Hangover awaits Macau after 2012 feast

Macau celebrated the new year in style. On the first working day of 2013, Macau announced casino revenue for December reached 28.2 billion Macau patacas (MOP; US$3.5 billion), a new record, topping the MOP27.7 billion reached in October last year. December registered 19.6 percent year-on-year revenue growth, the biggest increase since April.

For 2012 overall, gaming revenue topped MOP304.1 billion, or US$38 billion, growing 13.5 percent from 2011 to set another new record. All this in a year when the traditional growth engine of high roller VIP play sputtered, the long awaited opening of Sands Cotai Central in two star-studded phases in didn’t pack much sizzle, and tourist arrivals barely grew.

The situation is reminiscent of 2008 when mainland officials first tightened the reins on travel to the Macau, inducing panic and even talk of bankruptcy among casino operators, yet revenues grew 31 percent, topping MOP100 billion for the first time. When licensees gathered for a trade council meeting, one mogul reportedly declared, “Thank God for bad years.”

This year may not deliver such a happy ending. There won’t be any major resort openings during 2013 (nor, in all likelihood, 2014). Macau’s critical transition to mass market focus is still in its early stages. Vacationers who’ve come once must be convinced to lavish their limited leisure budgets and time again on return trips. That’s a growing challenge as Chinese travelers spread the wings further afield and more Asian destinations add casinos to their list of attractions. Moreover, Macau remains almost completely reliant on mainland and Hong Kong visitors and has failed to blossom in the broader international tourism market.

This year’s completion of Beijing’s leadership transition could mean tighter controls on money moving across the border into Macau as part of broader crackdown on corruption. However, VIP volume has staged a mild recovery since November as uncertainty over the potential impact of the Xi Jinping regime gives way to the reality of the new team moving into place. That trend could continue as the year progresses.

Opening of the high speed rail line from Beijing late last year, with an intercity link that drops passengers within yards of the Zhuhai side of the Macau border gate, could boost visitor arrivals. So could operation of a new 24 hour border crossing that’s awaiting approval from Beijing.

But even if more visitors can come, Macau has to do better at giving them reasons to visit. Many of the pieces are already there. Now it’s about assembling them properly, filling in the gaps, and perhaps the greatest challenge, providing the human software to support the billions of dollars in hardware.

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, high finance, and cheap lingerie. See his bio, online archive and more at www.muhammadcohen.com; follow him on Facebook and Twitter @MuhammadCohen.