Inside Asian Gaming

inside asian gaming May 2016 74 towards transformation. As a member of the commission he will join Macau’s Chief Executive Fernando Chui Sai On and seven other officials including the head of the Gaming Inspection and Coordination Bureau (DICJ) and the Secretary for Economy and Finance. Before his appointment, Wong served as a representative of the security body on the commission. The measure aims to reactivate a body that has not been active for years. Two years ahead of the opening up of Macau’s casino industry, the Commission was created to design, implement and monitor gaming policy and regulations in 2000. It was revamped in 2010 but has yet to publish any public reports or hold meetings that would make news. A spokesman for the security bureau told Reuters, “It seems there is a connection with security problems. [Wong] should be part of it. That is understandable.” Macau is facing rising crime rates and falling VIP revenues as it tries to develop the mass market segment of its casino industry and diversify its economy in general in the direction of non-gaming related tourism. Gambling-related crimes rose in the city by 38% last year, with big increases in loan sharking and illegal detentions. Gross gaming revenue has fallen for 23 months in a row. On 26 May the government released the draft of its first five-year plan for consultation. The report said the city would be developed as a cultural tourism hub, and set a target to increase the share of non-gaming elements from today’s level of 6.6% of all gaming- related revenues to 9% by 2020. REGIONAL BRIEFS Analysts not upbeat on Macau Morgan Stanley foresees possible overcapacity in Macau’s casino industry next year. “We see the industry mass market flattish (not recovering) since June 2015 and risk of over overcapacity in 2017,” said the bank’s analysts in a note. “Stable demand is facing significant capacity addition (6,000 rooms and 750 new tables) between the third quarter of 2016 and the first quarter of 2017. This could result in either cannibalization or rise in competition – thus, margin erosion.” Gross gaming revenue has fallen for 23 straight months in Macau amid the mainland Chinese government’s crackdown on corruption there. Earlier this year perception that the worst was over prompted a rally in the city’s casino stocks. But three big integrated resorts are scheduled to open in the Cotai area over the coming 12 months; Wynn Macau’s Wynn Palace in August; Sands China’s Parisian Macao, which is aiming for September; and MGM Cotai which owner MGM China Holdings now says will start operations in the first quarter of 2017. Each operator has delayed its launch by several months in response to the downturn. And each will likely receive a quota of 250 new-to-market live gaming tables from the government, to add to the city’s current stock of nearly 6,000. Visitor arrivals in Macau fell 1.0% year-on-year to 5.1 million in the first two months of 2016 and hotel room rates were down by about 20%. Morgan Stanley said delays in infrastructure projects, such as Macau’s light rail transit system and a bridge connecting the city with Hong Kong across the Pearl River Delta, would impede any recovery. In a different report, Wells Fargo said diversification away from pure gambling towards general tourism would not be easy for Macau to achieve. “The evolution of Macau into a less gaming- centric destination will be an extremely slow and arduous process, in our view,” said the bank. Leaders both locally and in Beijing have called repeatedly for Macau to be more like Las Vegas, where about two-thirds of casinos’ total revenue comes from non-gaming spending. In Macau, the figure is less than 7%. Macau strengthens control over industry; steps up transformation efforts Macau’s Secretary for Security Wong Sio Chak was appointed to its Gaming Commission; a move seen as strengthening central control over the city’s casino industry to intensify efforts Tighter rules for Macau’s beleaguered junket industry Macau’s Secretary for Economy and Finance Lionel Leong Vai Tac said the government and the city’s junket sector were discussing tighter capital requirements for the industry, although he added details had not been agreed on and any decision should not be rushed. Under proposals, the capital deposit any newly-registered gaming promoters would have to lodge with the authorities would be increased 100-fold, to MOP$10million (US$1.3 million) from the current MOP$100,000 set in 2004. In a note, however, Sanford Bernstein said the measure would have little impact because junkets still in operation after the recent industry shakeout were, on the whole, better capitalized. “The proposal, if implemented as proposed, would not apply to the existing 141 licensed junkets, but only to new entrants. The proposal is mild relative to our expected tightening of junket regulation this year,” the brokerage added.