20 September 2019
Macau is being buffeted by a strong headwind, with gaming revenue down 37 percent this year. Photo: WSJ
Macau is being buffeted by a strong headwind, with gaming revenue down 37 percent this year. Photo: WSJ

Macau cold streak clouds US$20 bln expansion plans

Macau’s faltering gaming revenue is raising concerns about a slew of expansion plans worth a combined a US$20 billion.

In April, revenue tumbled 39 percent to 19.17 billion patacas (US$2.41 billion) from a year earlier, the 11 straight month of decline which included a record 49 percent drop in February.

This year,revenue is down a whopping 37 percent, the Wall Street Journal reported Tuesday.

The losing streak has been reflected in dismal earnings from Macau’s six casino operators, sending their Hong Kong-listed shares down by an average of 45 percent and prompting analysts to question their plans for lavish new casinos.

These projects were launched when annual gambling revenue for Macau, a US$44 billion market that still rakes in seven times as much as the Las Vegas Strip, was growing by the size of the Strip’s revenue each year.

Among the projects under way is Wynn Resorts Ltd.’s US$4.1 billion Wynn Palace, scheduled to open in March 2016.

On Wynn’s earnings conference call last week, an analyst asked chairman and chief executive Steve Wynn why he doesn’t slow construction of the project or scale it down.

Wynn interrupted him: “Hold on. You can’t slow it down. It’s being finished and there’s bank obligations. You can’t slow it down in Macau. The building is sitting there. The skin is on. They’re getting ready to fill the lake. Staff is hired.”

At the same time, Wynn said he is not getting straight answers from the government when he privately seeks clarity about policies.

“The government is tentative at best in responding to us. I think that’s a reflection of a little bit of their own uncertainty under the circumstances,” he said. “There’s a new boss in China, Xi Jinping, and his agenda is something that everybody is adjusting to.”

The first project to be completed — an expansion of Galaxy Entertainment Group Ltd.’s flagship resort — is expected to open this month.

Las Vegas Sands Corp., MGM Resorts International and others are also planning multibillion-dollar resort openings in the coming years.

Macau has been struggling since President Xi’s crackdown on corruption began to hit hard last year.

The campaign has brought down many top mainland officials and scared off the high-rollers who used to spend billions on baccarat in Macau, the only place in China where casino gambling is legal.

In December, as Macau observed the 15th anniversary of its return to China from Portugal, Xi paid a personal visit to the casino hub and stressed the need for the territory to diversify its economy, stating that an overreliance on gambling had caused “deep-seated problems”.

On Las Vegas Sands’ earnings call last month, chairman and chief executive Sheldon Adelson said of the outlook in Macau: “We’re sailing in uncharted waters, and I hope we don’t sink like that boat off in the Mediterranean.”

First-quarter net profit was down 34 percent from a year earlier, to US$511.9 million as profit from Macau plunged 54 percent.

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