efore August, the peak of monthly gaming revenue was recorded in January last year, when the figure stood at us$ 1.32 billion, according to Macao's Statistics and Census Service (DSEC). Local gaming revenues reached us$ 1.2 billion in August last year.
The gaming growth came as Macao's lackluster economy sustained in the second quarter this year with many principal economic indicators sliding down. Local GDP contracted 13.7 % in real terms in the period, which was the worst decrease since the compilation of the quarterly GDP.
Gross gaming revenue (excluding gratuities) and total visitor spending (excluding gaming expenses) went down by 12.2 % and 20.6 % year-on-year respectively in the second quarter, while gross fixed capital formation and merchandise exports shrank by 27.4 % and 58.3 %.
Despite the economic downturn in previous quarters, last month's significant growth of revenues generated by the city's gaming sector, the pillar of local economy, still showed that Macao's gaming market is yet to be saturated since gaming operators continued to unveil new casinos in the island this year, which further expanded the market, said Zeng Zhonglu, an economic professor at the Macao Plytechnic Institute.
City of Dreams, a large casino hotel complex run by Melco Crown Entertainment Ltd, and Hotel Lan Kwai Fung Macau with a gaming floor were opened respectively on June and August, bringing the city's total number of casinos to over 30 so far. Another casino hotel run by local gaming operator SJM was scheduled to be opened in coming months.
The growth of local gaming revenues will continue in the near future given the broadening economic pick-up in the Chinese mainland, Macao's major source market, and the dwindling impact of the global financial crisis, Tsang also said. However, the government of Macao Special Administrative Region (SAR) has previously predicted a 10-% drop in gross gaming revenues for the whole of this year.
With the improving economic environment, local gaming operators also decided to slow down their cutback on personnel. Las Vegas Sands, which runs three casino complex in Macao including the largest Venetian Macao casino resort, has informed local labor authorities that it has decided to suspend its earlier plan to layoff 4,000 employees by this autumn.
Local gaming operators began laying off casino employees, most of whom were imported workers, at the end of last year when local gaming sector was hit by the combined impact of global financial crisis and Chinese mainland's visa restriction. Venetian Macao, LVSands' Macao subsidiary, has by far laid off no more than 1,000 employees, said Shuen Ka Hung, director of Macao's Labor Affairs Bureau, in a previous occasion.
Macau's gaming and tourism industries heavily rely on the mainland market, since most of the city's tourists come from the mainland, especially neighboring Guandong province. DSEC figures indicated that visitor arrivals from the mainland, accounting for 48.6 % of the total in the second quarter of this year, decreased by 19.2 % year-on-year to just 852,167.
Local media quoted travel agencies in Guangdong as saying that the visa restrictions that limit mainland residents' trips to Macao Special Administrative Region (SAR), the only place in China where gambling is legal, will be relaxed in coming months.
The relaxing of visa restrictions will boost the diversification of Macao's gaming and tourism industries, as most of the tourists tend to gamble in the main floor of casinos instead of the VIP halls catering to the high-roller gamblers, said Fong Ka Chio, director of Institute for the Study of Commercial Gaming at the University of Macao.
He also said that once the gross profit margin from casino's main floor increases, gaming operators will have more funds to invest in non-gaming entertainment facilities, thus diversifying local gaming sector. Unlike Las Vegas, a large part of gaming revenues of Macao come from VIP or high-roller gambling. As an effort to enhance the city's image and economic structure, local government has been striving to diversify Macao's gaming-centered economy by subsidizing non-gaming industries and encouraging local casinos to develop non-gaming operations.
However, Fong also pointed out that mainland's constantly-changing visa policy may affect investor's long-term plan in Macao, especially the gaming sector, and the city's diversification effort will suffer as a result. As a gauge of investment, Macao's gross fixed capital formation shrank by 27.4 % year-on-year in the second quarter, with private investment contracting by 30.6 % upon suspension or slowdown of some major constructions.
Las Vegas Sands has already stopped its us$ 12-billion Cotai Strip project on an area of reclaimed land in Macao, which is slated to build 11 resorts with a total of 20,000 hotel rooms and a number of casinos and shopping malls, when the global financial crisis made it hard for the company to seek funds to finance its projects. Similar move was also taken by another licensed gaming operator Galaxy Entertainment as it has put off the opening of its mega casino complex until 2010.