2015 in review | WSJ: A ‘rotten’ year for the gaming industry

This photograph taken with a tilt-shift lens shows part of the Cotai

This year has been a wild and unpredictable one for Macau’s gaming industry, which has suffered from repeated complications and is now mired in the worst recession of its short history.
In a yearly review of the gaming industry published yesterday by the Wall Street Journal, it’s mentioned that the upcoming release of the gross gaming revenue indicators for December will provide a full picture of the damage done this year. WSJ’s Kate O’Keeffe notes that by then, “Macau’s rotten 2015 will become official.”
Gross gaming revenue, by most forecasts, is expected to fall by approximately a third year-on-year. Although some investors hope that a recovery will materialize in early 2016, others warn that long-term trends in mainland China could mean that the VIP sector – historically the “moneymaker” in Macau – is gone for good.
According to the WSJ, investors who had been bullish on Macau’s casinos have grown frustrated with the prolonged recession. As of Tuesday’s closing price, the shares of the five major Hong Kong-listed casino operators had fallen by an average of 48 percent over the course of 2015.
Indeed, the effects of President Xi Jinping’s anti-corruption crackdown and the new, tighter banking regulations have compelled casino operators and junkets to adapt to a whole new ball game.
The MSAR’s gaming enterprises are expected to shoulder the recession with minimal long-term consequences, even as they make significant, costly investments to improve mass-market facilities, such as Melco Crown’s Studio City.
Junket operators, however, fared far worse throughout 2015. Some analysts, having observed the value of gaming revenue from VIP clients tumble by up to 44 percent this year, are questioning whether their Macau operations could be abandoned in the near future.
“The situation in Macau is like it was in the late 1990s ahead of the handover,” said Agnes Lam, a scholar at the University of Macau and president of the Macao Civic Power. She declared to the Wall Street Journal, “something big is going to change. The power will shift.”
The first few months of 2016 are expected to set the tempo for the rest of the year. While some are predicting a gradual recovery, others are far less optimistic.
Analysts at Daiwa Securities Group forecast another 5 percent drop in gambling revenue in early 2016. Staff reporter