The lights are on but nobody is home

Macau’s appeal as a global casino destination has never been greater – Melco Crown’s $3.2 billion Studio City has raised the game of what casino entertainment can achieve, recently opening Cotai’s fifth integrated casino resort with a star-studded, Hollywood royalty bash.

After such a glitzy splash you would expect the spirits of Macau’s gambling sector to be as soaring as high as Mariah Carey’s vocal range (she was there to turn on the lights for the launch of the casino-themed resort – she’s also the girlfriend of Melco Crown’s co-chairman James Packer).

Sadly, the answer is no. Things are still not good in Macau.

Are we seeing any signs of a recovery in Macau’s casino sector?

The gaming revenue figures for the month of October have now been released and they show that revenue is down nearly 30 per cent from a year ago. That’s the 17th consecutive year-on-year decline that Macau’s casino’s have reported. It is particularly disappointing as October includes the national holiday of Golden Week – traditionally one of the busiest periods for the casinos of Macau.

Macau’s casino sector is still massive and it is still generating huge volumes of revenue – about four times that of Las Vegas, but that’s a long way down from the golden days when Macau’s gambling revenue was around seven times bigger than Las Vegas.

What is impacting the performance of Macau’s casinos?

One of the challenges facing Macau’s casino operators is increasing government regulation. There is a relatively new cap on gaming table numbers – this is forcing some operators to shift gaming tables between their venues in order to ensure that they have maximum capacity in their busiest venues.

The major problem though is the drop in inbound business from mainland China. It was the gamblers from mainland China that really fuelled the growth in Macau however recent economic issues in China have led to a government crackdown on corruption and discretionary spending. This has hit the hip-pocket of Macau’s casinos hard.

The drop in inbound business from China has also impacted the providers of finance in Macau – generally referred to as the junkets. The junkets would provide finance to gamblers from mainland China who are restricted as to the amount of cash that they can travel with. With the changing face of this market, every aspect of the casino sector infrastructure in Macau is under pressure.

What does Studio City bring to the table?

The opening of Studio City may not have given an immediate boost to the performance of Macau’s struggling casino sector, but it does send a strong signal of confidence that the world expect Macau to bounce back and continue to be a global force and one of the world’s biggest gambling destinations.

Studio City is also a very visible representation of the changing face of gambling resorts. Certainly for the younger demographic it is not the gaming tables that are the big attraction – the big crowds seem to be heading to glamour-name nightclub Pacha instead of to the casino floor.

This could be a good time to look at booking a gambling holiday to Macau – there is bound to be some good deals on the table.

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