HONG KONG • Casinos in Macau, the world's biggest gambling hub, are poised for the first decline in annual gaming revenue since 2016 and next year may not be much better as China's economy slows and rising Asian hot spots such as Vietnam lure high-rollers.
Macau, which celebrates the 20th anniversary of its handover from Portugal this month, is facing its biggest challenges since a Chinese government crackdown on corruption five years ago.
The enclave, relied on by operators including Las Vegas Sands, MGM Resorts International and Wynn Resorts for the bulk of their revenue, will find it difficult to return to the double-digit growth of the past.
"All of the juice has been squeezed out of the orange," said Mr David Bonnet, a contributing analyst at Bloomberg Intelligence. "Macau is starting to resemble more mature competitive markets such as Las Vegas and Atlantic City."
Analysts forecast on average that Macau's gaming revenue will swing from 14 per cent growth last year to a decline of 3 per cent this year. They predict an improvement of 3 per cent next year.
A Bloomberg Intelligence index of Macau casino operators has dropped 20 per cent from a peak in late April. It fell as much as 0.9 per cent yesterday.
The industry went into 2019 expecting a difficult year as the US-China trade spat weighed on China's economy. Although hopes were raised in April for a second-half recovery, the rest of the year presented one setback after another, including the protests in Hong Kong that have slowed the number of tourists to Macau.
One of the biggest blows was the absence of high-rollers, or VIP gamblers. Macau, the only place in China where casinos are legal, has made its money for decades on a few thousand rich gamblers. That group is now more likely to place their bets on emerging gaming hubs in South-east Asia, as junket operators - middlemen who extend credit to wealthy gamblers - shift to those places.
The biggest, Suncity Group Holdings, is set to open a Vietnam resort in the first quarter, the launch of which "could result in the redirection of a material chunk of VIP play from Macau", said Union Gaming analyst Grant Govertsen.
The resorts in regional hubs "will be stunning," said Mr Ben Lee, a Macau-based managing partner at Asian gaming consultancy IGamiX.
One of the biggest threats may come from Japan, which is likely to emerge as Asia's second-largest gaming hub after a landmark Bill legalising casinos was approved last year. All six Macau operators have expressed interest in setting up a resort in Japan, which has the potential to see gross gaming revenue reach US$20 billion (S$27.2 billion) annually, brokerage CLSA predicts.
Casinos are racing to build bigger and flashier resorts to offer more options. Not only will that help replace weaker VIP revenue, it will also keep the casinos aligned with Macau's guidelines for providing more family-friendly attractions.
Las Vegas Sands is building more rooms designed for tourists as part of its renovation and rebranding of the Londoner resort. Wynn Resorts recently unveiled a US$2.8 billion non-gaming project in Macau, including a theatre, art gallery, food pavilion and gardens.
Mr Robert Goldstein, president of Las Vegas Sands, said China's middle class can still power Macau growth in the years ahead.
"The investment proposition in Macau, going back to the beginning, was always one billion or so people at your doorstep," he said in a conference call. "We've always believed that the engine here would be, and should be, all those people across the border."