In 2014, Nevada baccarat revenues dropped 20% at a time when other Vegas Strip numbers were steady.
China’s anti-corruption crackdown hit Macau hard from 2014 to 2016, but Beijing’s gambling policies also caused disruption on the Las Vegas Strip. Nevada casinos lost 20% of their baccarat revenues in a year’s time, due to the crackdown.
Everyone knows the story of Macau’s boom and bust. From the time integrated casino-resorts opened in Macau in 2004 until the end of 2013, Macau saw the biggest casino boom in history. Macau, which had been a gaming backwater in 2004, generated more than seven times the gaming revenue of Las Vegas in 2013.
Americans might have assumed that Macau’s relative decline from 2014 to 2016 would have been a boon to the Las Vegas Strip. Those Chinese high rollers had to go somewhere, the conventional wisdom might say, but that was by no means the case. If the Chinese VIPs could not travel to Macau, they certainly would not leave the country for Las Vegas.
In mid-2014, Xi Jinping’s anti-corruption crackdown began to impact Macau’s casino economy. The Cotai Strip’s casino industry declined year-to-year for the next 26 months. The collapse of the junket operators’ tourism market, especially its system for giving credit to high dollar customers, caused VIP high rollers to leave Macau in droves.
Players did not want to engage in conspicuous consumption at a time that flamboyant wealth was being punished in China.
Las Vegas Strip Baccarat Stats
Many might have thought that the VIPs would have flocked to Las Vegas and other gambling destinations. Nevada’s casinos doubtless recruited Macau’s players, with baccarat revenues outstripping blackjack revenues $1.6 billion to $1.1 billion in 2013 — despite there being 2,704 blackjack tables in Nevada, compared to only 302 baccarat tables.
The opposite happened. In 2014, Nevada’s baccarat revenues declined to $1.2 billion, despite Las Vegas Strip casinos adding more baccarat tables that year. A certain fluctuation happens from year-to-year, but the 2014 figure represented a full 20% of the baccarat revenues from the year before. That happened at a time that the American economy was improving and Las Vegas casino revenues grew overall. Blackjack generated the same amount both years: $1.1 billion.
China Tightens Cash Transaction Policies
Beijing’s policies hurt the baccarat market in Las Vegas over the past few years. Once President Xi’s corruption crackdown happened, some Chinese elite tried to move their money into international banks, investments, or real estate. China viewed such transactions with suspicion, because it meant those suspected of corruption might be preparing to flee justice.
Thus, the crackdown entered a new phase where capital flight out of China was investigated. One of the best ways for a Chinese businessman or elite party member to move a lot of cash was through the Macau casino economy. It was only a matter of time before Chinese authorities began investigating junket operators and big money China UnionPay credit card transactions in Macau. When it did, the crackdown began to be felt in Macau.
Chinese High Rollers in North America
Trips to Las Vegas and other global casino destinations similarly were eyed with suspicion. Like the case currently unfolding in British Columbia, Canada, Chinese high rollers could launder a lot of money by gambling overseas. Any crackdown on VIP high rollers in Macau was sure to involve a crackdown on Chinese high rollers in Las Vegas, so the baccarat revenues declined precipitously on the Las Vegas Strip in 2014 and beyond.
Xi Jinping recently began his second 5-year term as China’s president. Xi added several hand-picked lieutenants to the Politburo, cementing his control over the Chinese system for the next 5 years at the least. Political analysts say President Xi has more power in China than any leader since Mao Zedong. Nothing says the Chinese leader is going to begin a new crackdown on gambling in China, but if he does, it would not be a good sign for Las Vegas’s baccarat revenues.
So if the Beijing government decides to impose new gambling restrictions in the next few years, you can expect to see Las Vegas Strip casinos impacted by those changes. The Chinese gaming market is that big of a factor in the global gaming economy now — at least when it comes to baccarat revenues.
