Corruption Crackdown is Adversely Affecting Macau Revenues

Bar bar black sheep $/€1400 free plus 30 spins at Casino Mate - play nowMacau casinosFor the fourth straight month, the gaming revenues from the casino operations of 35 casinos in Macau took a precipitous drop in September. The drop of 11.7 percent (29 billion patacas in September 2013 to 25.6 billion patacas in September 2014) also represents the largest such drop since June of 2009. The most surprising part was the number came out a little better expected by analysts who were looking for a drop of 13-15 percent.

What is causing the Drop?

At this time, there are two primary factors that are causing this strain on revenues. First, the overall economy in China has been slowing, causing casual or mass market gamblers to take a more conservative approach with their discretionary spending. Secondly, a crackdown on corruption amongst some of the wealthiest companies, private individuals and government officials is keeping high-rollers from frequenting their favorite casinos. A couple of secondary factors are current visa restrictions and labour unrest that is coming as a result of a worker shortage in the area.

What Does the Future Hold

After several years of robust growth, it would appear that gambling operations in Macau need to brace themselves for a rocky ride. As the economy slows, it’s too early to determine how long this issue will continue. According to an anonymous gaming analyst, “The crackdown, transit visa restrictions and other factors have hit revenues and we don’t expect this situation to get better anytime soon.”

The big losers figure to be the workers in Macau. The gaming industry is responsible for 90% of the tax revenues received by the government, which figures to affect the ongoing development of the infrastructure needed to support future casino projects like the eight major casino projects currently under development. Also, any resulting layoffs from a recession would be a terrible strain on labour negotiations that are currently taking place.