Wynn Resorts just put out a horrible sign for Macau

Wynn Resorts, the global gambling empire controlled by Steve Wynn, is encouraging staff at its Wynn Macau property to take unpaid leave for the first time since the financial crisis, Hong Kong's The Standard reported.

There simply aren't enough customers coming to the island to gamble.

This is just the latest step in a steep march to the bottom for Macau. Gambling revenue on the island contracted last year, it was the first time since the figure's been tracked. February revenue fell by 49% from the same time a year before.

The industry was once sustained by globe-trotting ultra-rich VIPs who used companies called junkets to finance their bets, but since President Xi Jinping instituted an anti-corruption drive, they've stayed away. Last fall reports started circulating that casinos were installing cameras in the private rooms where high rollers played. In 2014, 16% of junkets on the island shut down.

And it isn't just the VIPs, the Communist Party has made it clear that it doesn't want retail customers gambling away their money either. The government is planning a crackdown on visas to Macau and illegal casino ads that make it to the mainland of China (where gambling is illegal). The government will also be monitoring transactions on UnionPay, the only domestic bank card in mainland China.

None of this is helped by the fact that China's economy is in its worst shape in 25 years, either.

So now the question on Wall Street has shifted from - "When will this carnage end?" to "What if it doesn't?"

"The key question everyone should be asking is whether the mid-year openings of Galaxy Phase 2 and Studio City will sequentially and proportionally drive revenue for the whole gaming industry, as opposed to taking market share away from the other operators in a shrinking pie," Macquarie analyst Jamie Zhou wrote in a recent note.

Macquarie revised down its 2015 estimate for Macau gambling revenue to -24% and cut earnings for gambling properties on the island by 13%-21%. The bank thinks there's a risk these companies might cut their dividends.

In terms of the casino industry in general Macau's failure puts Wynn in an especially tough spot. You have to remember that when Macau first opened these companies started making 2 and 3 times their revenue. Las Vegas Sands expanded to other parts of Asia - like Singapore, where those gambling revenue helped the company beat earnings last quarter (an ugly quarter for most, to say the least).

Wynn's Asia operations, however, are based solely in Macau, and CEO Steven Wynn has said he's not entirely sure what the future holds there.

"China remains a big question mark. We have more questions than answers, thousands of our Macau employees are anticipating promotion and a better life because of Wynn Palace ... We have learned in the last 12 years to behave in China, and that is to listen carefully to what the leadership says and to conform with the program as we are their guest," said Wynn in a February conference call. "We wait for an announcement from the government with baited breath ... What we are seeing in China is an entrenchment."

It's a bad time for this at Wynn too. His Elaine Wynn, Steve Wynn's ex-wife is fighting for her board seat and her brother just left the firm, according to Norm Clarke, of the Las Vegas Review Journal.

New casinos that open on Macau - and there are about $19 billion in projects slated for completion over the next few years - will likely be more family friendly places. That's how Xi wants it, but isn't happening fast enough. The transition is going to be ugly.