China’s credit bubble; Ocean Resort’s secret formula

China gamblers may be playing today at the expense of tomorrow. Bloomberg reports that Generation Z is borrowing heavily in high-interest debt to fuel its consumerism, a phenomenon that should be of concern in Macao. “Household debt hit levels of 57% of gross domestic product in the third quarter … more than double just 27% in 2010.” Household debt represents just under 100% of disposable income. Of Generation Z it is said, “They have little income and therefore virtually no credit history. It doesn’t matter, because they have had access to a whole range of online banks, fintech startups and peer-to-peer lenders, some of which charge exorbitantly high interest rates.” If they’re spending that moolah in Macao it means there’s going to be a trough when those bills come due.

Most of this household debt is collateralized, but that’s no solace to casinos when the coming generation has no money left to spend. Mind you, household debt to GDP ratios are off the charts in gaming-mad Australia (126%). In these United States it’s a mere 75%. As of a year ago, outstanding credit card debt in China stood at $1 trillion. By the way, personal bankruptcy does not exist as an option in China, meaning that when the well runs dry everything you own is fair game for debtors. At least Macao can take comfort from a slew of economic-diversification initiatives announced by President Xi Jinping, including the establishment of a Macanese stock exchange. “The future focus will be on tourism and finance, to make it a center to host international meetings, like Singapore,” said one source. With the Macanese government reliant on casinos for 80% of its revenue, we’re sympathetic with what President Xi (pictured) is saying. “This is the candy that Hong Kong did not want,” remarked political commentator Larry So. It is a gift for Macao, for Macao being a good boy.”

Adds Global Gaming Business, “The post-handover casino boom has brought full employment at high salaries relative to other unskilled jobs, and the government does its part by restricting croupier positions to Macau residents. Employment security with the casinos is virtually ironclad, layoffs are unheard of, and the concessions make sure to regularly dole out lucrative bonuses equivalent to a month’s salary or more.” There could be more where that came from if the government wills it. Global Betting & Gaming Consultants analyst Warwick Bartlett remarked, “The growth of Macao relies on the political whim of Beijing. With 1 billion Chinese citizens as a market it is quite possible for Macao to produce double-digit growth if Beijing wishes to allow it.” At the moment it doesn’t.

* Raving Consulting had a longtime formula for casino success. “Find out what your customers want. Give it to them.” Sounds simple but relatively few casinos follow that advice. Ocean Casino Resort does, hence its newfound success. “The property had a history of being tone deaf to most Atlantic City customers, and we’ve now overcome that,” CEO Terry Glebocki confessed to Global Gaming Business. “We put our casino guests first in absolutely everything we do, from offers to comp rooms to entertainment.  We knew it was important to listen to our guests’ ideas and concerns, and I’m proud to say we’ve tailored the improvements made thus far to be responsive to what our guests expressed.” Yes, growing success along the Boardwalk is being fueled in large part by sports betting and Internet gambling, but money is (more) money. As gaming pundit Rummy Pandit puts it, “That New Jersey is taking the lead with respect to new gaming products such as online gaming and sports betting can only be a positive. We should expect to see New Jersey’s gaming properties continue to innovate and diversify their gaming product to remain competitive with neighboring casino markets such as New York and Pennsylvania.”

Jottings: Employees at Red Rock Resort must be happy campers. They just voted against joining the Culinary Union. More details as we have them … Eldorado Resorts just got Louisiana regulatory approval to move the Isle Grand Palais riverboat casino to terra firma near Lake Charles. May it be the first of many (Boyd Gaming‘s Treasure Chest in Kenner may be next) … DraftKings is set to launch mobile sports betting in New Hampshire on the 30th, in plenty of time for the Super Bowl … The extension of Matt Maddox‘s contract as CEO of Wynn Resorts came with a substantial “but”: His pay packet will remain the same. The company was sufficiently “george” to pick up the $500,000 fine that Massachusetts levied on Maddox for his complaisance during the Steve Wynn sex scandal … Oklahoma Gov. Kevin Stitt (R) offered the state’s casino-owning tribes a compact extension until August 31, 2020, but 32 of 35 tribes have said “no thanks” … This week’s Global Gaming Business podcast features MGM Resorts International‘s interactive prexy—and S&G cult figure Scott Butera. It’s your chance to hear 25 minutes of “Woody” unfiltered.