Last updated: 02:29 PM ET, Mon May 04 2015

Future of Macau's Gaming Industry Murky

Destination & Tourism | Ryan Rudnansky | May 04, 2015

Future of Macau's Gaming Industry Murky

PHOTO: Construction on the Cotai Strip (The soon-to-be Parisian in the bottom right corner) (courtesy Ryan Rudnansky)

It’s an interesting time for Macau, China, these days.

If you look out on the Cotai Strip from the Sands Cotai Central complex, you can see several buildings under construction, including the base of an Eiffel Tower replica. It’s the beginning of what will become The Parisian hotel, part of Las Vegas Sands’ $2.7 billion project that will feature a variety of French-themed attractions when it’s complete.

Looking out from Sheraton Macao Hotel, Cotai Central (the largest Sheraton in the world), you can’t help but be in awe of the Cotai Strip’s present … while imagining its future.

But despite the fact that six construction projects are currently under way (representing 12,000 future hotel rooms), the future of Macau’s gaming industry is unclear right now.

How can this be, you may ask? Heck, The Parisian alone will have the capacity to accommodate 450 gaming tables and 2,500 slot machines and electronic table games when it’s finished.

Well, in case you haven’t heard, there’s been somewhat of a crackdown on corruption since Chinese President Xi Jinping took office. This has not only exposed several top officials, but it has also deterred the high rollers that helped Macau grow its massive gambling industry from lighting up Macau’s casinos today.

According to official data released on Monday, Macau’s gambling revenue plummeted 39 percent in April, compared to April of last year. It marked the 11th straight month revenue has taken a dive. In the first quarter of 2015, gambling revenue has dropped 37 percent, compared to the same period last year.

MGM Resorts International reported on Monday that first-quarter revenue dropped 11 percent, year-over-year.

A big reason for that?

Its MGM China Holdings Ltd. unit fell 33 percent to $630 million, with VIP table-games revenue falling by 45 percent and main-floor table games revenue dipping 13 percent.

One man who has a stake in Macau’s future is Steve Wynn, whose $4.1 billion Wynn Palace is slated to open in Cotai by early 2016.

In a conference call with analysts last week, Wynn expressed frustration, saying that there was “no question” that Macau’s atmosphere “has changed and become cloudier in terms of predictability and consistency,” according to GGRAsia. Complications range from how many tables the government is willing to allocate (a cap on table growth remains in effect) to the delays surrounding the region’s light rail transit system (LRT).

Because of the cap, Sands China — a subsidiary of Las Vegas Sands — ended up moving tables from its existing properties to Sands Cotai Central in 2012. It’s possible that Galaxy Entertainment Group Ltd and Melco Crown Entertainment Ltd do the same with Galaxy Macau and Studio City, respectively.

But walk around Sands Cotai Central now, for one, and the casinos are oddly quiet. It certainly doesn't scream “$44 billion industry.”

Look at the Cotai Strip today and you can envision a string of hotels and entertainment complexes popping up in the coming years, drawing comparisons to the Las Vegas Strip.

The only question is: How much gaming revenue can the Cotai Strip actually produce?

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