THE TEMASEK REVIEW

By Neil Gough from South China Morning Post

What happens in Vegas may indeed stay in Vegas, but the fortunes of America’s Sin City are becoming increasingly dependent on what happens in mainland China.

The Las Vegas Strip finally showed signs of a turnaround late last year, snapping an unprecedented 22-month losing streak that saw casino revenues decline to their 2004 levels despite the addition of tens of thousands of new hotel rooms in the US gaming capital.

But a closer look at the numbers shows that the tentative recovery has so far been one-dimensional, and it appears to be coming from an unexpected source: China.

High-rolling baccarat players flown in from the mainland, which is awash in cash, appear to have single-handedly driven the recent turnaround in Vegas.

Las Vegas Strip baccarat revenue – considered by analysts to be a proxy measure for high-stakes Chinese play – rose 26.5 per cent last year and 100 per cent in the fourth quarter.

By contrast, revenue from Americans’ beloved slot machines and all other casino games contracted 14.6 per cent last year and 11 per cent in the December quarter. That non-baccarat downtrend continues, as the strip’s usual core clientele of domestic holidaymakers and corporate conventioneers are still reeling from the effects of the financial crisis. US unemployment remains high, many business travel budgets are still tight and consumer spending is unlikely to return ton its credit-fuelled binge levels any time soon.

“Baccarat gains are likely a function of inbound play from China, where high-rollers have enjoyed the benefit of material real estate and stock market gains in 2009,” says Bill Lerner, a Las Vegas-based analyst at Union Gaming Group. He said several major high-end strip casinos were prompted to increase betting limits by 30 per cent, to US$300,000 per hand, during this month’s Lunar New Year holiday.

Vegas has been courting high-rollers from Asia for at least the past three decades, particularly during Lunar New Year, but since the opening of Macau’s casino market to US operators such as Wynn Resorts, Las Vegas Sands and MGM Mirage, the competition for China’s gambling dollars on both sides of the Pacific Ocean has increased greatly.

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