Macau casino revenue shrinks for 15th month, more VIP room closures coming

macau-casino-revenue-15th-month-declineMacau casino gaming revenue fell for the 15th straight month in August, forcing the local government to announce long-threatened austerity measures.

Gaming revenue fell 35.5% year-on-year to MOP 18.6b (US $2.3b) in August, better than most analysts had expected but worse than July’s 34.5% decline. The result reverses a trend of slowing declines that had held sway since February, which had led some observers to feel some kind of ‘floor’ had been reached.

In response, Macau’s government announced it was freezing a certain percentage of spending called for in the special administrative region’s most recent budget. The government had vowed to introduce such measures if average monthly revenue for the year to date fell below MOP 20b. If you want a barometer for how far Macau’s fortunes have fallen, the government originally budgeted for monthly revenue to average MOP 27.5b.

The austerity measures are expected to save Macau around MOP 1.4b in the current fiscal year but the government insists that cuts will not be made to social welfare services of the government’s investment plan.

MORE VIP ROOMS SHUTTING?
Macau’s VIP gambling sector has been hardest hit during the year-plus decline, and the worst appears far from over. On Monday, Macau Business Daily quoted local junket operator and labor union associations saying as many as 10 VIP gaming rooms have either closed or will close in the period covering August to early September.

Kwok Chi Chung, president of the Association of Gaming and Entertainment Promoters of Macau, said the Golden Group and David Group junkets are among those who shut some VIP doors in the past month. Kwok said “operation costs at this point have become unbearable” for junkets, especially given the current poor state of debt repayment ability.

Lei Kuok Keong, deputy director of the Forefront of Macau Gaming union, said David Group had been reduced to a single VIP room at Wynn Macau, down from the seven rooms David Group operated in Macau at the start of the year. David Group declined to confirm the closures. In June, David Group was the subject of similar rumors, prompting the company to issue a formal denial.

Lei said the Heng Sheng Group junket had been reduced to four VIP rooms from 11 rooms at their peak in early 2014. Over the same span, Lei believes Heng Sheng’s payroll has shrunk from 700 staff to just 100. Like many other junkets, Heng Sheng has turned its attention away from Macau, striking deals with casinos in other jurisdictions, like Donaco International’s Star Vegas property in Cambodia.