Corruption Crackdown Sends Gamblers Flocking from Macau to Las Vegas
China’s big spending, gambling elite are beginning to seek out the bright lights of the Vegas Strip amidst a massive government assault on corruption and extravagance.
It would seem as if Chinese businessmen and frequenters of Macau have grown tired of the assault by the government of the Peoples Republic of China and are looking to spend their money at other casinos.
So far, Las Vegas has shown a spike in revenue and it would seem both Melbourne casinos and those found in the Phillipines are both fighting to attract Chinese VIP’s that would usually play in Macau casinos.
Casinos around the world are spending a fortune on private jets, gourmet food and offering the use of private villas in an attempt to attract the big spending Chinese businessmen. Macau, the one place that offers legalized gambling in China, has suffered from three straight months of declining revenues due to the crackdown, which is only growing in strength.
MGM Resorts International and Wynn Resorts, the two biggest names on the Las Vegas Strip, have both posted revenue numbers that have exceeded early estimates, all due to the increase in high rollers flying over from Macau to play high stakes Baccarat, a game favored by Chinese gamblers.
Praveen Choudary, an analyst working at Morgan Stanley in Hong Kong said in an interview: “Since the scrutiny has intensified, gamblers are instead spending time away from Macau” he went on to add, “rich and famous gamblers are lying low and junkets have turned cautious in extending credit to worthy people”.
The crackdown in Macau has turned the odds, for the first time in many years, in Las Vegas’ favour as revenue on the Las Vegas Strip has increased by 3.7% from December last year numbers of $3.7 billion to July numbers this year peaking at $4.1 million. A number that has largely been influenced by the 14.4% increase in Baccarat revenue.
“Las Vegas is a brand that is clearly world-renowned and that people continuously want to come to” said Dan D’Arrigo, the Chief Financial Officer of MGM Resorts via a telephone interview with the Sydney Morning Herald.
However, as big a revenue spike as Las Vegas is enjoying, Macau still remains the biggest gambling center in the world and, even despite the recent decline in revenue, still managed to generate $45.2 billion in 2013. Revenues that are seven times as large as Las Vegas and even that of the entire USA which managed to generate $36.5 billion in 2013.
However, according to Praveen Choudary of Morgan Stanley, “The impact on Macau gaming aided in the decline of other industries like lodging, food and beverage, events and luxury retail”, and would cause the revenue generated by the city, not just the casino, to decline as well for a further six to nine months.
Junket operators, the ones that organize gambling and casino trips for a host of wealthy Chinese VIP’s, are leading the gamblers away from Macau and taking them to other casinos across Australia, Europe and even America. Avoiding Macau has enabled the gamblers to carry on playing, while not having to endure the spotlight cast on them and their habits by the Chines Government.
The recent labor unrest in Macau is yet another reason the players are shying away from the city. Labor unions in the City say they are planning even more strike action including the possibility of industrial action during the annual China National Day celebration which lasts a week, starting from October the 1st.
But, Macau operators are not going to easily give up the crown just yet and are even going as far as to allocate more resources in an effort to lure ‘mass-market gamblers’ who bet in cash.
The ‘mass-market gamblers’ are able to provide wider margins than the VIP’s as the high rollers tend to rely on credit from the various operators who would then collect their money from the casinos.
To encourage the new gamblers, the Sands China reduced VIP table capacities by 28% and allotted the spare tables for the ‘mass-market gamblers’ in an aim to reduce the casinos reliability on high rollers said Sands Chief Executive, Sheldon Adelson
It would seem as if the shift towards the ‘mass-market gambler’ would be a more lucrative business and one that would be less volatile than relying heavily on the VIP’s. But as it stands, only time will be able to tell if the new approach will be accepted by the Chinese Government and be profitable for Macau.
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