Is The Party Over? Macau Gambling Titans Post Drops In Revenue

Are the halcyon days of the Macau casino gaming industry coming to an end? Long seen as one of the leading industry locations, some of the largest players in Macau are facing large drops in revenue.

This week, Melco Crown Entertainment Limited, announced a drop in revenue of 24% for Q2 of 2015 as compared with Q2 of 2014. The company brought in revenue of $916.8 million, compared with $1.19 billion for the same period last year. Other casino operators such as Wynn have experienced similar or greater year to year comparative losses.

Macau has been a gambling haven in the Orient since 1850, when Portugal legalized gambling in its colony. When China assumed control in 1999, it kept this laissez-faire policy. China's growth as a global economic power over the past 15 years resulted in explosive growth for Macau's gaming industry.

But there are signs that the gambling industry has reached a plateau if not a decline. China's President Xi Jinping has vocally advocated to make Macau a tourist destination for pursuits other than gambling. The industry has also been affected by the general economic slowdown in China. Finally, a crackdown on corruption in China under Jinping has slowed the operations of the gaming oligarchy, which had long been used to smoothing operations along with a healthy dose of graft.

The casino operators are beginning to recognize that it is not wise to place all of their chips on the fortunes gambling. Melco, for example, is seeking to diversify its operations by constructing Studio City, a Hollywood themed studio that will focus on entertainment and not gambling. The company is bringing in heavy hitters such as Martin Scorsese, Leonardo DiCaprio and Robert de Niro to promote the new venture.

The question that has not yet been answered is whether Macau simply needs more diverse offerings to remain a revenue generating powerhouse for both developers and the Chinese government. It is possible that the slowdown is a symptom of larger issues with the Chinese economy and that the country can no longer rely upon small “havens” to act as economic dynamos.

Company officials such as Melco CEO Lawrence Ho have put on a bold face to confidently predict success for their new ventures. But it remains to be seen if the casino tycoons have yet another run of winnings in them or if they have already gone bust.