Light on the Horizon for Chinese Gambling Center - GGR Continues to Decline, Albeit Slower

Monday has dawned gloomy for the city of Macau, but according to the latest GGR report and the subsequent government prognosis, there is still hope for the city to continue on the road to recovery. Macau’s Gaming Inspection and Coordination Bureau has released data which shows the city's gambling revenue has dropped 37% in May from the same period last year to 20.35 billion patacas ($2.55 billion). So far, the revenue has dropped a full 37% compared with the same period in 2014. Despite the Macau government's estimations for the overall casino gross gaming revenue (GGR) to continue declining – in year-on-year terms – in the second half of 2016, the rate of decline is expected to slow down.

Following the daunting study results, the Office of the Secretary for Economy and Finance issued a hopeful statement on Friday in which they expressed hope and noted that the gambling market seems to be recuperating as the decline rates have been shown to slow down. Additionally, this slight improvement of the overall difficult situation was deemed comforting for the existing and potential investors.

“Taking into account the current economic situation, as well as the international and regional fluctuations, the uncertainty over the future economic growth of the gaming industry may continue for some time. There’s a high possibility of negative growth rate in the gross gaming revenue in the second half of this year but the rate of decline is expected to continue to slow,” stated the OSEF. A clear distinction has not been made, however, with regards to the forecast being deducted on a sequential basis or on a year-to-year basis.

Government officials consider this improvement the result of focused efforts towards diversification of the gambling sector and Macau's tourism market, which has also been affected due to tighter visa and smoking restrictions,and an increased oversight of UnionPay debit cards that served as the main banking method among tourists:

“The SAR Government will closely follow the development of the gaming industry and its impact on the Australian economy, employment, and to continue to vigorously promote the joint development of gaming and non-gaming elements element. Labour Affairs Bureau also take into account local labor market trends, take the initiative to provide targeted vocational training, job matching, maintaining the Employment Wen set to help local funding longitudinal and lateral flow.”

Gambling market problems began in June 2014 and affected the city's economy tremendously for the worse over the past two years, with more negative consequences to be expected in the future. Casino's staff demanding better working conditions, Beijing's large scale anti-corruption undertaking and the closing down of VIP rooms as high-rollers were scarred off by the new measures, casino officials clashing with the law, aggressive lending and Macau's budget control measures all lead to Oriental Las Vegas crashing down under the weight of its own system.

Other potential obstacles include expensive hotels and soaring minimum bets imposed on gamblers across casinos, which resulted in less and less tourists visiting and opting to stay in Macao. The revenue from low-budget gamblers is rapidly declining - a particularly worrisome fact since they are the targeted group that the newly built resorts are trying to attract.

However, the prices have started to decline recently and there are new projects and investments being planned that will hopefully improve the outcome. Macau’s five casino operators—MGM, Las Vegas Sands Corp., Wynn Resorts Ltd.,SJM Holdings Ltd. and Melco Crown Entertainment Ltd.—are also planning to open massive projects in the coming years.

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