Decline in VIP Customers Hurting Macau Casinos

macauMorgan Stanley Research Asia Ltd recently completed a detailed study of the casino industry in Macau and has concluded that the significant decline in revenue is directly linked to the drop in Macau’s VIP clientele. Macau used to bring in five times the revenue of Las Vegas but does not have a large customer basis like Las Vegas.

The report was compiled by analysts Thomas Allen, Alex Poon and Praveen Choudhary and revealed that Macau derived as much as eighty percent of its gambling revenue from these VIP customers. Initially analysts believed that VIP customers contributed close to fifty percent of Macau’s revenue but the research by Morgan Stanley puts the estimate in a much higher range.

These ‘premium customers’ used to cross over from Mainland China and spends large sums of money at the casinos and indulge themselves in the entertainment services that the casinos provided.

Beijing’s anti-corruption crackdown targeted these VIP customers as the authorities wanted to trace the source of their funds and ensure that all earnings were accounted for as per the law. This aggressive move by Beijing scared away these VIP customers from visiting Macau as they were not willing to take the risk of being investigated by Chinese authorities. They have now turned their back on Macau and have taken their business to neighbouring countries like South Korea, Vietnam and the Philippines.

Macau’s mass-market gross gaming revenue (GGR) during the first quarter of 2015 dropped by 27% when compared to 2014. VIP baccarat which is the most popular game in Macau and a favourite of VIP gamblers had a 42.1% drop in GGR revenue.

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