Inside Asian Gaming

INSIDE ASIAN GAMING | November 2008 16 Cover Story C hina’s travel restrictions finally appear to be making an impact on growth of Macau’s visitor numbers and casino revenues. The restrictions initially seemed like small stones froma slingshot repeatedly striking the giant that is China’s pent-up gambling demand. Each shot stung a little, but the giant simply refused to go down. The latest visitor and revenue figures from Macau suggest the giant just might have been stopped in his tracks. In2007,thenumber of visitors fromChina grew by 24.2% compared to arrivals for 2006. ThegrowthrateofMainlandvisitorstoMacau over the first nine months of 2008 remained strong,at 23.1%,though the growth rate had dipped to 8.0% by September as the visa restrictions were tightened further. Notably, the number of Mainland visitors travelling to Macau with permits obtained under the Individual Visit Scheme—the target of the travel restrictions—plunged 24.6% year-on- year in that month. Macau’s gross gaming revenues for the third quarter of 2008were up 28% compared with Q3 ‘07, but were down 10% from the second quarter of ’08. It was the second successive quarter that gaming revenue had declined year-on-year, following an almost uninterrupted growth streak since 2005. It also reflects the lull this year in major new casino resort openings—since 2003, significant spikes in visitor arrivals have accompanied large new property openings to the city. The last landmark property to open was Venetian Macao (property #18 on the map overleaf), in August 2007, and the pipeline will only resume in 2009 with the unveiling of more mega resorts on Cotai. [[HERE USE db map.pdf, go to fig 24 on page 22. Put “Source: Deutsche Bank” – can put here or on the next page]] It’s too early to tell whether the consecutive revenue results represent a trend, but it looks as though they might. The prime suspect is the visa restrictions, as they were a factor before the escalation of the global financial crisis in late September. In September, turnover slipped to 6.9 billion patacas,down 3.4%on the equivalentmonth in 2007, and down 28% compared to August this year. This latter statistic represented the first fall in consecutive monthly revenue in VIP and mass market sectors combined, since 2005. VIP trade down Gross turnover from VIP baccarat— the lifeblood of Macau’s casino industry, providing on average between 65%and 70% of annual gross gaming revenues—fell by 14.2% in Q3. It was the second consecutive quarterly fall in VIP revenue since the end of Q1 this year. This touches on the essential problem with blanket rationing of Macau entry visas. It’saprettyunsophisticatedandundiscerning tool. It makes no distinction between a highly successful businessman with cash to burn in the VIP rooms and a corrupt official gambling away public money on the mass- market floor. Neither does it distinguish between a middle class Chinese person wishing to attend first a trade exhibition and then to play on the mass market tables at The Venetian, nor a pensioner couple who can barely afford the cab fare to Cotai. David and Goliath China’s gamblers are slowly showing signs of waning energy Hazy—the outlook for Macau’s gaming and tourism sectors is now less clear A typical Macau VIP room