Macau’s casinos hit as punters turn to World Cup

The World Cup has been a fantastic competition, full of drama and excitement, but it has given casino operators in the world's biggest gambling hub, Macau, a real headache as punters turn away from the green baize tables towards the pitches of Brazil to place their bets.

Since the tournament began on June 12th, revenues in Macau's 35 casinos have fallen for the first time in five years. Total gross gaming revenue dropped 3.7 per cent to 27 billion patacas (€2.48 billion) in June, the first decline since the same month in 2009 when it fell 17 per cent, according to data from Macau's Gaming Inspection and Coordination Bureau.

Average table revenue dropped to HK$775 million (€73.18 million) per day from June 16th to 22nd after the World Cup kicked off, compared to revenue of HK$801 million per day the week before, representing a decline of 3.3 per cent.

"Instead of heading to the 35 casinos' tables, bettors have preferred to watch the World Cup matches in bars and bet on tournament matches," the Macau Business Daily reported.

Macau’s casino gaming revenue for the year to June was 193.09 billion patacas, up 12.6 per cent on the same period last year.

The analysts seemed non-plussed, and gaming analyst Billy Ng at Bank of America said he expected gross gaming revenue growth to return to positive in the second half of this year after the World Cup in June and July.

“World Cup headwinds should continue until the conclusion of the competition on July 13th, in our view. This once-in-every-four-years disruption of gross gaming revenue does not change our positive long-term secular outlook for Macau names,” said Sterne Agee in a research note to clients.

Revenues fell 20 per cent during the World Cup in 2010, so there is a precedence for money moving to football gambling during the world’s biggest tournament.

This appeared to be enough to boost confidence in casino shares. Galaxy Entertainment Group rose nearly 5 per cent to a two-month high in Hong Kong trading last month, while MGM China Holdings rose 3.5 per cent, and Sands China advanced 3 per cent, compared to a 1.6 per cent rise in Hong Kong's Hang Seng benchmark index.

Legal gambling

Macau is the only place in China where gambling is legal. More worrying perhaps, long term, is the difficulties facing the high-roller segment. These big spenders are brought in from mainland China by junket operators and account for 60 per cent of revenues in Macau’s casinos. The VIP punters bet at least HK$5 million per trip.

In May, nerves were rattled after a junket operator called Huang Shan disappeared owing a staggering €950 million to at least four casinos.

The high-roller segment has fallen foul of president Xi Jinping’s crackdown on graft, which has made it difficult for corrupt government officials from the mainland to channel funds into the former Portuguese colony, which reverted to Chinese rule in 1999.

The anti-corruption campaign is also increasing pressure on the casinos to follow Las Vegas’s line and diversify away from simply earning gaming revenues into leisure and tourism offerings.

Online betting

Sports betting takes place illegally online, with much of it taking place in

Malaysia

,

Singapore

,

Philippines

and

Indonesia

. On June 18th, the enclave’s Judiciary

Police

arrested 22 people involved in an illegal football betting ring, which had taken in bets of about 5.1 billion patacas, a daily average of more than 720 million patacas.

Macau is also dealing with a clampdown on the number of places in the casinos where mainland Chinese can use UnionPay cards, issued by state banks. There is a limit on withdrawal of 20,000 yuan (€2,356) per day on UnionPay cards, but mainlanders use the cards to pretend to buy items from shops from high-end jewellery and watch outlets in the casinos using the cards, but get cash instead.

No new machines will be allowed, according to Francis Tam, Macau's secretary for economy and finance, although existing terminals will not be affected.

And another development may have an even bigger impact – a smoking ban means that all casinos will become smoke-free from October 6th.

Mainland gamblers in Macau tend to sip from glasses of tea brought around by uniformed "aunties" (ayis) rather than cocktails brought around by glamorous wait staff, but they do like to chain smoke while gambling. It should be interesting to see the impact of the smoking ban.

Smoking or non-smoking, Mr Tam said he remained bullish on Macau’s economic outlook as partnership with surrounding districts in the booming Pearl river delta area was sure to increase when the Hong Kong-Macau-Zhuhai bridge is completed in 2016.