China's Macau review could spell bad news for gaming industry
Filed under: Company News
With the casino business in Las Vegas taking a huge hit during the recession, companies including Las Vegas Sands (LVS), MGM Mirage (MGM) and Wynn Resorts Ltd. (WYNN) have looked east for profit -- as far as Macau, the world's biggest gambling center. On Monday, however, the Chinese city's government threw a pail of cold water on their plans by suggesting it may limit the aggressive expansion in this booming market.
According to the Wall Street Journal, representatives of Macau's government met with casino operators to "review" the industry and lay down new restrictions, including raising the age for gaming from 18 to 21. Last year, the Chinese government clamped down on travel to Macau from nearby Guangdong province, ostensibly to fight gambling addiction, resulting in a drop in revenue. Since then, however, restrictions have been loosened and returns from the casinos hit a new high in August of $1.4 billion.
At home, newly released Las Vegas traffic data from August offers the casinos little hope for quick relief. Convention business is down year over year by a huge 58.9 percent, with 300 fewer gatherings for the month. For the year, convention business is off 30.2 percent. Visitorship was down in August by 3.7 percent, the 15th consecutive month of decline. Room occupancy fell 6.9 percent last month and 6.2 percent for the year, despite aggressive promotions. MGM Mirage's troubled CityCenter development is expected to come on line by the end of the year, adding another 6,000 rooms to the mix.
If Las Vegas is saturated and Far East development constrained by the Chinese government, where should these companies turn for business growth? Harrah's recently bought a race track in Ohio, which has approved slot machines there and at six other tracks around the state.
However, a recent study by the Nelson A. Rockefeller Institute of Government found that state tax revenues from gaming have fallen by 2.6 percent over the past 12 months, suggesting that, while the gaming pool is growing wider, overall volume has remained stagnant. Without new markets (read: China) or a dramatic turnaround in Las Vegas traffic, a recovery in this sector seems distant.
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Reader Comments (Page 1 of 1)
10-13-2009 @ 4:10PM
Dick Knight said...
Tom Barlow
You should really examine your facts before writing an article. Your Macau blurb was just that, showing the negative of the situation, instead of the more positive aspects for all the gaming people now in Macau. These restrictions by the government is agreed too by all the casino operators.
Let's look on the bright side Tom, and do some "good" for the market, and the economy.
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10-14-2009 @ 2:50PM
Michael from Georgia said...
2 points I'd like to make.
First, raising the age limit to 21 (like vegas) is not a radical move and should not have a drastic impact on gaming revenue since most of the casinos depend on high rollers to generate their revenue. I would venture to guess that these high rollers are not between the ages of 18 and 20.
Second, "limiting aggressive expansion" most probably means future plans that are currently not approved. Plans by LVS for Cotai expansion in all probability should not be impacted. It is obvious they don't want to shoot the goose that lays the golden egg, on the other hand they need to give the appearance that they are in lock step with Beijing
and it's philosopy on limiting capitalistic ventures.
Bottom line is that one should not overact by a meeting between the government and it's biggest revenue base, since such meetings are probably regularly held on an annual or quarterly basis anyway.
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10-13-2009 @ 6:47PM
Fernando Kam said...
I think the Macau government wishes to strike a balance between gambling and social morals by banning all slot machines away from residential areas. This affects most the Australian licensee Mocha which runs pure slot machine establishments in apartment blocks.
The age limit of 21 was already a previous practice in Macau's gaming prior to 1994, but was inadvertently lowered by then majority age legislation. And limited expansion should be construed to disallowing any new project sites, but not expansion from existing sites or approved projects on hold etc.
Overall, the move is conducive to modest growth and healthy compeititon among the 6 gaming giants. If any conclusion is drawn, it is positive not negative.
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10-14-2009 @ 9:10AM
Duane said...
Macau is already the leading destination in the world for gambling. Limiting competition for the existing players could only be a positive.
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