The tumbling fortunes of Macau’s casinos

casino de macaoWithout doubt it has been an interesting couple of years for Macau’s casinos sector, but the forecasts now being released for 2016 show no sign of things getting easier for the world’s largest gambling destination.

Macau is forecasting that combined revenue from casinos will be around USD$25 billion in 2016 – that sounds like an incredibly big number, and it is, but it is about half the takings of Macau’s casinos in 2014. The slide in fortunes seems set to continue.

October 2015 was the 17th month is a row in which Macau’s casinos have recorded a fall in revenue.

The main culprit according to industry observers is a shift in demand from the gamblers of mainland China. China’s slowing economy and tightening of controls on spending has led to less high-roller gamblers travelling to Macau for betting sprees.

Macau’s Chief Executive, Fernando Chui, is working with city regulators and casino operators to try and find ways to put the buzz back into this crucial sector of Macau’s economy. Much of the short-term focus in on expanding Macau’s appeal as a broader entertainment destination – not just focusing on gambling. This is seeing the construction of new shopping malls and family-friendly attractions to appeal to visitors of all ages.

Some analysts see Chui’s forecasts for 2016 as being a little on the pessimistic side, with some hope that there will be a stabilisation in the Chinese economy and a resurgence in the demand from in-bound high-roller gamblers.

One of the factors that seems to be confusing the picture somewhat is the role that the junkets play in Macau. Junkets are local operators who provide short-term finance to visiting gamblers – a crucial service for gamblers from mainland China who are restricted in the amount of funds that they can travel with. The downturn in the fortunes of Macau’s casinos has exposed a number of flaws with the junket operators – including a number of high profile thefts and questionable relationships between casino operators and the junket financiers.

One interesting development is the appointment of a new top gaming regulator for Macau. Paulo Martins Chan will be taking up the role and will be tasked with improving the territory’s gaming regulations as part of the drive to arrest the slump that the entire sector is experiencing.

Chan’s background is as a public prosecutor and his detailed legal knowledge is seen as a key strength, as his language abilities.

One of the immediate points of focus will be the current restrictions that limit the number of gaming tables that casinos are licensed to operate. This is particularly important for new casino resorts that are already in construction.

Another big source of debate between casino operators and regulators is whether or not smoking will be banned from casino premises. It seems unusual for smoking to be allowed in enclosed spaces such as casinos, but operators are keen to protect their revenue from any perceived threats or uncertainties.

It looks like it is all to play for in the casinos of Macau.

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