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Gamblers flock Macau casinos as World Cup ends

Posted on August 4th, 2010

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The soccer World Cup momentarily robbed away gamblers from card games and slot machines resulting in a 20 percent drop of Macau’s casino revenue in June. But the end of the tournament on the 11th of July instantly ushered a strong rebound in Macau’s casino revenue as bettors returned to casinos in the world’s biggest gambling hub. At the height of the soccer tournament, Hong Kong Police had to set up a task force to crack down on illegal football betting. South China Morning Post reported that authorities seized HK$361 million ($46 million) worth of illegal bets on the football games throughout the tournament season. Gambling revenue for casinos in Macau slid to 13.6 billion patacas ($1.69 billion) in June from 17.1 billion patacas in May.

As gambling aficionados tread back to Macau’s casinos, revenue is 70 percent higher as compared to the month of July from a year earlier, according to data from Gaming Inspection and Coordination Bureau. Total revenue was 16.3 billion patacas (or $2 billion) which was 20 percent higher than revenue posted in June. The performance is further propped up by the onset of the summer holidays as more gamblers flock to Macau—the only Chinese city where casinos are legal. Deutsche Bank forecasts that the growth is expected to continue throughout August which is traditionally the peak of the summer travel season.

David Katz and Stephen Shulstein, analysts from Jefferies & Co. in New York, said the results outperformed expectations and affirmed previous analysis that Macau gaming revenue will continue on a positive track in 2010 despite mild contraction of the Chinese economy. China’s economy is cooling as the government trims down credit growth when outstanding loans increased to a record high of $1.4 trillion and discourages multiple-home purchases, according to news reported in Bloomberg.

The country’s economic growth declined to a 10.3 percent annual pace in the second quarter from 11.9 percent in the first three months of the year. But in a July 30 note to clients, Aaron Fisher, an analyst of CLSA Ltd., sees another uptrend factor for the city’s gambling operation as concerns on policy risks are over. Fisher notes Beijing’s strong support for Macau’s new chief executive, Fernando Chui, who was sworn to office in December. Macau’s casino gambling revenue surged by 67.5 percent to 102.2 billion patacas for the last seven months. Junket operators in Macau have benefited from China’s economic growth, which has ushered a lending boom. Junket operators bring in VIP gamblers to casinos in Macau and lend them money. They receive fat commissions from casinos as well.

The VIP gamblers contribute about 70 percent to Macau’s gambling revenue, Fischer and another CLSA analyst Huei Suen Ng estimate. Revenue growth from high rollers placing bets at baccarat tables, where the lowest bet per hand is 10,000 patacas, was about 124 percent in May compared with 58 percent for “mass-market” bettors, adds KarenTang, Deutsche Bank analyst. Wagers at Macau’s VIP tables can go up to as high as 2 million patacas per player. “High-limit tables at Galaxy’s flagship casino, StarWorld, account for 85 percent of the revenue”, says Chief Financial Officer Robert Dake.

The Chinese gambling capital has overthrown the Las Vegas Strip as the world’s biggest gambling hub in 2006 when Macau casinos posted record revenue of 119 billion patacas last year. Macau has since begun to be a major source of growth for Western companies that are facing weaker trends and stiff competition at home. Casinos started to sprout like mushrooms in Macau after the Chinese government ended Stanley Ho’s four-decade monopoly of the gambling industry on the territory and allowed foreign companies, such as Wynn, MGM Mirage and Las Vegas Sands Corp, to build casino resorts.

Macau, a former Portuguese colony handed back to China in 1999, now boasts of more than 30 casinos sprawling in the city centre and Cotai Strip. Based on About.com rating, the Macau’s top six casinos are the Venetian Casino Resort, the City of Dreams Macau, the Sands Macau, the Casino Lisboa, the Wynn Macau and the Galaxy Rio Casino. Just an hour away boat ride from Hong Kong, Macau has become a popular day trip for Chinese who are longing to give lady luck a run for her money. Casinos contribute 99 percent of Macau’s gambling remittance.