Abstract
Singapore's Casino Revenue Declines Admist Falloff in VIP Traffic
Like Macau, Singapore's casino revenue is heavily dependent on Chinese VIP gamblers. But those gamblers have been short supply recently, with Singapore's VIP revenue falling by 39% since 2014—and a further 10% decline forecast by Morgan Stanley analysts for the months to come. The 2016 falloff is not quite as bad as the since-2014 decline, but it's certainly more than bad enough: 34% for the first two quarters of 2016. Grant Govertsen of Union Gaming Securities Asia has attributed Singapore's decline to the same forces powering Macau's revenue falloff, China's anti-corruption campaign, rather than to cannibalization by other venues: “Sure, some small number [of VIP gamblers] are going elsewhere, but a large majority simply aren't gambling anywhere. … the VIP pie has gotten smaller rather than [being] cut into different[-]sized pieces. Most of the VIP declines in Macau and Singapore are gone. Period. These are individuals who believe it to be in their best interest to stop gambling—likely a function of the ongoing anti-corruption campaign in China.”
Philippines Casino Revenue, Including VIP Revenue, Rises
However, in contrast to Macau and Singapore, the Philippines have experienced a rise in VIP gambling revenue: for the three-month period ending June 30, 2016, revenue from VIP junkets more than doubled, which—with a 22% gain in non-junket gaming revenue—helped power the venue's casino revenue to a 30% increase for the period.
The increase is attributed in part to the availability of proxy betting, which is favored by some Chinese VIP players. In proxy betting, a trusted “proxy” sits at the table, relays information by telephone to a VIP located elsewhere, then follows his principal's instructions in placing bets. While some other jurisdictions, like Macau, disallow proxy betting (Macau banned it earlier in 2016), the Philippines encourages it, and that policy is evidently paying off: the allowance of proxy betting is credited with contributing to the Philippines' VIP gambling revenue growth, and some analysts (e.g., Morgan Stanley) feel that proxy betting may account for up to half of the Philippines' VIP gaming.
Atlantic City's Trump Taj Mahal Closes
After 26 years, the Trump Taj Mahal closed its doors Monday October 10, 2016. With the closure—the fifth Atlantic City casino closure since 2014—3,000 workers lost their jobs, bringing to 11,000 the number of Atlantic City casino workers to become unemployed as 5/12ths of the city's casinos have gone out of business.
Taj owner Carl Icahn closed the casino to stem a flood tide of red ink: he has lost $350 million from investing in and/or owning the Taj, and did not see any way to put the casino in the black. Icahn stated that he felt that if he kept the Taj open, he could lose another $100 million next year. The final straw was a casino worker strike and the inability to come to terms with them on reduced benefits.
Workers and their representatives were defiant to—and past—the end. The president of Local 54 of the main casino worker union, Bob McDevitt, said, “The workers made a choice that they weren't going to accept benefits and terms of employment worse than everyone else's. I applaud them: for the first time in 30 years, workers stood up to Carl Icahn and made him throw in the towel.” A food service worker interviewed about the closing said, “We held the line against a billionaire taking from us!”
At the risk of disagreeing with people who deserve our sympathy—Carl Icahn's still a billionaire, but the Taj workers are unemployed; I'm not certain that this was any sort of victory, except maybe a Pyrrhic one at best. Yes, we all want to be paid a fair wage, and no one likes to be undervalued … but isn't less income and benefits better than no income and benefits? It's difficult to see what, from the workers' point of view, there is to celebrate.
Cleveland Casinos Post a Strong September
Jack Cleveland Casino posted an 8.2% year-over-year revenue increase, September 2016 over September 2015. Its September revenue was also slightly higher than its prior month (August 2016) revenue. Another Jack casino, the Jack Thistledown Racino in North Randall, Ohio, also posted strong year-over-year gains for September 2016 vs. September 2015, with revenue rising by 15.6%. The Hard Rock Rocksino in Northfield Park had the greatest monthly revenue for September 2016 any Cleveland casino: $18.1 million (for comparison, Jack Cleveland had $17.1 million in September revenue, while Jack Thistledown had $9.6 million in revenue). The Hard Rock's September performance was actually down from its month prior (August 2016: $19.6 million) but was ahead of its prior-year performance. The city's gambling gains were attributed to a better transportation situation, with prior periods suffering from extensive road construction, renovation of the Public Square area, and the distraction and gridlock caused by the Republican National Convention.
Maryland Casinos Also Post Year-Over-Year Gains
Another U.S. casino jurisdiction which had a strong September was Maryland. The state's five casinos were up 11% in revenue September 2016 vs. September 2015. While September 2016 was down compared to August 2016, due to the summer leisure/tourist season ending at the end of August, September still represented the 11th straight month of year-over-year gains.
In terms of growth, the biggest winner was the Horseshoe Casino Baltimore, which rose 21.6%, or $4.8 million to $26.9 million, over September 2015. The biggest winner in absolute revenue for the month was the state's largest casino, Maryland Live, which brought in $53.9 million in revenue in September 2016, a $4 million gain over the prior year. The only one of the state's casinos to decline in September was the beleaguered Hollywood Casino Perryville, the state's first casino, which only had September 2016 revenue of $5.9 million, a 4.6% decline from the prior year, and the fifth straight year-over-year decline for the casino.
Macau Revenue Upticks During “Golden Week” VS. Year Prior
While the last few years have been punishing for Macau, there are bright spots. The first week of October 2016 was China's major Golden Week holiday. Always a significant time for Macau casinos, Golden Week 2016 featured 7% more mainland Chinese visitors than Golden Week 2015, a welcome statistic for the world's largest casino venue, which has experienced a prolonged revenue decline attributed to China's anti-corruption campaign and Chinese economic softness. The year-on-year growth for Golden Week compares very favorably to the year-on-year decline (5.5%) which Macau experienced in mainland Chinese visitors for August. The increase is being attributed to the opening of major new resorts, such as the Wynn Palace and Sands China Ltd.'s Parisian, in August and September 2016, as well as to the territory's increasing effort to appeal to “mass market” gamblers and tourists in order to diversify away from overreliance on the VIP market segment; the thinking is that mass market gamblers are less affected by the anti-corruption crackdown. 1
Pittsburgh Wants the Rivers Casino to Voluntarily Pay $10 Million Per Year
Pennsylvania's Supreme Court recently struck down a “local host fee” on the grounds that the “local share assessment” unconstitutionally treated the state's 12 casinos unequally. Pennsylvania's 2004 casino law required casinos to pay their host communities as follows: 2% of gross slot machine revenue to their counties, and the greater of 2% or $10 million to the municipality. Without that assessment, some communities—like Pittsburgh—will face budget holes. To fill that $10 million hole, Pittsburgh has asked its Rivers Casino to voluntarily pay $10 million per year. The city's finance director, Paul Leger, has stated that he is confident that the casino will comply. This author, who has perhaps a cynical view of corporate behavior from his tenure at the Security Exchange Commission and his experience as an executive vice president and corporate counsel in a highly corporate publishing company, would rather let his money ride on the roulette wheel than bet on a for-profit company agreeing to pay $10 million a year when it doesn't have to—but for Pittsburgh's sake, I hope I'm wrong and the finance director is right.
Turkey to Georgia: Please Shut Your Casinos
Also in the not-likely-to-happen file—and substantially less likely to happen even than a casino choosing to voluntarily pay its host city $10 million/year (see above)—Turkey's President Recep Tayyip Erdogan has asked Georgia to shutter border casinos that have been drawing Turks. Erdogan did not go through official channels to make his request, but went rather to a former Georgian prime minister, billionaire Bidzina Ivanishvili, to ask the mover-and-shaker to use his influence to close the casino. Ivanishvili replied that 1) it's not up to him anymore; and 2) the border casinos are important to Georgia's economy.
It's not surprising that Turks would flock to Georgia's casinos. In 1998, Turkey banned casino gambling within its own borders. Then in 2012, it entered into an agreement with Georgia making it easier for each other's citizens to cross into the neighboring country. And a Georgian city neighboring Turkey has 11 casino permits. (For comparison, Georgia's capital, Tbilisi, has only three casinos.) The result of this confluence of events was a foregone conclusion.