IAG October 2014 - page 10

Cover Story
been tightened, resulting in fewer allowable trips from themainland,
and the government is cracking down on use of its popular state-
ownedUnionPaydebit cardsystem towithdrawcash for gambling in
excess of the statutory limit of 20,000 yuan (US$3,200) aday.
Gaming revenue growth has fallen eight of the last nine
months and went negative year on year in June, and so it’s stayed
every month since, declining by 11.7% in September, the worst
performance in five years. The downward pressure is coming
mostly from VIP, which went revenue-negative in May. It’s down
19% year on year in the third quarter and 4% year to date. Analysts
don’t expect a turnaroundbeforemid-2015, when thefirst resortsof
Cotai’s much-anticipated “second wave” come on line, and some
are doubtful even of that.
Morgan Stanley estimates that more than 30 junkets have
note that“Othermarketsare
adding capacityandmarketing
initiatives.VIPgrowth in those
countrieshas started tooutpace
Macau inrecentquarters.”
WolfgangGeorgArlt, directorof theChina
OutboundTravelResearch Institute, sees“more
andmoreChinese spreadingoutall over the
planet, discoveringdestinationsand travel
formsmorediverse thanever”.This includes
“more smallerdestinations, for leisure trips, for
investment, andalso forgambling”.
folded, individuals and companies, since the end of 2012, victims of
the liquidity crunch and competition from larger, better-capitalized
rivals. DoreHoldings, oneof the largest, threw in the towel this year.
SunCity, the largest, is diversifying into non-gaming investments.
Others are pursuing casino projects abroad. Others are working
existing markets from Australia to the Philippines to Indochina to
take advantage of more relaxed environments where tax rates are
lower and better deals can be had on comps and commission rates.
They are, of course, taking their playerswith them.
Nor is it unreasonable to suppose that more than a few of their
customers are tiring of Macau and would prefer to frequent it less
often in favor ofmore exotic locales theymay see asmore gratifying
to their wealth and status, and safer in terms of the possible
ramifications back home.
This would make sense in the larger context of a China that is
becomingmoreaffluentandmoreglobal in itsoutlookandaspirations.
The analysts at CLSA said in an extensive report released earlier
this year, “We incorporate shifting travel patterns into our Chinese
outbound-tourist estimate and forecast stronger growth in further-out
locationsas travelers look for amoredesirable travel experience.”
Hong Kong financier Tony Fung’s A$8 billion plans for amixed-
use resort complex in northQueensland, Aquis at the Great Barrier
Reef, are designed precisely with this inmind. He is confident it will
be “an easy sell”.
“You see, if you go to Macau your colleagues think you are a
gambler. If you go to Singapore they think you are a gambler. But if
you say you are going toCairns and theGreat Barrier Reef, then you
are still a familyman.”
Macau is the only place in China where casinos are legal. It’s not
the only place in Asia. There is no reason why the supply-side logic
driving the enthusiasm behind the new Cotai openings shouldn’t
apply to similarly scaled investments elsewhere.
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