Macau’s gaming industry suffered several setbacks in the last month, including lower revenues and worker discontent.
The SAR’s dominant VIP gaming sector shrunk to just 60 percent of total gaming revenue in the second quarter, its lowest share in almost a decade.
Official data show VIP baccarat generated MOP54.6 billion (US$6.8 billion) during the three months ended June 30. Proportionately, it’s the lowest percentage of total revenues since the fourth quarter of 2005, when it stood at 58.7 percent.
Sequentially, VIP was down MOP12 billion during the period, which reduced its share of the market from the first quarter’s 63.7 percent.
A number of reasons have been advanced for the downturn, from China’s slowing economy to competition from the World Cup, and investors remain divided over the implications. Some say the market lacks a clear definition of what constitutes VIP.
Analysts recently surveyed by Bloomberg say it is not a cyclical trend but a reflection of a structural change in the market itself, one more oriented to cash play and stemming from a desire by casino operators to reduce their exposure to the volatile VIP sector in favor of the mass market’s much higher and more consistent margins—particularly those generated by the high-limit play known as “premium mass.”
Mass-market exposure to total revenues has grown for 11 consecutive quarters, and is accelerating as operators shift more tables, which are in short supply as a result of a government-imposed cap, from VIP rooms to the public floors.
Macau’s casino workers are not happy, and that’s a problem for the casinos and for a government fearful of any public display of discontent.
As the Chinese territory races to build six huge new resorts in the next three years, labor strains are intensifying. Croupiers and pit staff are demanding higher pay and threatening strikes at a time when the market faces the most severe labor shortage in its history.
Las Vegas Sands and Wynn Resorts reported combined costs of US$50 million last quarter for labor-related compensation at their Hong Kong-traded Macau subsidiaries, and industry analysts expect the other four operators in the world’s largest gambling market—Galaxy Entertainment, MGM Resorts, SJM Holdings and Melco Crown Entertainment—to announce similar cost pressures when they post earnings in September.
LVS’ Sands China and Galaxy both have been targeted by demonstrations led by a labor group called Forefront of Macau Gaming, which accuses the companies of arbitrary and unfair wage practices and has staged sizable demonstrations outside Sands’ flagship Venetian Macao on Cotai and at Galaxy’s offices and outside its StarWorld casino on the Macau peninsula.
“For both Galaxy and Sands, we are not ruling out a strike,” said Ieong Man Teng, a baccarat dealer and Forefront’s president.