Casinos bet on Macau growth but China a wildcard

Tue May 22, 2012 6:28am EDT
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By Farah Master

MACAU (Reuters) - Gaming executives and industry players gathering for a convention in Macau on Tuesday may have to finally confront what they have been predicting for the past two years -- a sharp slowing of growth in the world's hottest gambling market.

As China's economic expansion slows and high rollers from the mainland become more cautious, growth in Macau's gambling revenue could ease to around 11 percent year-on-year in May, analysts say. That is a healthy number, but a far cry from the up to 70 percent monthly growth rates seen in 2010 and even the 22 percent growth in April.

If May's growth is confirmed at 11 percent, it will be the lowest number recorded since July 2009. But revenues will still be a record for a single month.

"We are on the 18th month of a gradual decline rate. May will likely see a notable slowdown in the growth rate, but a record overall number," said Grant Govertsen, Managing Partner at Union Gaming Research in Macau.

The three-day conference at the Global Gaming Expo Asia, known as the G2E, focuses on the outlook for gambling in the region. Of particular interest is the emergence of new casinos being built in Macau, the Philippines and Vietnam at a time when growth is slowing in the formerly turbo-charged Asian economies.

Revenues in Macau, once a sleepy Portuguese fishing village and now a boom town and the biggest gambling market in the world, will be closely watched by Asian peers. Of particular interest is how much Chinese VIP spenders will be crippled by bad debt and the impact that will have on their gambling.

Macau, where casinos raked in $33 billion last year, is expected to make around $40 billion in 2012, with a growth rate estimated at 18 to 25 percent, down from 42 percent in 2011. High-spending Chinese gamblers account for around 70 percent of revenues, but their spending is dropping, analysts say.

The gap is increasingly being made up by China's emerging middle class, which has swarmed Macau's baccarat tables in record numbers. The mass market, made up of these newly moneyed Chinese, has so far been able to offset a dip in VIP revenues.   Continued...

Attendants learn a poker game before introducing them to visitors at Gaming Expo Asia in Macau May 22, 2012. REUTERS/Bobby Yip