Three years after the implementation of China’s anti-corruption programme, it seems Macau is finally showing signs of recovery with significant gains in the casino market and the slow trickle of high rollers back into the area. China’s anti-graft campaign, spearheaded by President Xi Jinping was aimed at weeding out corruption in the government with Macau, or more specifically high-stakes gambling identified as a key target.
If you missed out on what happened, here is a brief recap.
In order to stem the flow of money laundering and reduce the amount of unchecked capital in and out of China, the government implemented a crackdown on cash gambling in Macau. Since Macau is the only area in China where gambling is legal, it was a naturally selected hotspot for illegal cash transitions. The result was a major transformation of the state and the lowering of ATM withdrawal limits. Once the crackdown took effect, Macau’s revenues dropped quicker than a lead balloon with high rollers heading home in a hurry, taking their Patacas (currency in Macau) with them.
Three Years Later
It may have taken three years, but Macau is working its magic again. Slowly but surely, the state is showing signs of steady growth and stability over the past nine months. In February 2017, Macau received a turnover of 22.9 Billion Patacas This was a massive 18% increase from 2016. It was also the highest level of turnover seen since January 2015. Interestingly enough, February was a month when no new casinos were opened and no external factors were present to push the revenues. What was taking place was the stability of Macau itself and a direct financial resolution from Macau’s push to turn the region into a Las Vegas type destination with plenty of non-gaming activities.
If analysts thought that the six-month year on year rise was just a fluke, they would be wrong. In April this year, the city’s casinos generated 20.16 Billion Patacas, a full 16.3% increase compared to April 2016. That makes it nine months in a row that Macau has seen significant gains in the casino market. It is clear that the effects of China’s crackdown have levelled out. According to analysts, the revenue shift to the mass market is the main reason for the margin improvement.
A Shift in Priorities
What is happening is that the non-gaming sector has become a higher priority for the Macau government. We are seeing an economic diversification of the entire city with a whole lot more family friendly projects in the pipeline to help draw in visitors. It is a tactic that has worked well in Las Vegas and will most certainly turn things around in Macau – as it’s no longer just the casino games drawing patrons in.
Since the drop-off of casino gambling in Vegas a few years ago, resorts have turned to more creative ways of bringing in revenue. The preliminary research showed that visitors to Vegas tended to opt for resorts with expanded entertainment facilities such as nightclubs, theme parks, waterparks, hotels and so forth.
Following the money, Vegas has adopted this new strategy offering a more rounded experience for their guests, with far less focus on the casino itself. Instead of just offering hotel rooms with individual room fees, Vegas has included resort feels that has boosted its revenue. There have also been a number of shifts from the casino floor to other moneymaking areas.
Westernisation of Casino Resorts
Macau seems to be catching up and adopting the same strategy. With fewer high rollers at the tables, Macau has become the transformation into a westernised wonderland that will bring in more mass-market clients while retaining their grip on the high rollers that can deal with the cash limit problem. In September last year, Las Vegas Sands opened up its new Parisian resort in Cotai, predicting a rise in traffic. It seems, they may have been right. The main contributor to the rise in revenue in Macau has been overnight visitors, which account for a massive 52.8% of the total revenue.
It was also reported that day-trippers were spending more on non-gaming items. In fact, the numbers show an 11 percent increase over last year. Overall, the world’s biggest casino market saw an impressive 4% growth in the final quarter of 2016 and is expected to carry on in single figures through to 2017. There are a lot of positive influences that have all converged to create a stable Macau. For starters, wealthy gamblers are feeling more confident about the new rules, cash limits and VIP treatments and are slowly making their way back to the tables with renewed enthusiasm.
The resorts have also been given an overhaul with the Cotai coming online, the finishing up of the Las Vegas Sand, and the Parisian, Studio City, Galaxy and Wynn Palace all popping up. In the next year, MGM Resorts will finish off the MGM Cotai to add to the growing list of westernised resorts. The infrastructure in Macau is also improving with new railway systems, airport wings, bridges and road systems coming into place.
Once again, Macau is on the rise, and is hot on heels of Vegas for the title of gambling paradise!