Deutsche Bank analyst Karen Tang says it’s possible that mass growth, which was surging at triple digit rates earlier this year, may only make it to 8 percent in September and could be flat in October, partly because of the main-floor smoking ban that takes effect October 6.
“VIP is worsening from minus-17 percent (year-on-year) in August to minus-25 to minus-30 percent in September,” Tang said in recent client note. “But our biggest concern is in mass,” she said. “Mass (growth) is sharply slowing.”
She said on a tour of the major casinos early last month “We found the premium mass areas very noisy with heavy construction activity to install glass walls to segregate the premium mass areas into ‘private gaming’ areas ahead of the smoking ban deadline. We believe there was considerable business disruption.”
October results also face a tougher comparison, she noted. “October 2013 mass revenue grew 40 percent year-on-year versus 33 percent year-on-year the previous month,” she wrote.
Tang cited casino hosts as saying a slowdown in visits by high-frequency mass players and premium-mass players had the most impact on the market. Both have been crimped by cutbacks in the number of visits mainland Chinese can make to the city on third-country visas.
The central government’s anti-corruption drive, considered by observers as the principal reason for the fall-off in VIP play, may also be taking a toll on the bigger mass players, she said. “High-end premium mass players, similar to VIPs, now preferred to remain low profile in the anti-corruption climate. Visits by high-end premium mass had fallen by around 10 percent, according to some casino hosts.”
With September shaping up for VIP as “the worst ever year-on-year decline in more than five years,” she said if the sector does not improve, market consensus for 2015 “has room to fall”.
She said there is concern as well that the first installment of the next wave of resort development on Cotai—Galaxy Macau’s Phase 2 and Melco Crown Entertainment’s Studio City, both slated to open next year—could fail to create the expected new demand.
The bank has cut its revenue growth estimate for next year to 1 percent from 10 percent. Consensus is looking for growth between 8 and 12 percent.
