Down by a disappointing 9.8 percent in May, Macau’s casino gambling revenue confounded analysts who had estimated a drop of 8 percent. The figures released by the Gaming Inspection and Coordination Bureau of Macau indicated a total take for the month of May at $2.3 billion, and show that casino gambling revenue has now declined for a continuous 24 months. This is a reflection, not so much on an ailing world-wide economy, but rather more on the anti-corruption crackdown by the Chinese government. This is an indication that the high-stakes gamblers who are now staying away from Macau’s casinos, had quite a bit to do with the stratospheric numbers of previous years at the world’s largest gambling hub. An early May ban imposed on phone betting, which is popular with high-roller gamblers from China, also contributed to the lower revenue figures.
Along with the release of the dismal figures, Macau gaming stocks dropped an average of 2.4 percent. Losers were led by Sands China with a loss of 3.3 percent and Galaxy down 2.5 percent.
In an effort to stem the falling tide of casino gambling revenue, casino operators are looking outside of Macau for new areas of potential growth. Areas that won’t be impacted by China’s new stricter gambling policies. As a result, Sands China and Wynn Macau Ltd. have already started focusing on recreational gamblers and tourists as a more reliable source of revenue. Plans are already in the works for Macau to rebrand itself as a tourist destination that is world-class and not solely a casino gambling hub. Their intent is to be able to compete with popular tourist destinations such as London, Singapore, Hong Kong and Paris as a way to diversify its economy.
Moody’s Investor Service, a world renowned credit and debt watcher, issues sovereign credit ratings which serve as a barometer for the government’s ability to repay debt. These ratings are used by investors to judge the stability and strength of local economies. Moody’s has recently downgraded Macau’s long-term sovereign debt rating as well as their long-term foreign currency bond ceiling and warned that plans for economic growth based on the tourism market would be “volatile and susceptible to shifts in external demand.” Moody’s further pointed out that “the government has expressed plans to diversify the economic base. But these are at an early stage of development, centering primarily around the execution of existing infrastructure efforts and on vertical diversification within the tourism sector itself. Lacking a track record of implementing such reform, there is a risk that these measures will not stem the deceleration in growth in the near-term nor diversify the economy over the medium-term.”
Following the announcement from the city’s casino regulators, Macau gaming stocks extended its losses, dropping 2.4 percent at the midday break trading on Wednesday. The losers were led by Sands China, which fell 3.3 percent while Galaxy also found itself in the red at 2.5 percent.