Macau struggles to overcome gaming revenue slump

Gambling revenue from Macau's 35 casinos fell to US$ 3.6 billion in August from 30.7 billion patacas a year earlier according to data released by the Macau government on Monday. Analysts were expecting a decline of 2-6 percent.

The southern Chinese territory of Macau, a special administrative region like neighbouring Hong Kong, is the only place in the country where casino gambling is legal. Gambling revenues have been turbo charged for the past two years, raking in US$ 45 billion last year. In the past three months however, growth has plummeted to lows not seen since 2009.

As the former Portuguese colony races to build eight new resorts in the next three years, labour strains look set to intensify. Workers are demanding higher pay and threatening strikes at a time when operators face a labour shortage.

On August 30 casino dealers started an industrial action for the first time, pausing and slowing activity on the baccarat tables at one of Macau's most popular casinos, the Grand Lisboa.

While the decline in gaming revenues in August was the third consecutive drop in over five years, analysts expect stronger demand in the coming months from so-called "mass market" visitors who come in larger numbers directly to the casino compared to high rollers who are typically brought in by junket companies or middle-men who take a hefty commission.

A smoking ban due to be implemented in October may crimp revenues initially, but analysts say Macau's fundamentals remain strong due to the lack of penetration in mainland China and increasing infrastructure developments like high-speed trains and the Hong Kong-Macau-Zhuhai bridge that will ease travel times.

Hong Kong-listed casino and gaming stocks have dropped 17-28 percent in the year to September 1, underperforming the benchmark Hang Seng Index .HSI, which has risen 7 percent in the period.

Macau's gaming revenues still far out perform rival casino hubs with the month of August raking in more than half what the Las Vegas strip earns in one year.