Macau: Spinning towards a shakeout?
NEW YORK: A US business magazine has warned that Macau’s spectacular growth as Asia’s leading gaming city is under threat.
Writing in BusinessWeek, Frederik Balfour – Asia correspondent for BusinessWeek based in Hong Kong – said that at a time when Macau has become a bigger revenue magnet than Las Vegas, “it could also be heading for a nasty shakeout thanks to a looming casino glut”.
Balfour quotes figures which confirm Macao’s gaming revenues are growing an average of nearly 20 per cent per year and were just shy of US$7 billion last year, earning the enclave more than the entire Las Vegas strip
“But behind those headline-grabbing numbers a less glittering picture starts to emerge. The average take per table, which peaked at US$10,000 per day in 2002 when Hong Kong mogul Stanley Ho still had a monopoly on the gaming industry, has been steadily falling this decade,” said Business Week.
In 2006 the average take was just US$3,200 because of the rapid overall expansion of gaming tables.
“It’s going to get worse: As ever more properties come on stream in the next few years, that figure could reach as low as US$1,800 by 2010,” said Morgan Stanley gaming analyst Rob Hart. “We’ve been warning investors,” he says.
Casino czars like Sheldon Adelson of Sands and Stephen Wynn of Wynn Resorts have been joined by Australia’s James Packer in re-shaping Macau as the Las Vegas of the East.
But according to Business Week, it’s not just a surge in supply that’s to blame for falling revenues at the tables: There’s also a fundamental shift in the nature of Macao’s gaming market. The VIP high rollers who spend their money classy hotels and designer goods, are being replaced by mass markets gamblers who gamble less in the casinos, save on accommodation and avoid the upmarket shops.
Given the current trend lines, most of the visitor growth is going to be mass-market. Morgan Stanley’s Hart estimates these consumers will overtake the VIP business by 2008.
Not surprisingly, the US casino bosses who are driving the development of Macau as Casino Island, are confident that over-supply will not be a problem.
Speaking at the opening of his Wynn Macau casino earlier this year, Steve Wynn declared, “People say there could be a glut of hotels here, but I think Macau – like Las Vegas – will not grow in spite of development, but because of the development.
“In the past, tourism here was one-dimensional. It was gaming. Period. Now Macau is being enriched at a pace never seen before. The speed of development is dizzying.”
Ian Jarrett
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