In case casino raids and falling revenue weren’t enough to convince you that the Chinese government is purposely killing Macau’s gambling business, officials laid it all out on Monday.
In his annual policy address on Monday, Macau’s Chief Executive Dr Fernando Chui Sai-on said that the government would be strengthening regulation on the gaming industry ahead of its review of casino licence renewals.
“After a decade of opening up and rapid growth of the gaming industry, the pace of development has started to slow down,” Chui Sai-on said. “The government will strive to adjust the pace without changing the momentum, seeking stable growth amid adjustments.”
It’s hard to see how that’s possible, considering the fact that analysts at Wells Fargo think Macau gaming revenue for March will be down between 37%-39% from the same time last year.
Chui Sai-on also said that unemployment on the island was a “possible concern.” In the muted language of the Chinese government this is clear message — the Chief Executive is preparing his people for some difficult times ahead.
Macau’s economy contracted 17% in the fourth quarter of 2014 alone. Gaming revenue in the month of February was half what it was the year before. The world’s capital of gambling is being crushed by Chinese President Xi Jinping’s corruption crackdown. He says he’s trying to flush out what he considers the seediest elements of Chinese business and government — others say he’s just trying to consolidate power.
Either way, what he’s doing — putting cameras in casinos, monitoring purchases on the island, busting prostitution rings, arresting powerful businessmen — it’s scaring away VIP and retail gamblers alike.
The government will now ensure that it “closely monitors the possible problems and difficulties caused by the adjusting pace”, Chui Saion said. “Effective measures will be taken in a timely manner to prevent the problem from expanding, thereby confronting and impacting other industries or sectors… In particular, efforts will be put on safeguarding employment stability of residents.”
Casino operators need to submit their business plans to the government, and those plans better have solid non-gambling entertainment elements. Live shows, amusement parks — whatever. Just not gambling.
Of course, some CEOs didn’t see this coming. There are billions of dollars worth of new projects in the works for the next two years.
“The key question everyone should be asking is whether the mid-year openings of Galaxy Phase 2 and Studio City will sequentially and proportionally drive revenue for the whole gaming industry, as opposed to taking market share away from the other operators in a shrinking pie,” Macquarie analyst Jamie Zhou wrote in a recent note.
Melco Studio City, a project from Lawrence Ho, the son of the man who essentially built Macau, Stanley Ho, along with Australian billionaire James Packer, is supposed to be family friendly, with rides for the kids and everything
Of course, the kids won’t be there unless mum and dad aren’t creeped out by all the surveillance.