Crown’s $4 Billion Studio City Unable To Stop Macau’s Casino Decline
When Wynn Resorts and Crown Resorts decided to build new casinos on the Cotai Strip in Macau there were never any concerns about the success of these casinos for Macau was the biggest gambling hub in the world and a haven to VIP gamblers and high-rollers from Mainland China.
The launch of Beijing’s anti-corruption crackdown during the start of 2014 quickly changed the vibe of Macau’s casino industry as the authorities cracked down on money laundering, corrupt officials, prostitution and racketeering which scared away this VIP gamblers.
Macau’s casinos experienced a decline in revenue but many believed the anti-corruption crackdown would stop in a few months.
The casinos were wrong as Macau’s government has continued the crackdown for the last 18 months and gaming analysts believe that it will continue into 2016.
The gambling industry in Macau which generates the bulk of Macau’s government budget has suffered a decline for the last 17 consecutive months and more than $100 billion has been lost by the casino industry. Macau’s image has quickly changed from being a haven to the gambling industry to becoming a strict and highly regulated market that is more suited for mass gamblers than VIP customers who were once responsible for generating well over 50% of Macau’s total casino revenue.
Australian billionaire James Packer’s Crown Resorts had to open its $4 billion Studio City casino on the 27th of October 2015 in the midst of the gambling market meltdown. Packer called in a number of celebrities including Packer’s girlfriend and R&B diva Mariah Carey, Leonardo DiCaprio and Robert DeNiro as he wanted to have a grand launch and pull in as many new customers as he could to Studio City.
In a statement, Vitaly Umansky, a senior analyst from Bernstein said
From now until early next year, we expect no material rebound of market gross gaming revenue, although the year on year decline rate should taper to below 30 per cent level and mass may reach positive year on year performance in early 2016. Our analysis suggests that it generally takes around one and a half years to fully ramp up a new casino’s mass operations. Therefore, we believe it is too early to draw conclusion on whether Studio City can grow Macau’s mass market by simply extrapolating the first few weeks of operations.
Studio City has already downgraded its hotel from being a 5 star property to a 4 start property and also changed its gambling strategy which will now focus on mass market gamblers in an effort to build a bigger customer base and generate revenues to help the casino make consistent revenue.
