Why Macau casino revenues are crumbling

Macau casinos posted gross gaming revenues of just over 19 billion Macau Pacatas (USD$ 2.3 billion) for the month of April 2015. Sounds like a lot but you have to go way back to January 2011 for a lower number.

The great Macau casino revenue slide began in June 2014, coinciding with Beijing’s anti-corruption crackdown, and it has gathered pace month on month since then with no signs of letting up.

Units: MOP millions. Source: Macau Gaming Inspection and Coordination

There is an interesting article in Global Gaming Business Magazine postulating the reasons for this rapid decline.

Number one of course is Beijing’s  anti-corruption drive, the length and severity of which is taking everyone by surprise. It’s now patently clear that this was not a bit of political fluff. It’s real and it’s got the VIP playing market pretty spooked (which gives you some idea where a lot of Macau gambling cash money comes from). A large chunk of Macau’s VIP playing market is staying away because they don’t want to draw attention to themselves.

A flow on from a big drop in VIP players, is carnage in the junket industry. Slow payment of losses by players, investors withdrawing funds and rumors even of some agents disappearing with investors funds have all contributed to reduced liquidity generally and less chips finding their way onto casino tables.

Hong Kong’s ‘umbrella revolution’ is believed to be a significant factor, leading to both travel restrictions and self exclusion by certain VIP players on political grounds.

China’s general economic slowdown comes in at number 5. Could probably be higher on the list I reckon. Just track Macau’s GGR numbers and China’s property price index over the last year or so and there’s a pretty strong correlation.

The other factors rounding out the list are a bunch of policy/regulatory factors that have thrown a little more water on the dying fire: added transit visa restrictions, heightened scrutiny of money flows as part of government efforts to clamp down on money laundering (part of the anti-corruption effort), continued tough talk from Beijing and the casino floor smoking ban that was brought in October last year.