Full smoking ban to have negative impact, gaming experts predict

The implementation of a full smoking ban in casinos will have a negative impact on gaming revenue, said Grant Govertsen, gaming analyst and managing partner of Union Gaming Research Macau.
Mr Govertsen claimed the, “policies that are being discussed are detrimental to the industry rather than supportive of the industry, namely smoking.”
Speaking on the sidelines of a panel discussion titled “A Year of Two Halves: The 2015 Asian Gaming Market,” which was held yesterday at the Global Gaming Expo (G2E Asia), Mr Govertsen stressed, “There’s no way [the smoking ban] wouldn’t have a negative impact on gaming revenue.”
“If you say you have to physically leave the casino to go to the sidewalk to have a cigarette, that will interrupt game play and that will have a material impact on revenue,” he told The Times, adding that other markets implementing full smoking bans have seen revenue fall between 15 to 20 percent.
The Secretary for Social Affairs and Culture, Alexis Tam, recently said that the government “stands firm” on its intention to implement a full smoking ban.
This means smoking would be prohibited not only on mass gaming floors, but also within VIP rooms, where gamblers are currently still allowed to smoke. Current smoking lounges in mass gaming floors would also be forced to close if the plan is approved.
During a Legislative Assembly (AL) plenary meeting held last week, some lawmakers raised concerns over the potential impact of a full smoking ban on Macau’s gaming revenue, which dropped again for the 11th straight month in April.
The new policy and its impact on Macau’s economy, however, divide lawmakers, gaming analysts and experts.
In an interview with the Times, Andrew W Scott, CEO of World Gaming Group, also acknowledged that, in the short-to-medium term, a full smoking ban would have a negative impact. However, he expressed that, “smoking is a dying activity and in 100 years from now nobody will smoke. Smoking is on the way out; we’ve got to get over it.”
“We need to implement our smoking ban, get a new normal from it. It’s not a popular thing to say amongst gaming operators, but it’s something that eventually is going to go. And the revenue will bounce back as the prevalence of smoking becomes less and less,” he added.
Aaron Fischer, regional head of Consumer & Gaming Research at CLSA Limited, told reporters yesterday that he sees the full smoking ban as a positive change, particularly for casino employees who will no longer be subject to second-hand smoke. But he too thinks that, “It’s probably somewhat negative for the gaming revenue.”
As several gaming experts shared diverse insights on Macau’s gaming industry at G2E Asia yesterday, many agreed that the city’s gaming revenue will continue to decline in the coming months.
Mr Govertsen recalled that the downturn is not likely to change this year, while China’s anti-corruption campaign is still predominant.
“The key to Macau turning around is the anti-corruption campaign in China beginning to wane,” he reiterated, adding that, “it has to happen at some point. I think at some point customers who have decided not to come to Macau will begin to comeback slowly.”
On the other hand, Aaron Fischer recalled that the anti-corruption measures in China are here to stay. “That’s resulted in a significant decline on VIP revenues. In 2013, the VIP revenues were USD30 billion and we had that declining to USD18 billion this year. I think 75 percent of that decline is due to anti-corruption measures in China. And those gaming revenues are not coming back,” he warned.
The director of Asian Research for Bloomberg Intelligence, Tim Craighead, shared a more optimistic view on the future of Macau’s gaming industry.
He told reporters that they are relatively optimistic looking into 2016: “A combination of economic stimulus in China can stabilize the economy, and [trigger] inflation and improvement in the housing market, which tends to correlate well with the gaming revenue growth.”
Furthermore, he concluded that once “the anti-corruption push in China starts to normalize in people’s minds, and there’s not much of a concern about conspicuous consumption, then that will clearly be an important [point of variation] to monitor, not only for the gaming business but also for luxury goods, and for travel.”

Junkets ‘play unique role’

Macau junkets play a very unique role in the gaming industry, and it’s premature to say that the junket system has been broken, said the managing partner of Macau-based gaming consultancy IGamiX Management & Consulting Ltd., Ben Lee, who moderated a G2E Asia panel discussion yesterday. He told the Times that whenever the economy dives, the VIP market dives much quicker than the mass market. “Junkets have a unique role to fulfill. That role will only change if casinos can market directly in China. If the casinos can issue credit and collect on debts in China, then there’s no need for junkets. Will that ever change? If the answer is no, then there’s a need for junkets,” he said.

Gov’t investment in infrastructures is key

Aaron Fischer, a gaming analyst and regional head of Consumer & Gaming Research at CLSA Ltd., believes that a tourist cap will not be implemented in Macau, although the government has proposed to limit the number of visitors to 21 million per year. Mr Fischer told reporters yesterday that the city can cope with more tourists if it has the right infrastructure in place. “As hotel capacity is being added over the next few years and there’s quite a big increase, I think Macau could absorb quite a number of tourists, but the government has to invest heavily in terms of infrastructure,” he stated. He added that he believes the government “has been under-investing in infrastructure over a long period of time and that needs to change.”

G2E Asia kicks off featuring 180 exhibitors

G2E Asia, which is organized by Reed Exhibitions and the American Gaming Association (AGA), kicked off yesterday at The Venetian Macao, with 180 exhibitors displaying gaming products and services while industry experts discuss the future of gaming.
Mr Hu Wei, president of Reed Exhibitions China, said at the opening ceremony yesterday, “This year marks our ninth anniversary and, nearly a decade on, G2E Asia continues to be the one-stop destination for gaming decision-makers in Asia and abroad.”
This year, for the first time the event features a new pavilion focusing on nightlife and entertainment, set up in partnership with the Macau International Clubbing Show. It will feature entertainment and event management products and services. Furthermore, Mr Hu said that for the first time G2E Asia has launched an auto-matchmaking system, which is designed to match visitors with exhibitors, resulting “in hundreds of matching results.”
Organizers are calling this year’s G2E Asia the biggest edition ever, as 500 privilege members and 9,000 attendees from Asia and overseas have registered.