Two decades after Macau returned to Chinese rule, a shift that catalyzed its emergence as the world’s biggest gambling hub, casinos are facing serious obstacles to their future growth.
Macau casinos are poised for the first decline in annual gaming revenue since 2016, and next year may not be much better as China’s economy slows and rising Asian hot spots such as Vietnam lure high rollers. Macau, which celebrates the 20th anniversary of its handover from Portugal this month, is facing its biggest challenges since a Chinese government crackdown on corruption five years ago.
The enclave relied on by operators including Las Vegas Sands Corp, MGM Resorts International and Wynn Resorts Ltd. for the bulk of their revenue will find it difficult to return to the double-digit growth pace of the past.
“All of the juice has been squeezed out of the orange,” said David Bonnet, a contributing analyst at Bloomberg Intelligence. “Macau is starting to resemble more mature competitive markets such as Las Vegas and Atlantic City.”
Analysts surveyed by Bloomberg forecast on average that Macau’s gaming revenue will swing from 14 per cent growth in 2018 to a decline of 3 per cent in 2019. They predict a mild improvement of 3 per cent in 2020 on easy comparisons with this year’s low levels.
One of the biggest blows was the absence of high rollers, or VIP gamblers. Macau, the only place in China where casinos are legal, has made its money for decades on a few thousand rich gamblers. That group is now increasingly more likely to place their bets in emerging regional gaming hubs in Southeast Asia, as junket operators — middle men who extend credit to wealthy gamblers — shift to those territories.
The biggest, Suncity Group Holdings Ltd, is set to open a Vietnam resort in the first quarter, the launch of which “could result in the redirection of a material chunk of VIP play from Macau,” said Union Gaming analyst Grant Govertsen.
One of the biggest threats may come from Japan, which is likely to emerge as Asia’s second-largest gaming hub after a landmark bill legalizing casinos was approved last year. All six Macau operators have expressed interest in setting up a resort in Japan, which has the potential to see gross gaming revenue reach US$20 billion annually, brokerage CLSA predicts.
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