Even though the Chinese government doesn’t seem likely to relax the strict visa rules for its citizens on visits to Macau, some operators are saying that the market is leveling out and that they don’t expect the bad time to last much longer.
Despite the bad news of late, gross gaming revenues for 2008 set yet another record in Macau. The 31 casinos in the special administrative region grossed 108 billion pacatas or US$13.7 billion during the calendar year, a big increase over the US$10.6 billion posted in 2007. December ’08 revenues dipped about 7 percent.
Ciaran Carruthers, chief operating officer of Galaxy Entertainment’s Star World Hotel and Casino, says he’s optimistic about 2009.
“The worst predictions for this year still have Macau having a better year than Las Vegas ever had,” he says. “If I was a betting man, I’d say Macau is still going to be very strong for 2009.”
Although some operators expected that the federal government would ease some of the visa restrictions, a visit by a Chinese official seemed to quash that hope. During a two-day visit to the SAR, Vice President Xi Jinping suggested that Macau officials diversify the economy to avoid dependency upon the gaming industry. He recommended that new development on Hengqin Island be aimed at ventures not contingent on gaming.
“Macau’s need for diversification will be carefully considered in the development of Hengqin,” Xi said.
Analysts were disappointed with Xi’s visit, hoping that some easing of the travel restrictions would be announced.
“The immediate need is to help the labor market that’s been deteriorating because a lot of the casinos are laying off people,” said Gabriel Chan, a Hong Kong-based analyst at Credit Suisse. “There was nothing specific to help Macau.”
Xi’s lack of action sent the shares of Macau casino companies tumbling.
Meanwhile, operators continued to cut salaries to avoid staff cuts. Melco Crown Entertainment slashed wages by 8 percent, with the approval of the government. While the company avoided firing Macau residents, it did eliminate some positions occupied by “imported” staff members.
Lawrence Ho, the partner, with James Packer, in Melco Crown, said the salary cuts were necessary to preserve the team.
“I have always believed that our long-term success depends first and foremost on our employees,” he said. “We have insisted on exploring ways to avoid large-scale redundancies and our primary hope is to keep our employee teams together in the best shape possible.
“This will help us to best deal with the current turbulence in market conditions, so that when the market revives-as it most surely will-MPEL will be best poised to benefit.”
Melco Crown is scheduled to debut its City of Dreams casino resort in the second quarter of this year.
Las Vegas Sand Corp., owner of the Venetian and the Cotai Strip development, has said no more layoffs will be necessary.
“The positions that we eliminated were primarily managerial,” said LVS President and COO Bill Weidner. “We did not cut one gaming or one Macau local position.”
Weidner was also defensive about charges that LVS has taken its profits in Macau to use in developments elsewhere.
“All our earnings in Macau have stayed in Macau and were matched five times over by additional investments in Macau,” he says.
One company that will not be doing layoffs or salary reductions is Wynn Resorts, owner of Wynn Macau and the soon-to-open Encore Macau. As he has done in Las Vegas, where the economy is even worse than in Macau, Wynn says he will drop his room rates “to keep people in the building and my employees working.”
Wynn said layoffs are the “absolute last option.”