Gambling revenues in Macau fell in April at their fastest rate in three years, on the back of slowing Chinese economic growth. The island is the only place in China where gambling is legal.
Revenue Figures Dropping Fast
Macau’s casinos had a year-on-year drop of 8.3% for gaming revenue April – $2.9bn – according to the Macau Gaming Inspection and Coordination Bureau. This is the largest drop since June 2016. Analysts had forecast a potential drop of 3-12%.
Some analysts believe that second quarter revenues could rise slightly by 2-4%, based on the potential for high-end gross gaming revenues (GGR) to stabilize as well as the recovering credit cycle in China. These factors could trigger an increase in the number of VIP visitors to Macau in the coming months.
There have been warning signs for some time that China’s slowing economy is having a significant impact on the performance of Macau’s casinos. However, the economic figures in early 2019 were better than expected, indicating there is still some life left in this sluggish period.
Importance of VIP Visitors
High rollers are vital for the success of the world’s major gambling hubs, such as Las Vegas and Macau. Asia enjoys a particularly large concentration of these VIP players.
The game of choice for high rollers is usually baccarat. This is despite many people believing that high rollers prefer the “sexier” casino games such as roulette, craps and blackjack.
Baccarat has a very minimal house edge, which is the main reason why it is generally the preferred choice. About 90% of all of the casino gaming revenues in Macau derive from baccarat, of which about 60% of this sum comes from high rollers.
The casinos ensure these players have their needs well looked after. Different perks offered include free flights, free hotel rooms and free chips. Most high rollers also use the lines of credit offered to them by the casino.
The number of high rollers visiting casinos in Macau has fallen recently, reflecting the slowdown in the Chinese economy. According to Credit Suisse, the number of VIP players visiting Macau declined by about 10% in the final quarter in 2018.
In the same period, the number of non-VIP players increased by just 1%. This is why Credit Suisse is making plans to decrease its exposure in Macau. It is currently the coverage provider for the Sands China Casino, the Galaxy Casino, the MGM China and the Wynn Macau.