Macau in Figures – A year into the recession

2015_08_Monthly Gross Revenue

One could say that the above graph shows all there is to say about the current state of Gambling in Macau, yet we will come to that as we are deep diving into the current situation. First of all, the month of August has ended and figures for August will be released sometime later in September by DICJ. Until then we can work with what we see above. And what do we see?

  1. The peak gaming revenue was in February 2014
  2. The first sign of a low was in June 2014
  3. The downwards trend has continued (with smaller peaks in between) until July 2015
  4. Lowest point in the downward trend had been June 2014 so far with 17 billion MOP revenue, the same as experienced in November 2010 for the last time.
  5. July 2015, the last month on record logged 18.6 billion MOP, the same as experienced in January 2011 for the last time.
  6. Comparing the low in June 2015 with the peak in February 2014, Macau revenue has dropped by 55% in less than a year.

The following graphs capture  the same set of data in slightly different views:

2015_08 - Comparison of Monthly Growth Rates

The above graph compares total revenue figures (in million MOP) month to previous years’ month. Also here the sudden drop in June 2014 is visible and there had been no month that was able to peak higher than the corresponding season the year before. That includes every month in 2015. That gap was highest in February 2015 as visualized below:

2015_08 - Gap to last year

Whereas one might think that a stabilized graph, as seen between March to July 2015 is a good thing, in reality it is a sign of negative growth as it represents the gap towards the last years revenue figure and if continuing over a year resembles a downward trend.

2015_08 - Monthly Gross Revenue compared to last years month

The above graph, with data from January 2010 all the way to July 2015 shows the growth rate of revenues compared on a month-to-last-years month basis in percentage. Once again, the downward trend is more than visible.

2015_08 - Growth Month to Month and Average

This graph is focussed on comparing growth rates between consecutive months, i.e. January 2015 to December 2014 and gives an indication on the general trend. The more peaks are below the 0% line, the more of a downward trend it is, whereas when there are more peaks above the 0% line, revenues are growing. The red line resembles the average for each half year of each month’s growth/decline percentage. Once again, the downward trend starting in 2014 is visible.

Whereas the above are great representations of probably the most talked about issue in Macau, they are all based upon one single set of data:

  • Revenue of Games of Fortune in Macau

The above alone cannot be representable for the state of Macau is the following is not taken into account:

  • Visitor figures
  • Openings of hotels and casinos
  • Unemployment figures
  • External factors

Let’s have a look at the visitor figures as published for Macau. DSEC has released figures up to Q2 2015 (and the month of July, which is being excluded in our comparison below).

2015_08 - Visitor Figures

Immediatelly visible is a drop in visitors from mainland China. This is also visible when one makes the overall graph for comprehensible:

2015_08 - China vs Rest

Before going into further discussions on any of the implications, let’s review this a little bit further.

  • Peak visitors overall to Macau had been in Q3 2014 (surprisingly in the quarter in which the drop of revenues occurred). The same quarter had also seen the highest amount of visitors from mainland China.
  • Q2 of 2015 is the lowest quarter in the recent downward trend and is the lowest quarter since Q2 of 2013 (i.e. two years)
  • The peak in visitors had actually not just been one quarter, but two quarters, with Q4 of 2014 having had the second highest number of mainland Chinese tourists (and the second highest overall visitor figure as well)
  • Rest of World is pretty stable and Hongkong has not escaped it longterm downward trend.

Let’s have a look at the gambling revenue broken down into visitors (per-head-analysis):

2015 - Revenue Down

Since Q2 2014, revenue per head (i.e. per visitor) is down compared to the previous quarters. No remember that Q3 and Q4 of 2014 had been extremely strong visitor months hereas revenue as sinking, so let’s have a look at an overlap of the figures:

2015 - Visitors and Revenue

What can be seen above is a very dangerous trend: Not only are the overall visitor figures decreasing, but at the same time, the spending per head is decreasing as well. The current spending rate of about 7740 MOP per visitor in gambling revenues is the lowest figure since Q3 2010.

This leads us to our next verification: which major casinos or hotels opened during the recession? Often it is talked about that Macau is adding it’s Cotai 2.0 projects to the market. Galaxy Macau Phase 2 was the first of several large resorts to open. It opened on May 27th 2015. So let’s have a closer look at the months that followed the opening. In particular we are looking at visitor figures to see if an additional casino would attract more visitors:

2015 - Visitors after Galaxy Opened

It is important to note that we want to compare Total Visitor figures on a monthly basis agains the same period the year before and the year before that. We do NOT want to compare consecutive months as that might be a one-time trend, whereas comparing a similar time in the year the year before will give one a clue if there had been an impact or not.

As can be seen above, June 2014 and July 2014 had seen much higher visitor figures than 2015 or 2013. That is in line with previous indications about a peak in 2014. As such whatever stimulus the opening of Galaxy Macau Phase 2 had, it was not enough to get visitor figures back up to 2014 levels. They are however higher than 2013.

Above we have looked at revenue figures and total visitors. We have not yet looked at individual casino’s performances (which would require a little bit of deep research for which I do not have time at hand right now). We can however have a look at the unemployment rates of Macau:

2015_Unemployment Rate

Over the years unemployment dropped significantly and even throughout most of the recession, unemployment was at a record low of 1.7%. Only in the second quarter of 2015 unemployment slightly increased to 1,8%. As such it can be concluded that the recession had no impacts on the employment situation of the Macau workforce.

What are the external factors that caused the above?

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Summary of present world politics, the challenges Obama has to face in the term of his presidency

The Economist has published an article called “Obama’s world” on November 6th 2008 describing and summarizing the challenges Obama has to face in the term of his presidency.

The connection between China’s and the USA’s economy, the rise of Russia and its late struggle with Georgia, the Iran question, the wars in Iraq and Afghanistan. Nearly every newspaper in the US and many abroad are constantly following the bits and bytes of Obamas ascend to presidency these days and try to map out the most likely resolutions to be drafted, agreed on and absoluted.

However the outcome, the world is changing rapidly and the path it is going on a few might predict correctly.

Shareholder value – bliss of the world?

Recently I came into a discussion with a Russian colleague of mine, someone who had not only experienced the downfall of the Soviet Union, but also the rise of capitalism in his own country, the negative impacts of helplessness and the sheer amount of consume and money-spending.
The discussion circled around the concept of shareholder value. Surprisingly for me, my Russian colleague stood totally behind this topic, supporting it and emphasising on the fact that capitalism and free market theory are the only effective concept to guarantee the spread of wealth among people contrary to communism belief.

I stood up to another idea: The superiorism of stakeholder value towards shareholder value, the idea that a company should be and actually already is part of society, its social networks and its social responsibilities. In my opinion shareholder value is only aspect of stakeholder value and only one of the aspects to be taken into account when a situation needs a decision.

Interesting enough our discussion went into a lot a lot a lot of details on how decisions are based on identities and values, on how companies should have what specific place in society, the role of governments in the way capitalism should act or enact and basically we both came to the same conclusion or at least we could agree to the same principle: that we are driven by ideas, that people are driven by values and that a system can never be just a system but is consisting of people. People grown up believing in principles and values.

Values they have inherited, they have learned. That our culture (see Hofstede) is telling us are worth to believe in.

Cultures, civilizations. Hofstede, Huntington.

In my opinion we need a change in present capitalistic thinking. Towards Stakeholder Value! A company cannot push away its responsibility towards society, government, competition, shareholders, employees, customers and suppliers. There is more to a company than pure concentration on the stockmarket. And I hope people in responsible positions will learn to base their decisions upon that.

Getting and receiving information on railways, rail business opportunities and new market developments.

If one wants to stay up to date in any topic it requires a certain amount of effort. Not to receive information, but to filter it and get the relevant information picked out of the sheer mass of data. The same applies to the railway market.

Using the internet there is however a certain ease in the aggregation of information. In general, to get an overview of any market, there are two approaches:

  • focus on the customer side
  • focus on the supplier side

Customers are feeding the market with demand and needs, therefore allowing the suppliers to deliver. Intensive market studies, researches and enquiries are undertaken every day in each kind of market to filter out relevant data.

Suppliers are usually the technological drivers that develop products and deliver new answers to questions raised (directly or indirectly) by customers worldwide.

In addition to these two approaches there are certain other ways to figure out information on specific topics: Is it a medical issue, there should be hospitals and universities involved. Is it a technical issue, there are certainly independent organizations of engineers around defining standards and norms.

For the global railway market the following ways might be applied to get the latest and hottest data worldwide:

  • usage of existing networks of information gatherers (i.e. magazines)
  • information collection at the source (i.e. suppliers / customers)
  • cross-branch information collection (i.e. not-rail related sources)

Information Gatherers

Information from the source

Due to the sheer number of customers and suppliers the collection of information from the source needs to be taken in steps.  Questioning oneself, what is the exact information I need? Which branch of technology do I want to look into? Which market segment is the relevant for me?

Europe
Suppliers
Siemens AG
Signaling
Locomotives
Trains

Alstom

Clients
Deutsche Bahn

North America:
Suppliers
General Electric
Bombadier

Wikipedia is offering a list of railway operators sorted by Continent and country, as well as a ranking of these countries according to the railway network size. An extensive list of rail vehicles manufacturers can be found Wikipedia as well as a  shorter list of rail industry companies.

Cross-branch information

Conclusion

The main effort to stay up-to-date in this specific topic won’t be in the aggregation of information, but rather in the transcription of information into the needed form.

Hunger is topiced by Bush for G8

According to the German news magazine SPIEGEL ONLINE, Bush is going to topic hunger as his central commitment for the upcoming G8 conference.

According to Food and Agriculture Organization (FAO) 2006 statistics, there are 820 million chronically hungry people in developing countries.
212 million live in India
206.2 million live in Sub-Saharan Africa
524 million live in Asia and the Pacific
52.4 million live in Latin America and the Caribbean
37.6 million live in the Near East and North Africa
Source: World Food Programme

According to the World Food Programme’s Annual Report 2007 (caution, pdf), 86.1 million people are reported to have received benefits from the WFP in 2007 (-1.9% yoy) of which 71.6 million had been children or women. this means that the WFP is reaching at the moment only 10.5% of those in need. Have a look at the Hunger Map for detailed information on how hunger is spread among the worlds’ countries.

The Copenhagen Concensus has listed malnutrition as their highest priority, i.e. Micronutrient supplements for children (vitamin A and zinc), and despite all the criticism this project has received, the overall question of priority and selection of topics is still nagging: Which issue is the first and most important one to address, or on a more metaphysical way: Why is there the need to specifically address one item and not all of them?

I wish there would be more ways to contribute to these ongoing developments. It’s not just “Do your part”, for as team work and integrative combination of single factors have proven to be more effective than the single part. Where are the integrative measures everyone of us can join? The team work groups doing something?

There are two ways I can think of at the moment: One-time effectiveness via devoting on’s life to a certain mission, or a part of one’s life to this mission, such as volunteers doing with their respectful work in developing countries. And there should be ways the normal life can be integrated into the process of combined efforts to solve. E.g. by creating market situations for businesses to compete against each other, by making daily routine jobs in the industry in a way, that they include support for others, help for others. Dedicated work time for something else? One-year working as a librarian abroad, as integrated part of your normal librarian career? I think this are just some spin-offs that could be possible.

I just hope for the right people taking some spin-offs into account as long as we have some kind of stable gas prices to bring people around to make things possible.

20000 jobs in danger in Germany (logistics)

According to German news website Tagesschau round about 20000 jobs are in danger in the logistics industry, mainly with small- and medium-sized businesses, due to the currently high oil price and therefore resulting high gas prices.

From an economic point of view, this is a normal market development. As costs for goods increase, the selling price will increase as well, thereby less consumers are taking the offer in the long run. On the extreme short run, the demand cannot change and people will take the higher prices, yet slowly search for alternatives. The market from the customer point of view does not only include logistics, but based on the actual need  (i.e. is it a product shipped or just a conveniently side-stop), clients will find other more cheaply ways to solve the situation or will pass the higher costs to their customers.

In any way, with not decreasing input costs, high prices will remain stable, thereby less customers will buy and those business who cannot afford to operate with less consumers will be out of market, giving a higher share of customers to the remaining businesses.

The complaint that jobs are lost is a single-view one. Jobs are never lost, for there is always the question: Lost to whom? The economic power to create or service that is behind each individual is still existing, however the exploitation, the usage of this power, within this function logistics is not valid anymore. However it may be shifted to another industry, being in use there.

From the personal point of view of each of these laborers, workers and employees however it is a loss, for their life changes dramatically, especially in the low-educational sector. The higher qualified people are, the easier it will be for them to get a job again, just as the general spectrum of jobs available to them is greater than for lower-educated people. Whether high-qualified people take low-educational jobs or not is another question, but for those not educated to take over high-qualified jobs the situation is a different.

Right at this point, several questions should come to mind:

1. In which way is society generating a process that people loosing their jobs will find another adequate work within a reasonable amount of time?

2. In which way is the educational system prepared and activatable to give a mass of people a new education and to whose costs?

3. Whose responsibility is it to guarantee that an economy is using its potential economic power? The state, the industry or the individuals within their situations? Or, otherwise said: Who should initiate the above-mentioned process?

4. Despite the fact that we have to consider an amount of 20000 people on the short run to get another education, how is our youth prepared for the challenges of fast-changes in the industry?