The news that the number of visitors to Macau from mainland China fell in June is not totally unexpected since the Guangdong government adopted some visa restrictions in May. There is speculation that China does not want Macau to expand too quickly, but the 16.5% drop in mainland Chinese visitors was larger than anticipated. Gaming revenue in June also fell by 20%, which is less than great news for the many casino projects in Macau that are lining up for completion.

The rising cost of raw materials and labour have already hit the construction of these mega gaming palaces. Those foreign operators first into the market may be breathing a sigh of relief that they are now benefiting from Macau’s rapid expansion. Those with projects still in the pipeline could face a harder time to repay their investments. Melco PBL Entertainment (MPEL) has today confirmed that it has negotiated an extension to the company’s agreement to purchase a site on the Macau Peninsula.

“In light of recently imposed restrictions affecting mainland tourists visiting Macau under the Individual Visitor Scheme, such extension provides the Company additional flexibility to evaluate the uncertain impact of such restrictions on the evolution of the market, and allows the Company to thoroughly review its development plans for the Macau Peninsula site.”

The site on the Macau Peninsula is a third development for MPEL. In May the company opened its Crown Macau property, albeit with delays to its VIP accommodation. Its City of Dreams project on the Cotai Strip is one of several integrated casino resorts planned there. The Venetian Macao, which is being claimed to be the world’s largest casino, is set to open on 28 August. It will be Las Vegas Sands’s anchor property of its Cotai Strip development.

In announcing the opening date for the Venetian Macao the Las Vegas Sands chairman and CEO Sheldon G Adelson commented, "As this one-of-a-kind destination resort opens, and our development of the Cotai Strip continues, Macao will begin its transformation into the type of business and tourist destination only dreamt of in the past and in doing so fulfilling the desire of the government to turn Macao into a premier leisure, entertainment, and meeting and convention destination."

There are now 26 casinos operating in Macau, with Venetian Macao and MGM Grand Paradise both opening later this year. There are many other casino projects with indefinite timetables. Shortages in the Macau construction industry - labour and materials – make it difficult to define either final costs or opening dates. Future problems could arise over lax money laundering requirements by the government. The recent decline in gambling revenue and visitor numbers from mainland China is just another factor in the Macau gamble. (E-07.30.07)

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