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Macau’s gaming revenue dropped more than analysts’ estimates in May, as tighter rules affecting gamblers increased the challenges for the city’s casinos including those owned by Galaxy Entertainment Group Ltd. and Wynn Resorts Ltd. Gaming stocks extended losses in Hong Kong.

Gross gaming receipts fell 9.6 percent to 18.4 billion patacas ($2.3 billion), completing a two-year decline, according to data from Macau’s Gaming Inspection and Coordination Bureau. That followed a 9.5 percent decrease in April and compares with the median estimate of an 8 percent drop by analysts surveyed by Bloomberg.

Macau has been struggling for two years as China’s economy slowed and President Xi Jinping’s corruption crackdown caused high-stakes gamblers to avoid the world’s largest gaming hub. Operators in the city, the only place in China where casinos are legal, have responded by shifting focus to tourists and recreational gamblers, with Wynn Macau Ltd. and Sands China Ltd. due to open new resorts later this year.

The steeper decline in May was “partly due to the tightening policies on the industry, especially the recent ban on phone betting,” Daiwa Capital Markets Hong Kong analyst Jamie Soo said via telephone, adding the limited revenue improvement of about 1 billion patacas from April, despite last month’s Labor Day public holiday, supported his cautious view of Macau casino stocks.

Stricter Rules

The city’s government is planning stricter rules on the industry, including raising the entry threshold for gaming promoters, the middlemen who bring in VIP players and loan them money to gamble with. Macau also banned phone betting in early May, a form of proxy betting favored by some high-stakes gamblers from China.

Hong Kong-listed casino operators extended losses after the data was announced, with Bloomberg Intelligence’s index of Macau gaming stocks plunging 2.4 percent, compared with the 1.2 percent drop at the mid-day break in trading. Sands China fell 3.3 percent while Galaxy lost 2.5 percent. The benchmark Hang Seng Index was little changed.

Macau is trying to diversify and reduce its reliance on gambling, a $30 billion industry that is the source of about 80 percent of the former Portuguese colony’s tax revenue. The government wants to limit growth in the number of new gaming tables at the city’s casinos, and raise the revenue contribution from their non-gambling features.

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Gambling generates about 90 percent of Macau casino operators’ total revenue, with SJM Holdings Ltd. and MGM China Ltd. the most reliant on gaming while Sands China is the most diversified, according to Bloomberg Intelligence analyst Tim Craighead. The next wave of casinos will focus on increasing their hotel rooms as well as retail and convention space, he said.

Wynn Palace, with 1,700 hotel rooms and a lake with gondolas and fountains, is expected to open in late July or early August while Sands China’s 3,000-room Parisian, featuring a half-size replica of the Eiffel Tower, is targeting to start operations in September.

Convincing mainland Chinese tourists to spend more remains a challenge. Visitors to Macau shelled out $220 per person in the first quarter on non-gambling purchases, down almost a third from 2014. Mainland Chinese still make up about two-thirds of Macau’s visitors, even as the number last year fell for the first time since 2009.

Macau’s economy shrank 13.3 percent in the first quarter, the seventh straight contraction as gambling revenue remained weak. Moody’s Investors Service last week downgraded the city’s debt rating, reflecting concerns it will continue to suffer volatile growth.