Macau VIP gambling room investor Iao Kun Group Holdings Ltd announced on Tuesday that it had closed its VIP gaming rooms at Galaxy Macau, in Cotai, and StarWorld Hotel on the Macau peninsula, two properties operated by Galaxy Entertainment Group Ltd.
The termination of the two VIP rooms was with effect from September 10, the firm said in a press release. The company had also terminated its agreements with Sang Heng Gaming Promotion Ltd and Sang Lung Gaming Promotion Ltd relating to those VIP rooms, it added.
Iao Kun said the decision to close the two VIP rooms was part of the “comprehensive strategic review” of its operations in Macau. The firm said on September 2 that – as part of an initial cost-cutting measure – it had shut down its VIP gaming room at Sands Cotai Central – a property operated by Sands China Ltd in Macau’s Cotai district. That move was with effect from August 31.
The Nasdaq-listed company said the closure of the rooms at Galaxy Macau and StarWorld could generate annual overall cost savings of approximately US$4 million.
Following the shutdown of these two VIP rooms, Iao Kun’s business partners will still promote two high roller facilities in Macau casinos; namely at City of Dreams Macau, a Cotai property of Melco Crown Entertainment Ltd; and at Le Royal Arc, a peninsula venue which operates under the gaming licence of SJM Holdings Ltd.
In Tuesday’s release, Iao Kun said the strategic review of its Macau operations “remains ongoing”. The firm stated it expected to take “additional action to reduce its operating expenses and preserve its capital position in due course”.
The company earlier this month reported unaudited rolling chip turnover of approximately US$110 million for August, down 75 percent in year-on-year terms. It was the 23rd consecutive month of year-on-year chip roll declines for the firm.
For the first eight months of 2016, Iao Kun’s rolling chip turnover was US$2.41 billion, down 50 percent from the prior-year period.
Morgan Stanley banking group said in a report on Monday that a recovery of the Macau VIP market was “not in sight”. It noted that Macau VIP revenue “fell … 21 percent year-on-year in the second quarter 2016”, adding that “no new VIP tables have been allocated [by the Macau government] to newer casinos since 2015”.
“Casinos do not grant incremental credit to the junkets, and junkets are mainly relocating resources between casinos,” suggested Morgan Stanley.
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Amount that each Macau casino operator paid for the circa six-month extension of their respective contract