GGRAsia – Macau’s revenue downturn cyclical: Adelson

Macau’s revenue downturn cyclical: Adelson

Feb 04, 2015 Newsdesk Latest News, Macau, Top of the deck

Sheldon Adelson (pictured), chairman of casino operator Las Vegas Sands Corp, said at an event on Wednesday that the downturn in gross gaming revenue (GGR) in Macau is “cyclical” and will pass once the corruption crackdown in mainland China “levels off”.

Las Vegas Sands is the parent company of Macau-based casino operator and developer Sands China Ltd.

Casino GGR in Macau fell for the eighth straight month in January, by 17.4 percent from a year ago to MOP23.75 billion (US$2.97 billion), official data showed on Monday. It is the longest losing streak on record.

Analysts say the Chinese government’s campaign to rein in conspicuous spending and corruption is to blame for the weak results in Macau’s casino industry. And there are growing expectations the pain will persist as China’s clampdown on graft continues.

Mr Adelson said: “People blame it [the downturn] on the crackdown on corruption in [mainland] China… I say they [VIPs] stay below the visibility radar, because nobody – whether they are legitimate businesspeople that are making billions or many millions of dollars – want to come in and be ostentatious.”

He added: “High-rollers say they will lay low and won’t be conspicuous until the witch-hunt – whatever you call the crackdown on corruption – levels off.”

Mr Adelson had made similar remarks at Global Gaming Expo (G2E) 2014 in Las Vegas, in October. But on Wednesday he added that the anti-graft push is also impacting Macau’s premium mass table games segment.

“A lot of those people [in premium mass] are laying low as well, because they don’t want the government to see them spending what they consider a lot of money,” said the executive, adding that a premium mass gambler “would be somebody who can bet US$5,000 to US$100,000.”

“Everything in life is cyclical. Night follows day, day follows night, recession follows expansion, expansion follows recession. This [downturn in GGR] too will pass, and this too will be cyclical,” said Mr Adelson.

The plunge in Macau revenue has led to weaker results for Sands China in the fourth quarter of 2014. Net income for the Hong Kong-listed casino operator decreased 18.3 percent to US$535.3 million in the fourth quarter, compared to the year-prior period.

Nonetheless, on a GAAP basis (generally accepted accounting principles), full-year 2014 total net revenues for Sands China increased 6.8 percent to US$9.57 billion and net income rose 15.4 percent to US$2.55 billion.

Hiring locals

Mr Adelson on Wednesday added he remains confident in the growth story of Macau’s gaming industry, given the increasing number of hotel rooms and the expansion of the tourism offering to neighbouring Hengqin Island, albeit without gaming.

Speaking at a session on entrepreneurship and leadership at Macau’s Institute for Tourism Studies, the executive acknowledged that it is becoming increasingly difficult to hire people in Macau.

“I always want to employ the local people and I want to promote the local people,” said Mr Adelson. “The problem is that there is a 1.7 percent unemployment [rate] here [in Macau]. There’s nobody to hire,” he added.

“We’re looking for people for construction and for operation for the Parisian. We need thousands more construction people and we’ll need many thousands [for resort operations],” he said, referring to the US$2.7-billion casino resort under construction in Cotai.

The Parisian Macao, which will feature a scale replica of the Eiffel Tower, will open “some time” in 2016, the firm said last month. Mr Adelson had said previously that the allocation of labour could be an issue affecting the timetable.

Mr Adelson, who is scheduled to take over the role of chief executive at Sands China in March, said that Macau residents account for about 72 percent of the company’s workforce, which has grown to nearly 35,000 employees.

Answering a question from one of the students, Mr Adelson said Sands China would strive to hire and promote local people. But he warned: “We want to promote more local people, but you have to bring the talent and expertise to be able to manage other people.”