3 Alarming Trends in Macau

Gaming Revenue Is Falling Off a Cliff

• Gaming revenue has dropped to levels not seen since 2011.

• February gaming revenue fell 48.6% to $2.4 billion.

Source: Macau Gaming Inspection and Coordination Bureau. Chart by author.

Why Gaming Is Down in Macau

• The Chinese government has been cracking down on corruption and money laundering.

• Junkets that once fed the VIP market have come under pressure, and many have closed their doors.

• High-rollers who gambled millions in Macau have hunkered down and delayed or eliminated once-regular trips to Macau.

A Building Boom Is Coming

• While business is struggling, casino operators are building new supply.

• All six concessionaires plan to open new resorts in the next three years.

• Las Vegas Sands, Wynn Resorts, and Melco Crown are building new hotels (seen on the right) that could cannibalize their existing businesses.

Source: Las Vegas Sands (top left), Melco Crown (right), and Wynn Resorts (bottom).

No One Saw This Coming

• The Macau gaming market seemed constrained by supply, not demand, until summer 2014 when revenue began to decline.

• By the time the downturn began, shovels were in the ground on a massive expansion on Cotai.

• If the weak conditions continue, we could see major declines in profits for all gaming companies, no matter what market they serve.

The party for gaming companies looked like it would never end:

And It Is Not Just a VIP Problem

• VIP gaming revenue fell throughout 2014, but until Q3, mass market play remained flat.

• In Q4, revenue dropped 20% Q/Q, showing that mass market may be a problem in 2015 as well.

The VIP segment has struggled the most, but the problem is bleeding into the mass market.

Source: Macau Gaming Inspection and Coordination Bureau. Chart by author.

Macau Faces Challenges It Has Never Seen

• Year-over-year comparisons will be difficult, and it is uncertain if or when players will return.

• The Chinese economy, which supplies most of the Macau region, is starting to sputter.

• The crackdown on corruption and money laundering will continue this year.

• New resorts will mean greater competition for revenue in the next few years.

2015 will be the toughest year for U.S. gaming companies in Macau since they entered the market in 2004

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