A recent slump in Macau VIP gambling revenue may be linked to an increase in baccarat gaming by Chinese gamblers in Las Vegas, according to a memo from Union Gaming Research LLC. The latter may be related to political issues within mainland China.
The Nevada Gaming Control Board recently announced game sales for June 2014 in Clark County, which includes the Las Vegas Strip. According to the results, baccarat wins (less prize money) increased by 155 percent year-on-year to about $134.2 million.
"We've seen three straight months of strong baccarat games now," says Union Gaming analyst Robert Shore.
"We believe there is a correlation between the recent strength of Las Vegas luxury play and the weakness of Macau VIP play. Recent commentary and channel checking have shown an increase in Chinese visitors to Las Vegas strip accommodations. This is consistent with our thesis that the main driver of Macau VIP softness is politics, not economy," Mr. Shore added.
In early June, Japanese brokerage firm Nomura warned that the 2014 FIFA World Cup soccer tournament will play a role in putting a damper on Macau's VIP gambling demand.
According to analysts, VIP income fell 20 percent in June from a year earlier. However, if the softness of the high roller sector continues into July - a tournament that ended on July 13 - analysts will consider other factors.
Credit Suisse Group AG said in a note issued in Hong Kong on July 21 that total Macau game sales in July were down 5% from 3% a year earlier.
According to data from Macau's Bureau of Game Inspection and Coordination, VIP contributions to total game sales in Macau dropped to 60 percent in the three months to June 30. The decline coincided with a widely reported crackdown on corruption in mainland China. The crackdown actually began in the fall of 2012, but seems to have intensified recently. Mainland Chinese media say it includes more scrutiny of spending by senior officials and senior managers of state-owned enterprises.
According to data from the U.S. National Travel and Tourism Administration, the number of Chinese tourists visiting the entire U.S. in 2013 increased by 23 percent to 1.81 million.
"Drops were up 57.4% at 12.4% hold but 150 basis points below average LTM (last 12 months), but up 470 basis points from the previous year," Union Gaming said in a note on the Las Vegas strip's baccarat June figures
"For reference, if you look at the recent average monthly volume, the 100 bps swing could explain the win or loss of about $10 million in either direction. We have now seen strong bakara volume growth for the third consecutive month (+19.7% in April, +26.4% in May and +57.4% in June)."
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