 percent, the 13.5 percent boost in ’12 was amazing. And remember, it came during a year when the Chinese economy was slowing, so just to keep up the same pace as 2011 would have been a victory.

So the question remains: how long can Macau sustain this level of growth? And every casino executive from Macau gives me the same answer: they don’t see any reason it will stop anytime soon.

In fact, it could increase yet again in 2013. The market penetration into the Chinese middle class remains around 1 percent. There are only a few provinces where the citizens are allowed to travel to Macau. Let’s not forget that China is still a communist country with rigid controls on the movement of its people. Yes, this is slowly changing, but the emphasis is on slowly.

Nonetheless, a new rail line, the Guangzhou-Zhuhai Intercity Railway, has already increased visitation to Macau, opening up a previously small market for the Macau casinos. What was once a two-hour bus ride has been cut in half. A new border gate that can accommodate more than triple the number of visitors as before has also recently opened.

Some worry about the attitude of the Chinese national government toward gaming in Macau. When federal officials noted that the Macau gaming industry was overheating in 2008, they closed the spigot a bit by limiting the number of times a Chinese national could visit Macau. That had a devastating impact on the Macau casinos, but when the regulations were lifted, the current surge began almost three years ago.

But what’s to prevent the national government from coming to the same conclusion? Some believe that the unusual actions of the Macau government late last year when it approved projects in the Cotai region for every one of the six casino concessionaires was a realization that these projects should be approved before the Chinese government changes its mind.

Surely, the carefully planned growth of the past few years has been exploded with the new approvals. Clearly, the limits on the number of table games and foreign workers are going to have to be revised if the government truly wants all these projects completed in a reasonable time period.

One thing the Macau government has wanted has come to pass. Last year, the mass market showed remarkable growth, while the VIP market—which accounts for 70 percent of the Macau gaming revenues—slowed. The new Cotai projects are all designed to attract the mass market with new and better non-gaming amenities, intended to make Macau much more than just a gaming destination. It’s going to take a lot more attention to the mass market, however, to ease the grip of the VIP market on the city.

And while we’re discussing the VIPs, the Macau regulatory scheme needs to become more transparent. While the government doesn’t want to crimp the all-important VIP market, there needs to be a better understanding of what the SAR’s criteria are when licensing the VIP operators. Reports of connections to the Chinese organized crime groups, the triads, continue. And the fact that very few of the VIP operators have applied for licenses in Singapore, Asia’s secondary gaming capital, makes one think they have something to hide. This irregularity has already drawn the attention of international law enforcement organizations, particularly when it comes to money laundering.

So back to the original question of how far is up for Macau. I don’t know the answer, but I do know there are many concerns. While Singapore barely dented the Macau market, the entry of Taiwan or South Korea could have an impact. Vietnam will open its first integrated resort this month, and what happens when Japan really gets into the game? Or how about the unlikely—but possible—option of China opening another region to gambling?

Coming from Atlantic City, I remember casino executives giving me the same answer about how long the Boardwalk town could sustain increasing revenues. It did so for nearly 30 years, but the last five have seen Atlantic City revenues fall by 40 percent. Not really apples to apples, but my point is that you never know what is coming down the road, and you have to be prepared for any eventuality.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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