Macau’s casino industry lost over $100 billion during the last 18 months due to the anti-corruption crackdown which scared away high-rollers and caused a major slump in the gambling market in Macau. The market is yet to recover and gambling analysts predict that this market slump will continue into 2016 as Beijing has no plans to slacken its anti-corruption crackdown.
Melco Crown Entertainment Ltd has invested $3.2 billion to build Studio City a mega-casino resort that was expected to generate significant revenue for the company. Due to the current market scenario and the fact that tourism prices has declined for the first time in twelve years, the company has decided to change its strategy to adapt to the new market.
Studio City was initially going to be promoted as a five star hotel but after careful consideration the company has decided to downgrade that rating and launch the hotel as a four star property. This change of plan has been brought about to accommodate the new strategy that Macau’s government wants to implement and that is to attract more tourists and be more family oriented.
Melco Crown Entertainment Ltd explained its new strategy by stating that this “is most suitable for the policy of the diversification of accommodation and tourist product” of Macau. Macau’s casinos and hotels used to be frequented by a large number of VIP gamblers who had no problem spending lavish sums of money on accommodation and entertainment facilities.
The Macau Hotel Association stated that the cost of an average hotel room in Macau was estimated to be around $189 (MOP1,512) each night between Jan to August 2015. When compared to the same period in 2014 the price of the average hotel room dropped by 5.4% and casinos might have to drop their prices even further as gamblers from Mainland China have shown a preference of travelling to neighbouring countries like the Philippines, South Korea and Vietnam were gambling laws are a lot more friendly.
The average occupancy rate in Macau’s hotels from Jan to August 2015 stood at 79.5% which was a 7% drop when compared to the same period in 2014. A total of 6.75 million visitors stayed in Macau’s hotels and guesthouses during the first eight months of 2015 which was a 6.4% decline when compared to 2014.
The Statistics and Census Service show also confirmed a drop in the tourist price index by 2.7% when compared to a year on year analysis. The drop in tourist prices was due to the lower costs of both accommodation and shopping which was rolled out to encourage spending in Macau.