Beijing's glare deepens crisis in Macau

Rich Goldman Holdings

18/02/2015 21:00

* VIPs avoid Macau during Beijing corruption crackdown 
    * 60-70 percent of Macau casino revenues from high rollers 
    * Some casino VIP rooms closed, more closures expected 
    * Junket operators, pawn shops, jewellers also hit 
    * Casinos hope mass-market punters can fill the gap 
 
    By Farah Master and James Pomfret 
    MACAU/ZHUHAI, China, Feb 19 (Reuters) - China's crackdown on 
corruption and conspicuous consumption is ever more visible in 
its impact on Macau, the world's biggest gambling hub, which 
makes most of its money from the high rollers who are staying 
away to avoid Beijing's scrutiny. 
    During a recent visit to four of the city's glitziest 
casinos, VIP rooms were mostly desolate, with some shuttered and 
one boarded up, their tables covered with wood and white cloth. 
    At nearby pawn shops and jewellers, used by many gamblers to 
evade China's strict currency controls, and at money remittance 
agents in the Chinese border city of Zhuhai, there are fewer 
customers about. 
    In February last year, operators of the Chinese-controlled 
enclave's 35 casinos were riding high, their revenues for the 
month up 40 percent year on year. This year, February revenues 
are expected to fall 40 percent, having fallen in each of the 
previous eight months, too. 
    The trend is set to continue despite increasing numbers of 
Chinese tourists crossing the border during the Lunar New Year 
holidays. 
    "This is a very dangerous time," said Johnny Fok, one of 
over 100 junket operators in Macau that extend credit to wealthy 
punters and arrange transport and accommodation. 
    "It seems President Xi really doesn't want people to come 
and gamble any more ... Maybe we have to wait seven more years, 
then, after Xi has left, and only then, we might have a chance 
for things to go back to the old days." 
    China has beefed up its anti-corruption monitoring network 
in Macau with staff from the Central Commission for Discipline 
Inspection and other agencies now permanently based in the local 
liaison office, according to a regulatory official and junket 
operators. 
    Fok's business has slumped 70 percent in the past two months 
compared with a year earlier. Three of the top 10 junket 
companies have closed some of their VIP rooms in the last three 
months as Beijing's anti-graft campaign bites. 
    More closures are expected. 
    "For the next three months China will continue to crack down 
on Macau," said Lei Kuok Keong, a leader of Macau union 
Forefront of Macau Gaming, which represents junket workers and 
casino dealers. "For VIP, it is more serious. Many more VIP 
rooms will shut." 
    Phone betting, where a gambler in China calls a junket in 
Macau, and side betting, where gamblers bet several times the 
table stakes, has also tumbled due to increased scrutiny from 
Beijing, said Lei. 
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    MASS-MARKET HOPES 
    In an underground mall in Zhuhai, remittance agents, who 
help punters transfer money in and out of Macau, say banks are 
imposing tighter monitoring on large transactions, including on 
China's state-backed debit and credit card UnionPay, with 
amounts of HK$100,000 ($12,892) now requiring identity checks 
and verification. 
    That deters those wanting to remain anonymous. 
    Four shops had their shutters down around the old Lisboa 
casino, though most pawn and watch shops still offer illegal 
cash-back services, letting punters swipe their cards for fake 
jewellery purchases to get hard cash. 
    At the Blessing Watches and Jewellery outlet in the Venetian 
casino, a store manager said amounts well above permissible 
limits could still be swiped using UnionPay cards, though some 
transactions might be split into smaller amounts to reduce the 
risk of detection. 
    "We had a client who swiped HK$1 million three days ago," he 
said.  
    Just across the casino floor, an electronic notice states 
that credit or debit cards issued by mainland China banks are 
not accepted at the counters where customers buy their chips. 
    Mass-market gamblers are still travelling to Macau, and 
casino executives hope they will make up for the fall in high 
rollers, but since VIP business typically makes up 60-70 percent 
of revenue, it is a big hole to fill. 
    There will also be a lot of extra space to fill, with two 
new casinos from Galaxy Entertainment  0027.HK  and Melco Crown 
 6883.HK  opening this year in Cotai, a strip of reclaimed land 
joining two of Macau's islands. 
    The strip has more under construction, planned long before 
the slowdown struck; the base of a half-size Eiffel Tower 
replica sprouts from the ground of U.S. gambling kingpin Sheldon 
Adelson's upcoming Parisian resort, and the emerging bronze 
facade of Steve Wynn's new multi-billion-dollar casino will be 
fronted by a gondola and lake. 
    Credit Suisse analyst Kenneth Fong says the downside risks, 
which could include a full smoking ban, are more apparent than 
the upside. 
    Junket operator Fok scoffs at the idea that mass market 
gamblers could make up for the absent VIPs. 
    "These small punters," he said, gesturing towards the 
sparsely filled gaming hall, "what they spend is not even enough 
to pay the electricity bills." 
 ($1 = 7.7569 Hong Kong dollars) 
 
 (Editing by Will Waterman) 
 ((farah.master@thomsonreuters.com; +852 28431631, +852 9631 
8262; Reuters Messaging: 
farah.master.thomsonreuters@reuters.net)) 
 
Keywords: MACAU SLOWDOWN/