Macau casino revenues collapse

James Packer’s Macau casino joint venture and the poker machine maker Aristocrat Leisure have been hit by further headwinds with gaming revenues in the territory falling for the third consecutive quarter.

Gaming revenues in Macau slumped 7 per cent in the three months to December 31 to 24 billion patacas (AUD 4.5 billion), compared to growth of up to 67 per cent in 2007. They include bets on table games and on poker machines in casinos.

The fall comes as Melco Crown Entertainment prepares to open its new AUD 2.2 billion City of Dreams hotel and casino and as the ailing poker machine maker Aristocrat was pinning its hopes on increasing sales to the market.

Mr Packer is relying on the success of the City of Dreams to vindicate his decision to invest billions of dollars of his own money and investors‘ funds in Macau after his purchase of a casino licence for AUD 1.3 billion.

Gaming revenues are expected to fall further this year with the Macau Government predicting they will average 21 billion patacas each quarter.

The 31 casinos in the former Portuguese colony responded to falling visitor numbers by closing 300 of the 4300 gaming tables and removing 1000 of the 12,800 poker machines in the quarter.

Aristocrat is the top supplier of machines to the Macau market, with more than 60 per cent of the market, giving it about 7000 machines. It had hoped that the total number of machines would grow to 35,000 in two years but this now appears unlikely.

It sold some machines to Mr Packer’s City of Dreams casino, which aims to lure high rollers to its 500 tables when it opens in the middle of the year.

But it will have to compete with the established casinos for customers and will open in a virtual ghost town as neighbouring casino developments have been shelved due to the credit crisis and a downturn in the world’s largest casino market.

Turnover on VIP baccarat games, which are the biggest single source of revenue in Macau, were the hardest hit in the past three months, falling by 9 per cent from 17.2 billion patacas to 15.6 billion, according to the Macau Gaming Inspection and Coordination Bureau. They had been as high as 21 billion patacas in the first quarter.

The VIP segment makes up about 66 per cent of gaming in Macau and is the biggest contributor to Melco Crown Entertainment’s Macau casino.

The falls were expected as fewer gamblers visited from mainland China last year, after five consecutive moves to tighten visa restrictions by Beijing.

Last week Mr Packer’s business partner, Lawrence Ho, said he expected China to ease visa curbs on tourists in coming months.

VIP revenues have also been stung as the operators of group gambling tours, who lend money to casino visitors, find it harder to get credit from banks.

Melco Crown has cut wages by about 8 per cent and forced its 3610 staff to choose between taking two and six months‘ unpaid leave.

The company plans to save USD 25 million (AUD 38 million), or 10 per cent of its salary base, by making staff stay home each month. Its only existing casino, Crown Macau, has also lost up to 10 per cent of its market share since April.