IAG October 2014 - page 9

October2014
inside
asiangaming
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that drop was around $31 billion. Not all of this could have come
at Macau’s expense, of course. But if we assume 50% was play
out of China—which is probably conservative, approximately in
line, however, withWynn’s information noted above—that’s $15.5
billion that wasn’t gambled in Macau, or anywhere else for that
matter. There are, after all, only somany whales in the seawhen it
comes to committing to theHong Kong dollar equivalent of the 5
million or 10million yuan buy-in needed to qualify for a flutter at
a private table inMacau. (If
Calvin Ayre
’s Rafi Farber has it right,
and he’s an insightful observer of the Asian gaming scene, 22%
of Melco Crown’s first-half revenue was derived from all of five
players.)
‘FAMILY’MEN
Macau has seenVIP slowdowns before. Revenue even fell once year
on year, in 2005, when it dipped 3%. Growth plummeted from 32%
in 2008 to 8% in 2009when the financial crisis hit. In 2012, it grew
only 7.5% (it was up 44.6% the year before) at a time when China’s
leadership was changing hands, a once-in-a-decade event, and the
fallout from theBoXilai scandal was still fresh.
In each of these cases the broad assumptionwas that if China’s
high rollers weren’t coming to Macau they weren’t gambling. This
timemight bedifferent.
The VIPs and their bankers, the junkets, are fixed in the sights
of a central government wrestling with endemic corruption in high
places and a shaky financial system that’s feeling the heat from
falling property prices—they’ve dropped more than 10% this year;
they fell in August in 68 of the country’s 79 most-watched cities,
the highest number on record—and an expected softening of GDP
this year and next. The government isn’t resorting to the printing
press either, preferring to keep a rein onmoney supply to allow the
economy toadjustmoderatelydownward; andsocredit is tightening,
whichdirectly impactsaccess tocapital for the junketsat a timewhen
players are feeling less wealthy and moving slower to repay their
markers. Theplagueof capital flight, estimatesofwhichhave ranged
in excess of US$200 billion a year, has spilled onto the junkets as
well. It’sa lot ofmoney, $45billion, not countingall theoff-the-books
side-betting going on, which some observers believe to be at least
equal to that, and the junkets and their agents and associates and
investors are under greater scrutiny than ever, according to some
reports. They’re being squeezed at the other end too. Casinos in
some instances are exploiting the situation to reduce their influence,
ratchetingup termsanddemandinggreater levelsof disclosurewhile
simultaneouslymovingmore tablesoutofVIP tocater to theirhigher-
margin cash players, a far more profitable business for them in an
operating environment where the supply of new tables is capped by
law at 3% a year.
The impacts arebeing felt in themassmarket, where growthhas
slowedby half since thefirst quarter. Indications are that higher-limit
cashplayersarebecomingmorecautious.The transitvisasystemhas
ChinA–PropertySalesGrowth
Source:
CEIC,DICJ,MorganStanleyResearch
TonyFung is confidenthisA$8billionAquisat
theGreatBarrierReefwill be“aneasy sell”.
“You see, if yougo toMacauyour colleagues
thinkyouareagambler. If yougo toSingapore
they thinkyouareagambler.But if you sayyou
aregoing toCairnsand theGreatBarrierReef,
thenyouare still a familyman.”
AsianVIPMarkets1H14Growth–Macau isLagging
Note:
JunketVIP roll forMacau
Source:
CompanyData,MorganStanleyResearch
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