Macau Lead on Las Vegas shrinks in 2015

Macau is still clear and away the world’s largest gambling destination. However, its massive lead over second-place Las Vegas shrunk considerably in 2015.

According to the Macau Gaming Inspection and Coordination Bureau, gross gambling revenue fell by 34.3 percent to 231 billion patacas ($29 billion) on the year. December featured a 21.2 percent drop from Dec. 2014, which is the 19th-straight month that the Chinese gambling capital’s revenue has fallen.

In 2014, Macau collected about seven times the revenue that Las Vegas casinos did. Now, after yet another down year, Macau’s lead has shrunk to 4.6 times more venue than Vegas.

Bloomberg reports that Macau casinos lost around $45 billion in market value due to a crackdown by the Chinese government. The crackdown, which is aimed at wiping out money laundering and government corruption across the country, has scared off many high rollers.

Given these problems, Aaron Fischer, who’s runs consumer and gaming research at CLSA Ltd., doesn’t believe that 2016 holds much promise for a Macau turnaround.

“Macau has seen much greater pain in 2015 than everyone expected at the beginning of the year,” said Fischer. “It would be difficult for the first half of the year for sure because there’re not so many catalysts to drive a rebound.”

Looking specifically at the high-roller market, VIP baccarat, the leading moneymaker for Macau casinos, has fallen quite a bit. The first nine months of 2015 saw a 41 percent drop in high-roller baccarat play compared to 2014. Analysts believe that Macau’s VIP sector will experience another 13 percent fall in 2016, before finally rebounding the next year.

One more big dilemma facing Macau is their junket operators, who have mirrored the decline in VIP gambling. Junkets, or companies that recruit high rollers from the Chinese mainland, where casino advertising is illegal, are expected to see another 5 percent drop in 2016. However, their fall isn’t expected to be as significant as the overall Macau market.

“Conversations with casino operators don’t give us confidence that junket volumes improve in the New Year,” said Christopher Jones, Union Gaming Group LLC analyst. “Most seem preparing for further moderation in junket VIP in 2016.”

Overall it sounds like 2016 will be another tough year for the Macau gaming industry. However, the following year should bring more promise for a market that’s seen plenty of decline in recent months.