Golden Week: Good, Not Great

China’s Golden Week celebration paid off for Macau, though not as much as in previous years. Analysts says lower visitation created lower expectations, but gross gaming revenues didn’t lag as much as expected. Some believe a slowing Chinese economy will impact all future Macau revenues, and has impacted Macau gaming stocks, which have sunk almost 40 percent since May.

Golden Week: Good, Not Great

Sluggish returns for balance of October

The highly anticipated Golden Week celebration proved better for Macau than some analysts had predicted.

From October 1 through October 7, the average daily rate for casinos in the gaming hub rose to $162 million, according to JP Morgan Securities (Asia Pacific) Ltd. In an October 9 note, analysts Sean Zhuang and DS Kim wrote, “This implies that ADR grew well over 15 percent year-on-year, and that ‘total GGR’ during Golden Week grew high-single-digit year-on-year.”

The analysts said the results were “better than our expectations of approximately 5 percent growth, and likely ahead of the market’s.”

Sanford C. Bernstein analysts said ADR for the period was in the same range, approximately $161.12 million. According to Vitaly Umansky and Kelsey Zhu, “Mass volume is estimated to be up 22 percent to 23 percent, with VIP volume estimated to be up 15 percent. Other than visitation growth, better quality players helped drive VIP and mass GGR growth.”

The timing of this year’s Golden Week holiday was fortuitous; it started on a Monday, allowing some visitors to start their vacations earlier. CalvinAyre.com reported that overall visitation to Macau during the holiday increased 7.2 percent over 2017 for a total of 895,000 visitors. Visitors from Mainland China accounted for more than 82 percent of the total, up 14 percent from last year.

But brokerage Morgan Stanley predicts that the strong visitation will be offset by weak third-quarter earnings and a slower 2019, reported the Macau News Agency. The brokerage predicts that GGR industry will grow 0 percent quarter-on-quarter and 10 percent year-on-year, while property earnings will decline 2 percent quarter-on-quarter and increase 7 per cent year-on-year, MNA reported.

And Bernstein predicts year-on-year growth for October to be anemic, growing between 5 percent and 8 percent. The results will be important in the aftermath of Typhoon Mangkhut, which struck Macau in mid-September and caused gaming revenue to plummet. GGR for the month grew just 2.8 percent year-on-year.

Golden Week’s better-than-expected performance “may not continue for the remainder of the month,” wrote Morgan Stanley analyst Praveen Choudhary. “Macau in a slowing growth environment tends to underperform.”

Moreover, Bloomberg News contends that Golden Week could be “fading” as a revenue generator as the Chinese economy slows down. The news outlet reported that Macau casinos were among the biggest losers in Hong Kong in the immediate aftermath of the seven-day holiday. On October 8, shares of Galaxy Entertainment Group were down 6.6 percent, while Wynn Macau Ltd. declined 5.5 percent. The Bloomberg Intelligence gauge of Macau casino stocks has fallen more than 38 percent since its peak in May.

“The Golden Week this year was very robust, better than our pre-holiday expectation,” said Andrew Lo, executive director of Macau junket operator Suncity Group Holdings Ltd. “For the fourth quarter and next year, we don’t expect the performance will be as ‘golden’ as last week.”