Macau: Ballooning with hot air?

New Implications for Macau Casinos

Many analysts start to question once again, about Macau casino industry and its future outlook. New doubts arise because of the territory’s VIP gaming landscape seems to be ballooning with hot air.

Inside Asian Gaming has raised the only one sensible question of whether Junket VIP driven market demand is sustainable? Yet there is no sign of this situation will ever changed in the near future, albeit Beijing’s intervention from time to time. It is a forgone conclusion that Macau’s Junket network for VIP players will continue to command a larger market share in casino revenue so long as the gaming tax regime remains at 40%. Casino operators in Macau have been squeezed into tight corner by the gaming tax coupled with huge capital investment needed, they have basically run out of other viable options but to allow Junket syndicated groups to take the lead in order to churn up rate of turnover and top line revenue.

Soon Chinese premier Wen will visit Macau and many are speculating that he will pull the plug on the casino overheating problem. New measures may be released in due course to control illegal funding coming into Macau for the casinos. Beijing has been tracking the trends and has good reason to be worried, in that more and more Chinese officials are involved in casino gambling as well as involved with syndicated networks for money laundering. It is not a good situation when American casinos increasingly get to master the list of Chinese officials who are visiting their casinos and worse still, with list of officials who are in huge gambling debts.

The basic broad strategy that is apparently used by Beijing has moved towards creating “saturation point” for major casino operators (i.e. the Big Six). Over time, if only half of the Big Six can survive on low margin war among them, the territory’s casino landscape will grind to a hault with no further expansion is viable and businesses will inevitably divest capital for non-gaming development. Natural attrition will take its course.