Casi­nos lose in anti-cor­rup­tion cam­paign

China Daily (Canada) - - FRONT PAGE - By REN QI renqi@chi­nadaily.com.cn

The US gam­bling in­dus­try is los­ing big bucks un­der China’s anti-cor­rup­tion cam­paign.

The tra­di­tional Chi­nese New Year travel hol­i­day has ended, but casi­nos in the US barely felt the warm em­brace of Chi­nese tourists to the ex­tent they did last year. An ex­pert in the gam­bling in­dus­try said be­cause of China’s an­ti­cor­rup­tion cam­paign, Chi­nese “high rollers” dare not throw money like wa­ter in the casi­nos, and that Las Ve­gas casi­nos will hardly see an in­crease in in­come this year if they keep los­ing Chi­nese cus­tomers.

Ac­cord­ing to statis­tics from the Las Ve­gas Con­ven­tion and Vis­i­tors Author­ity, in 2014 more than 41 mil­lion tourists vis­ited the en­ter­tain­ment cap­i­tal of the world, which brings in more than $45 bil­lion to the lo­cal econ­omy.

Grant Govert­sen, an an­a­lyst of gam­bling in­dus­try at Union Gam­ing Groupe, said that in the past few years dur­ing the Chi­nese New Year hol­i­day, the in­come from Chi­nese cus­tomers oc­cu­pied 20 per­cent to 25 per­cent of the whole Las Ve­gas gam­bling in­dus­try, and in the year of 2013 this num­ber even reached 38 per­cent.

Weeks be­fore the Chi­nese New Year, casi­nos in Las Ve­gas had dec­o­rated with red lanterns, goat stat­ues and spring fes­ti­val cou­plets to wel­come the Chi­nese Year of Goat. Lo­cal casi­nos and luxury ho­tels joined in the cel­e­bra­tion of China’s big­gest hol­i­day.

The Bel­la­gio Ho­tel and Casino looked ex­tremely fab­u­lous this year. The ho­tel put 22,000 red flow­ers and pot­ted plants in the lobby. The ho­tel also made a 4-me­ter­tall ar­ti­fi­cial hill along with five ar­ti­fi­cial goats to greet Chi­nese cus­tomers.

“In the past few years, in­come of Las Ve­gas casi­nos was raised a lot dur­ing the Chi­nese New Year,” said Govert­sen. “Maybe it’s be­cause Chi­nese tourists wanted to start a lucky year by win­ning in a gam­ble game.”

How­ever, there were not so many Chi­nese gam­blers com­ing to Las Ve­gas as the casino had ex­pected this year, and the hus­tle and bus­tle didn’t hap­pen dur­ing the tra­di­tional hol­i­day. As a mat­ter of fact, the an­a­lyst pointed out that the liq­uid­ity from Chi­nese VIP seg­ments has shrinked rapidly since Pres­i­dent Xi Jin­ping stepped up his cam­paign against of­fi­cial cor­rup­tion in 2014.

Con­sider the Las Ve­gas Sands. Its fa­mous Ve­gas prop­er­ties such as the Vene­tian and the Palazzo made up a mere 10 per­cent of its sales in 2014, ac­cord­ing to the com­pany’s lat­est earn­ings re­port. It’s a sim­i­lar story for Wynn. Its Ve­gas op­er­a­tions drive less than a third of the com­pany’s en­tire busi­ness last year.

Ac­cord­ing to the data from Ne­vada Gam­ing Con­trol Board, rev­enue of Las Ve­gas casi­nos in last Oc­to­ber was $520 mil­lion, de­clin­ing 5.6 per­cent just in one month. More­over, rev­enue from bac­carat ta­bles dropped 36 per­cent in that month. In­come from the bac­carat ta­bles can de­cide the rev­enue of the whole casino, and the bac­carat game is usu­ally called “bench­mark­ing of US casino prof­itabil­ity”.

Brent Pirosch, a Las Ve­gas­based an­a­lyst at world lead­ing com­mer­cial and in­vest­ment com­pany CBRE, said bac­carat game is a game for rich gam­blers, and some gamers can wa­ger $100 on the ta­ble. For those from the Far East or Mid­dle East, the bet per round can reach as high as $100,000.

To meet the need of Chi­nese VIPs, casi­nos cre­ated some cus­tom­ized prod­ucts, such as VIP rooms with elite ser­vices and ex­cel­lent equip­ment fa­cil­i­ties.

In spite of the im­por­tance of VIPs, the seg­ment is not that large. Pirosch said VIPs in the en­tire Las Ve­gas gam­bling in­dus­try are merely less than 150. There­fore, if the VIPs de­clined, even just de­clined a lit­tle bit, the whole in­dus­try would suf­fer ob­vi­ous im­pact.

The pres­sure of rich Chi­nese gamers, some of whom are of­fi­cials, comes from the in­ten­sive anti-cor­rup­tion cam­paign, said Govert­sen.

Here, for in­stance, is a list of Chi­nese casino VIPs who ended up in jail or were sen­tenced to death due to cor­rup­tion: Li Shu­biao, for­mer direc­tor of Hous­ing Prov­i­dent Fund Man­age­ment Cen­ter in Chen­zhou, lost $19.2 mil­lion in casino; Li Weimin, for­mer mayor of Zhang­mutou town in Guang­dong prov­ince, lost over $14.4 mil­lion in casino; Jin Jian­pei, for­mer direc­tor of the Hubei pro­vin­cial rep­re­sen­ta­tive offi in Hong Kong, lost $12.6 mil­lion in casino.

An­a­lyst in­sists that Las Ve­gas casino for­tunes may have taken an­other body blow this year af­ter China’s Pres­i­dent Xi Jin­ping an­nounced plans to in­ten­sify his anti-cor­rup­tion cam­paign in 2015.

The coun­try will also work out re­vi­sions to the Law on Ad­min­is­tra­tive Su­per­vi­sion, said Zhang De­jiang, chair­man of the Na­tional Peo­ple’s Congress (NPC) Stand­ing Com­mit­tee, while de­liv­er­ing a work re­port at the an­nual ses­sion of the top leg­is­la­ture.

He stressed that the anti­graft leg­is­la­tion should be in­tro­duced as quickly as pos­si­ble and the sys­tem of sanc­tions and pre­ven­tion im­proved with the goal be­ing a mech­a­nism which means “of­fi­cials dare not, can­not and do not want to be cor­rupt”.

Cri­te­ria for im­pos­ing penal­ties on crim­i­nals found guilty of cor­rup­tion and bribes would be mod­i­fied. Heav­ier penal­ties will be im­posed on those of­fer­ing bribes, ac­cord­ing to a draft amend­ment to the Crim­i­nal Law sub­mit­ted to the NPC Stand­ing Com­mit­tee for a first read­ing last Oc­to­ber.

“Any form of mov­ing a large amount of money out of China would be a lot more dif­fi­cult be­cause of what’s hap­pen­ing,” said Hoffman Ma, deputy CEO of Ponte 16 Re­sort in Ma­cao. “Ob­vi­ously, the gov­ern­ment doesn’t want the cor­rupted of­fi­cials to be able to move their money out.”

That is likely to re­sult in con­tin­ued pres­sure on Chi­nese VIP gam­blers, Govert­sen said. He pre­dicted that the rev­enue in 2015 would main­tain a rel­a­tively low level.

To ex­pand their mar­ket and at­tract more Chi­nese VIPs, lead­ing Las Ve­gas casi­nos have built up busi­ness in Ma­cao, which is a Spe­cial Ad­min­is­tra­tive Re­gion of China that lies at the mouth of the Pearl River Delta, about an hour’s ferry ride from Hong Kong. It cov­ers a land mass about half the size of Man­hat­tan. It is the only place in China where gam­bling is legal.

To at­tract Chi­nese gam­blers, lead­ing Amer­i­can gam­bling com­pa­nies opened busi­nesses in Ma­cao. In 2013 rev­enue of Ma­cao casi­nos rose about 20 per­cent, reach­ing $45 bil­lion, which is al­most seven times the haul on the Las Ve­gas strip.

How­ever, a down­turn in Ma­cao also hap­pened. Since last June, Ma­cao’s rev­enue has fallen so fast, that in Oc­to­ber it plunged 23 per­cent, which is the big­gest drop on record.

Ma said the VIP seg­ment of lo­cal casi­nos was suf­fer­ing roughly about 20 per­cent decline per month in the mid­dle of 2014.

The Ma­cao slow­down is hurt­ing Ve­gas vet­er­ans — and in­vestors in th­ese com­pa­nies. The stocks have fell sharply in the past year.

As a mat­ter of fact, be­cause of the down­turn of busi­ness in Ma­cao, since last April, three of the largest gam­bling com­pa­nies in the US, Las Ve­gas Sands Corp, Wynn Las Ve­gas and MGM Re­sorts In­ter­na­tional, have lost onethird of their mar­ket value.

“Wynn and Las Ve­gas Sands have been bet­ting big on Ma­cao so that’s why the stocks have been lousy,” said John Staszak, an an­a­lyst at Ar­gus Re­search, who has a hold rat­ing on Wynn.

LINDA KAS­TRUP / REUTERS

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