Inside Asian Gaming

INSIDE ASIAN GAMING DECEMBER 2018 80 COLUMNISTS is working in the gaming industry alone. This makes allocating additional workers tricky. Another concern is that Macau is already the most densely populated place on earth with three times the population density of Hong Kong. Such land limitation is likely to cause great difficulty with regards to further casino developments should new licenses be granted. Despite its geographic advantage of bordering mainland China, there are now only three plots remaining – plots 3, 7 and 8 next to Sands Cotai Central on the Cotai Strip – potentially available for new properties. The concession re-tendering will also bring changes to current junket promotor licenses. Macau’s Chief Executive Fernando Chui Sai On stated in his 2017 Annual Policy Address that tightening regulations on junket operations at re-tendering is likely to create an extra thrust for casino operators to further shift their focus to premium mass. It’s notable that the 19% revenue growth Macau’s operators achieved in 2017 after a three-year decline was most heavily aided by a 27% rise in the VIP segment, whereas mass market grew by only 10%. Undoubtedly, VIP will continue to play its part in Macau, however the profit margin for casino operators in VIP comes in at around 10% after deducting the junket operators’ share and VIP rebates. By comparison, profit margin in premium mass is closer to 40%. Macau’s Gross Gaming Revenue (GGR) peaked at US$45.27 billion and US$44.16 billion in 2013 and 2014 respectively, a time when the VIP segment represented around 75% of total GGR. As Macau is the only location in China where casino gambling is legal, Chinese visitors comprised over 70% of all visitors entering Macau in 2017, which also accounted for 17% of all China’s outbound tourists and around 90% of all gambling activities by Chinese nationals. Many of Macau’s VIPs are among the 1.3 million high net worth Chinese individuals whose combined wealth totals US$4.3 trillion. However, VIP has been declining over time, even with its recent surge. Due to the impact of a Chinese Government crackdown on corruption and outward capital flow, mass market’s contribution rose from 27% in 2011 to 43% in 2017, while some new facilities like Macau is the most densely populated place on earth, making land for new developments hard to come by.