Land-based casino profits have taken a hit this year as casino’s around the world continue to see a downturn in profits. While the issues behind the downturn are complex and vary by region, certain common factors seem to be leading the plunge.
The rapid growth of online casinos around the world is also a factor likely to be dampening traditional land-based casino growth.
At the same time, China’s on again off again crackdown on corruption has scared away many big money Chinese players from travelling abroad to destinations such as Macau and Las Vegas to play, further driving the downturn.
These factors, together with other more regionally specific issues, have been pushing casino stocks down and, as some analysts have noted, there still might be some way to go until the market hits bottom.
The UK market
UK casino profits have been falling this year thanks to a number of different factors, including both a downturn in the number of international whales visiting the country’s land-based casinos as well as more frequent wins as players due their due diligence and become better educated.
Rank Casino CEO Henry Birch has attributed the falling profit numbers to “more stringent customer due diligence to address money laundering, proceeds of crime and problem gambling, in common with the rest of our industry”. Rank Casino also owns and operates Mecca Bingo and Grosvenor casinos.
While the company saw total revenue rise a meagre 1% year-on-year in 2017, pre-tax profits fell by 7%, as total gaming revenue fell 3% year-on-year.
The Ritz Casino also had a bad year in 2017, with losses completely wiping out the $11.64 million in profits from the previous year.
Barclay brother’s casinos also took a dive, posting a $15.3 million loss for 2017. The company attributed the loss to having to pay out more than usual, with member of the board Adrian Barclay attempting to put a positive spin on the loss by saying, “efforts to encourage new Middle East and Far Eastern players remain focused and business in 2018 is expected to be more fortuitous”.
The reason? The Chinese government’s anti-corruption drive, which has led to numerous arrests and a sharp decline in the number of Chinese whales willing to travel abroad and risk earning the ire of Beijing.
Baccarat has long been a popular game among Chinese players. At the peak of its popularity before the crackdown in 2014, baccarat was generating $287.3 million for Crown, as opposed to $118.4 million last year.
Crown has also been hit by a number of public scandals, with allegations of slots being fixed, having 19 employees arrested for activities that ran afoul of anti-gambling policies in China as well as the sudden early retirement of executive chairman and 50% owner, the billionaire James Packer, for unspecified mental health reasons.
Unfortunately, the legendary Las Vegas has also not been exempt from the industry downturn, with January revenues down 8.9% to hit $554.8 million and first quarter revenues down 6.1%.
Trump’s trade war with Chine, Beijing’s continuing anti-corruption drive and a general climate of hostility towards foreigners spawned by the Trump administration’s politics have all contributed to the decline.
Baccarat revenues in Las Vegas have also taken a beating, with income from the game down by 14.1% to come in at $1.09 billion in 2017, making loss of players engaging in the game a significant contributor to the overall fall in Sin City revenue.
Casinos in Korea have also been hard hit recently, with Kangwon Land revenue down 9.2% year-on-year for 2017 to come in at $301.6 million. The reasons for the downturn are again complex, with both Beijing’s crackdown, a decrease in the number of operational gaming tables and scandals involving political influence in employment decisions all contributing to the decline.
At the end of the day, 2017 was far from a stellar year for the world’s land-based casino venues. A combination of declining numbers of Asian visitors, especially Chinese whales in light of Beijing’s crackdown on corruption and its attempts to stem the flow of Chinese currency overseas, inclement weather, corruption scandals, and the rise of interest in online gambling globally have all factored in to push casino stocks to new lows.
While it’s too early to say if the trends seen in 2017 and early 2018 are likely to continue, there is little doubt land-based casino operators are in for an interesting ride.
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