Bustling Macau Economy Helps Reverse Downward Gambling Revenue Trend

Posted on: February 27, 2017, 02:00h. 

Last updated on: February 27, 2017, 11:58h.

Casino.org Staff Writer Read More
Expertise: Commercial Gaming.

The Macau economy is strong, and the market is paying off for casino companies operating in the Special Administrative Region of the People’s Republic.

Macau economy gambling Lawrence Ho
Every major casino company is looking at Japan, but billionaire Lawrence Ho remains optimistic on the future of Macau. (Image: Kin Cheung/Associated Press)

China began cracking down on VIP junket companies that brought high rollers from the mainland and loaned them credit to gamble with in 2014. The government’s efforts were in response to alleged money laundering and the movement of wealth out from underneath the country’s control.

President Xi Jinping successfully disrupted the scheme, which the resorts were apart of and actively participated in, and the suppression led to plummeting casino revenues. Gaming income went from $45 billion in 2013 to $28 billion last year.

But a renewed economy led by surging real estate prices has revitalized Macau, and the city’s resorts are collecting on the bullish market. The area’s gambling report is expected to post yet another monthly percentage increase when the Macau Gaming Inspection and Coordination Bureau releases data for February.

If that happens, it would mark Macau’s seventh straight monthly year-over-year percentage gaming gain.

“There’s a lot more confidence,” Wynn Macau President Ian Coughlan said during a teleconference with investors last month. “There appears to be more liquidity . . . with the junkets, and the outlook is pretty promising.”

New Week, New Narrative

Financial experts have been trying to get their heads around the Macau economy for months, if not years. The government’s impeding of VIP players has downright baffled even the most seasoned Asian economists.

It was just a little more than a week ago that Bloomberg published an article warning investors that their renewed enthusiasm on Macau might be unwarranted. The Bloomberg Intelligence index that combines the six biggest Asian gaming stocks is up more than 20 percent since September.

Along with rising home prices in the region, the job market is strong in Macau. The local government is investing substantially in transportation and infrastructure, and that’s created thousands of jobs and a seller’s real estate climate.

Mass Market Still Key

Jinping’s assault on VIP companies forced many companies out of business. But the remaining operators, estimated to be about 120 groups, are slowly returning the elite gamblers casinos so heavily desire.

Lawrence Ho, the billionaire CEO of Melco Crown Entertainment, says the VIP recovery has surprised many. Regardless, the gaming tycoon explained recently that his group is remaining focused on the casual visitor and tourist over the high roller.

“The future of Macau is going to be pinned on the growth of the mass market,” Ho told his shareholders this month.

While all the major casino players in Macau including Melco, Las Vegas Sands, Wynn, and MGM remain optimistic on the Chinese gambling zone, they’re all also focusing their attention on Japan. The Pacific island nation is seen as the holy grail of gambling on planet Earth, and Ho and billionaire Sheldon Adelson have both stated recently that they would be willing to spend $10 billion on a casino resort in the country.