MGM Resorts International Delays Opening of New Macau Resort to 2017

MGM Resorts International has decided to delay the opening of its new resort in the Cotai district of Macau, due to gloomy market conditions. Gross gambling revenues in Macau fell 34% in 2015, to a five-year low of $28.8 billion from a year ago, according to Macau’s Gaming Inspection and Coordination Bureau. Gambling revenues had fallen 2.6% over 2014; the sharp drop in 2015 illustrates just how much the economic slowdown in China, coupled with the crackdown on corruption, has hit gambling in Macau.

Slow Growth and the Anti-Corruption Crackdown in China hit Macau Gambling

Real GDP growth in China slowed to 6.9% in 2015, down from 7.3% in 2014, the slowest in 25 years. China’s economic slowdown has been attributed to a fall in manufacturing and capital investment, combined with high debt levels, especially for local governments. China’s transition from an investment to a consumption driven economy is expected to make progress in 2016.

However, risks to underperformance on the growth front remain. Even if the government increases public spending, the continued overcapacity in the manufacturing sector means that manufacturing will remain weak. Manufacturing will also be hurt by the slowdown in export growth, given that China’s export market, consisting of developed economies, is also expected to see subdued growth numbers. Continued weakness in manufacturing could hurt wages, which would hit consumption spending.

The Chinese government’s continued crackdown on corruption is also likely to hit the flow of VIP customers to Macau. There has also been a crackdown on gaming promoters in Macau, the so-called junket operators, who provide credit to wealthy players. This follows the September 2015 arrest of an employee of a junket operator, who allegedly stole millions of dollars from the junket operator’s investors. Before 2015, Macau’s gambling industry relied heavily on wealthy VIPs, who constituted over two thirds of the total gambling revenues. Now, VIP gamblers only account for half of the city’s gambling revenues.

MGM Resorts Sees Losses, Delays the Opening of its New Resort in Cotai

MGM Resorts International reported a loss of $1.47 billion in the last quarter of 2015. MGM’s losses in Macau were particularly acute. Revenues declined 31% in 2015 from the 2014 levels, while income from VIP tables fell by a whopping 49%, and income from the tables on the main floor fell 14%. MGM’s Macau losses overshadowed a good performance in the US markets.

This decision by MGM Resorts came after Wynn Resorts announced that the opening of its new casino at Cotai would be delayed by three months; the opening is scheduled for July 2016 rather than the earlier scheduled date of March 2016.

Gambling Revenues Show a Small Recovery in February 2016

Gambling revenues fell by 0.1% in February 2015 to $2.4 billion from February 2014, the 21st consecutive monthly decline. Revenues had fallen by 21.4% in January 2015 over January 2014. February’s figures indicate the smallest drop since gaming revenues began their decline in June 2014.

Visitors to Macau from mainland China showed an increase over the Lunar New Year holiday in February. However, most of these visitors were just tourists, not the wealthy gamblers that have helped support Macau’s rise as a premier gambling destination, surpassing even Las Vegas. In fact, the six licensed casino operators in Macau are now focusing their attention on the so-called “mass market” gamblers, as the wealthy ones prefer to stay out of Macau and under the radar.

The long-term outlook on Macau’s gambling industry remains bullish, due to its strategic location close to the Chinese mainland, ongoing infrastructure improvements, and independent policy-making in terms of economic development.

MGM Resorts International has decided to delay the opening of its new resort in the Cotai district of Macau, due to gloomy market conditions. Gross gambling revenues in Macau fell 34% in 2015, to a five-year low of $28.8 billion from a year ago, according to Macau’s Gaming Inspection and Coordination Bureau. Gambling revenues had fallen 2.6% over 2014; the sharp drop in 2015 illustrates just how much the economic slowdown in China, coupled with the crackdown on corruption, has hit gambling in Macau.

Slow Growth and the Anti-Corruption Crackdown in China hit Macau Gambling

Real GDP growth in China slowed to 6.9% in 2015, down from 7.3% in 2014, the slowest in 25 years. China’s economic slowdown has been attributed to a fall in manufacturing and capital investment, combined with high debt levels, especially for local governments. China’s transition from an investment to a consumption driven economy is expected to make progress in 2016.

However, risks to underperformance on the growth front remain. Even if the government increases public spending, the continued overcapacity in the manufacturing sector means that manufacturing will remain weak. Manufacturing will also be hurt by the slowdown in export growth, given that China’s export market, consisting of developed economies, is also expected to see subdued growth numbers. Continued weakness in manufacturing could hurt wages, which would hit consumption spending.

The Chinese government’s continued crackdown on corruption is also likely to hit the flow of VIP customers to Macau. There has also been a crackdown on gaming promoters in Macau, the so-called junket operators, who provide credit to wealthy players. This follows the September 2015 arrest of an employee of a junket operator, who allegedly stole millions of dollars from the junket operator’s investors. Before 2015, Macau’s gambling industry relied heavily on wealthy VIPs, who constituted over two thirds of the total gambling revenues. Now, VIP gamblers only account for half of the city’s gambling revenues.

MGM Resorts Sees Losses, Delays the Opening of its New Resort in Cotai

MGM Resorts International reported a loss of $1.47 billion in the last quarter of 2015. MGM’s losses in Macau were particularly acute. Revenues declined 31% in 2015 from the 2014 levels, while income from VIP tables fell by a whopping 49%, and income from the tables on the main floor fell 14%. MGM’s Macau losses overshadowed a good performance in the US markets.

This decision by MGM Resorts came after Wynn Resorts announced that the opening of its new casino at Cotai would be delayed by three months; the opening is scheduled for July 2016 rather than the earlier scheduled date of March 2016.

Gambling Revenues Show a Small Recovery in February 2016

Gambling revenues fell by 0.1% in February 2015 to $2.4 billion from February 2014, the 21st consecutive monthly decline. Revenues had fallen by 21.4% in January 2015 over January 2014. February’s figures indicate the smallest drop since gaming revenues began their decline in June 2014.

Visitors to Macau from mainland China showed an increase over the Lunar New Year holiday in February. However, most of these visitors were just tourists, not the wealthy gamblers that have helped support Macau’s rise as a premier gambling destination, surpassing even Las Vegas. In fact, the six licensed casino operators in Macau are now focusing their attention on the so-called “mass market” gamblers, as the wealthy ones prefer to stay out of Macau and under the radar.

The long-term outlook on Macau’s gambling industry remains bullish, due to its strategic location close to the Chinese mainland, ongoing infrastructure improvements, and independent policy-making in terms of economic development.