Chinese High Rollers Spur 42% Growth In Macau’s Casino Revenue
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Casino gambling revenue in Macau grew by 42 percent in 2011 to a record $33.47 billion, thanks to an ever-increasing flow of wealthy mainland Chinese who flock to the sole Chinese territory where casinos are allowed to operate.
The total revenue is believed to be about five to six times higher than what gamblers in either Singapore or Las Vegas were thought to have spent during the same period, with estimates by accounting firm PricewaterhouseCoopers claiming that the industry would be able to double its revenues within the next five years.
Casino gambling revenue in Macau grew by 42 percent in 2011 to a record $33.47 billion, thanks to an ever-increasing flow of wealthy mainland Chinese who flock to the sole Chinese territory where casinos are allowed to operate.
The total revenue is believed to be about five to six times higher than what gamblers in either Singapore or Las Vegas were thought to have spent during the same period, with estimates by accounting firm PricewaterhouseCoopers claiming that the industry would be able to double its revenues within the next five years.
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[quote]“Following the 57 per cent growth in Macau’s gaming revenue in 2010, nobody expected the market to grow at the rate that we have seen,” said Aaron Fischer, Asia head of consumer and gaming research at Hong Kong-based brokerage CLSA, to the Financial Times.[/quote]“At the beginning of 2011, we were expecting a 20 per cent growth for that year, and we were among the most bullish in the sector,” he added.
The boom in the gaming industry in Macau stands in sharp contrast to US-based venues such as Las Vegas, which have been suffering from declining revenues due to the effects of the global downturn.
While Chinese gamblers are not thought to be immune from the economic slowdown, the average Chinese gambler is believed to “bet up to 10 times more than his American counterpart” during a round of gaming at a Macau casino.
About 16 million mainland Chinese visited Macau in 2011, an increase of more than 20 per cent on the previous year, and 60 per cent more than the 10 million who visited in 2006. According to the BBC, Macau has been looking into various ways in order to expand transport links and accommodation facilities for the surge in mainland visitors.
Presently, there is a new railway that connects Macau and Guangzhou that aims to reduce travel time from the mainland, as well as the Hong Kong-Zhuhai-Macau road bridge. Ferry services also take passengers from Hong Kong to Macau, while the Macau International Airport regularly receives flights from mainland Chinese cities such as Beijing and Shanghai.
Newer and larger casinos also sprout out constantly in the former Portuguese colonial outpost, which have transformed from a sleepy fishing village into a glitzy and bustling tourist destination.
In May 2011, the Galaxy Macau opened in with 450 gaming tables and 2,200 hotel rooms.
The Sands Cotai Central, a casino resort, is scheduled to open in 2012 with 300,000 square feet of gaming space and 5,800 rooms, said Mabel Wu, senior press officer at Sands China.
Today, Macau is the world’s largest gambling market, surpassing Las Vegas in 2006. Shares of Galaxy Entertainment Group Ltd, owner of Galaxy Macau casino in May rose by 62 percent last year, with those of Melco International Development Ltd and Sands China Ltd rising by 30 percent and 29 percent respectively. The gains in these casino holding groups was a sharp contrast with the 20 percent decline in Hong Kong’s benchmark Hang Seng Index last year.
Still, there is some concern in the market over whether Macau can sustain its recent explosive growth in gambling revenue, particularly those that come from VIP gambling, which accounts for nearly 75 percent of all gambling revenue in the Chinese territory.
Their capital positions “aren’t as strong as the street believes,” said Wells Fargo analyst Cameron McKnight in a recent report cited by the Wall Street Journal.
A “modest decrease in VIP junkets’ working-capital efficiency, which is very likely in a slowdown scenario, could eliminate the majority of junkets’ surplus capital,” he wrote.
