Inside Asian Gaming

December 2008 | INSIDE ASIAN GAMING 13 The credit crunch could take the shine off Macau’s VIP rooms Cover Story in 1H2008, the current tight credit environment would make it difficult for junkets to raise capital; and second, VIP players may take longer to repay their debt, which would reduce the multiplier effect of junkets’ working capital on the rolling volumes,” says the analysts’ report. “We estimate 17% gaming revenue decline in 2009E (similar to 1998 which saw -18% decline).” Goldman Sachs points out that even though revenue growth in Macau correlates less strongly with feeder market GDP growth than is the case in United States’ gaming jurisdictions, the Macau gross has shown volatility in previous cycles, with spikes during bull markets and troughs during bear markets. “In the last economic downturn, Macau’s gaming revenue fell -18%/-11% in 1998/99 but grew +29% in 2003; VIP gaming revenue fell -25%/-7%, but rose +36%, respectively,” says the report. A crucial factor in the Macau revenue mix since 2003, however, is the implementation by China of the Individual Visit Scheme in 2003, the research paper points out. The IVS allows residents of selected cities in Mainland China to travel to Macau unescorted. Up to 2002, the year Stanley Ho’s 40-year casino monopoly ended, only 20% of Macau’s visitors came from Mainland China. By the end of 2003, the proportion had risen to more than 50%, as Inside Asian Gaming reported last month. However the benefits of the IVS scheme are likely be muted End in Sight for Travel Restrictions? Recession could lead to China relaxing travel rules, says Goldman Sachs Macau’s border traffic could soon heat up again