Macau’s casino industry is showing the first signs of slowing down after seven years of breakneck growth.
Operators are reporting plunging profits. The stock values of some gaming companies have fallen, and one operator even had to lay off staff last week.
Galaxy Entertainment, one of Macau’s six gaming concessionaries, last week cut 270 jobs at two of its casinos, the South China Morning Post reported yesterday.
The layoffs affected staff at the Grand Waldo and the President – 226 local dealers and dealer inspectors, 37 expatriate pit managers and supervisors as well as seven foreign security guards.
While casino revenues shot up a better-than-expected 69.8 per cent last month – to 9.8 billion patacas (USD 1.2 billion) from 5.8 billion patacas a year earlier, gaming companies are bleeding share values.
Melco International Development’s stock fell 16.4 per cent last week, while Galaxy Entertainment shed 22.6 per cent.
Both stocks are down more than 45 per cent this year, and are trading at their lowest levels since 2005, the Post reported.
„It is a massacre. There is blood everywhere,“ a gaming analyst at a European bank told the newspaper.
„Something must be wrong in Macau. It can’t be growing at 60-plus per cent and nobody is making a decent profit.“
The paradox in the world’s biggest gaming hub is being blamed on fierce competition among the six major players.
The companies have been locked in a VIP commission war for the past few months, and now routinely hand over up to about half their casino winnings to junket agents who bring in the high-rollers, the Post noted.
This is in addition to the 38 per cent to 39 per cent government tax on gaming revenues.
As a result, casino developers are left with as little as 11 per cent of their earnings.
The government has sounded the alarm over the state of the industry, which was liberalised in 2001, with a series of cooling measures.
Last July 4, secretary for economy and finance Francis Tam announced that the number of gaming tables will be capped at 5,000 as the authorities study ways to regulate the industry, reported the Post.
The number of gaming tables in Macau had jumped from 424 in 2003 to 4,311 at the end of March, while the number of slot machines rose from 814 to 13,552 in the same period.
Three months ago, the government said it would not grant any more land for casino development, and would also not approve applications to open new casinos.
Tam will meet executives of the six gaming companies today to discuss government plans to curb casino growth.
Rules might be tightened to prevent casinos from hiring non-Macau residents as card dealers, he was cited by the Post as saying.
Beijing has also taken action to shore up the industry, which now employs a quarter of Macau’s population and accounts for 82 per cent of local government revenue.
From last week, Guangdong residents – who form one of Macau’s main source of business – can apply to visit the city only once every two months, instead of twice a month, the Post reported.
The move is seen as an attempt to rein in the junket agents who control the market for high-rollers.