Macau crackdowns on the flow of cash from high rollers who are predominantly Chinese could benefit the Australian gambling industry.
Australian casinos have been fighting an uphill battle against their rivals in Macau over the past decade. The Chinese enclave has become the dominant force not only in the region, but in the worldwide casino market. But while Macau will still likely lead the world in casino revenues for the foreseeable future, cracks are starting to show, and that could benefit Australia’s casinos tremendously.
Until recently, Chinese gamblers have been able to find ways around restrictions that limited how much money could leave the mainland, and thus how much they could take into Macau. But the Chinese government has taken a hard line on corruption that has hurt the flow of cash into the territory, sending VIPs scurrying to other locations around the world.
Las Vegas Sees Revenues Rise as Macau Struggles
“Since the scrutiny has intensified, gamblers are instead spending time away from Macau,” wrote Morgan Stanley analyst Praveen Choudhary. “Rich and famous gamblers are lying low and junkets have turned cautious in extending credit to worthy people.”
Destinations like Las Vegas have seen a bump in their revenues as a result, with much of the increase coming from high-stakes baccarat, suggesting that these are Macau gamblers who are looking for a new place to play. But perhaps no market is better-suited to capture these gamblers than Australia, which is somewhat closer to home for Chinese gamblers than Las Vegas, while also offering many of the same first-class amenities.
There are other local options in the mix as well. Casinos in Manila and other locations are drawing junket operators (and, in turn, gamblers) away from Macau, and many Asian nations have foreigner-only casinos that market themselves to Chinese visitors.
Australia Could Be Prime Beneficiary
But Australia is rapidly getting into the mix in terms of a potential destination for Chinese whales who aren’t comfortable with the current restrictions in Macau. Crown’s casinos in Melbourne and Perth already attract some VIP play, as does The Star in Sydney. But the real attraction may prove to be James Packer’s Barangaroo casino, which will cater exclusively to high-end gamblers in an effort to attract big spenders from China and around the world.
The key may be to establish relationships with junket operators who are widely used by wealthy Chinese gamblers. These organisations work out the logistics of gambling sprees for their clients; in the Macau market, they also often provide loans to help gamblers get around the currency restrictions imposed by the Chinese market.
As we recently wrote about, however, there is some risk when dealing with such organisations. Some junket operators are alleged to have connections to criminal groups, often using them to enforce debts that the junkets can’t legally collect under Chinese law. Australian regulators and casino officials say they have protections that will prevent criminals from moving money through their resorts, and police and the gaming industry do work closely to report any potential issues.
Should the situation in Macau continue to hamper growth there, it seems almost inevitable that more Chinese gamblers will come to Australia and other worldwide gambling destinations. But at least one casino official in Macau believes the situation is only temporary, meaning it may be resolved well before the Barangaroo casino opens for business.
“High-stakes Chinese gamblers go to overseas casinos for a new experience,” said Francis Lui, deputy chairman of Galaxy Entertainment, which operates six Macau casinos. “Macau will continue to benefit from its close proximity to China.”