Macau was headed for another down month in November, but the market is looking to expanded hours of operation at its border crossings with China to provide a badly needed boost.
Opening hours for three major checkpoints, two in the neighboring mainland city of Zhuhai and one at Hengqin Island, will be extended beginning December 18, the Macau government said.
“We believe it could be positive in terms of the number of hours spent at gaming tables by same-day travelers, and thus potentially for casino operator revenues,” Barclays analysts wrote in a recent note to investors.
The crossing linking Hengqin to Cotai will be open 24 hours a day, while the main Gongbei Border Gate in Zhuhai will be open for two hours longer. The Zhuhai-Macau Cross-Border Industrial Park will be open to all Macau residents; currently, it’s only open for employees of the industrial park.
A central government crackdown on corruption, combined with tighter visa rules and currency controls are wreaking havoc with Macau’s world-leading gaming revenue, which dropped 23 percent in October compared to October 2013 and in November was headed for its sixth straight month of year-on-year declines.
Credit Suisse was expecting revenue to fall 20 percent in November versus the same month last year, with VIP, which accounts for the majority of the casinos’ take, likely to decline by up to 28 percent and the mass market by as much as 6 percent.
Analysts mostly are looking for 2014 to end flat to slightly down compared to last year.
Standard Chartered, meanwhile, expects 2015 revenue will contract by 2 percent, with VIP down 10 percent and mass up by 11 percent.
Analyst Philip Tulk wrote, “We continue to like Macau as a longer-term, secular growth story given the expected growth of China’s middle class, Macau’s currently low penetration into China overall, and an apparent commitment by the central government to the development of Macau as a destination for general tourism. We do think valuations need to become more rational, however.”
“All eyes will be on the emerging trends performance during Lunar New Year”, which next falls in February 2015, said analysts Jamie Soo and Adrian Chan of Daiwa Capital Markets. “Industry participants expect the casino operators to be much more aggressive in driving business/defending market shares, if performance is lackluster for two consecutive busy seasons,” including the recently concluded October Golden Week.
Analysts are hopeful, however, that the increase in operating hours at the borders will translate to more time spent at casino tables and spur more visitation from neighboring Guangdong province, which accounts for around 40 percent of total mainland visitation.
“The changes to the Hengqin border would likely have a limited near-term impact, in our view, but could be positive in the long run as Hengqin’s development projects are completed and potentially attract more residents and visitors to the area,” said Barclays.
Both Barclays and Citi Group interpret the decision as the Chinese government being supportive of Macau’s long-term developments.
“Macau’s 15th anniversary of handover to China falls on 20 December (two days after new border hours take effect), which is when President Xi Jinping is expected to visit Macau. We believe this is his gift to the Special Administrative Region,” Citi said.
