Analysts expect the upcoming Golden Week holiday to be a disappointing one for Macau’s casinos.
Occurring twice a year and one of the biggest Chinese holidays, Golden Week is historically golden for operators, but brokerage Sanford Bernstein said its analysis indicates it is “not looking optimistic”.
“While hotel bookings are solid, we expect the quality of the customers will be lower,” said analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu. “Room comps will be high during the period, but likely go to an average lower-spend customer than in 2018. Consequently, higher-end play will likely remain tepid.”
Moreover, they expect this trend to continue “during the whole of October.”
Times have been difficult for the world’s largest pure gambling market, with softness spreading through the Chinese economy in the midst of a trade war with the United States, combined with headwinds from the ongoing political turmoil in Hong Kong and recent negative publicity on the mainland targeting the junkets that drive the VIP trade.
Gross gaming revenue were down year on year by 3.5 percent in July and 8.6 percent, and basically more of the same is forecast as 2019 winds down.
Bernstein has lowered its September estimate from slight growth to flat. JP Morgan is looking for plus-1-2 percent.
“September is set to be another month to forget for Macau, following two months of GGR misses,” analyst D.S. Kim said.
Macquarie Research is looking for September to end plus- or minus-1 percent year over year, which implies a 4-5 percent decline in the third quarter, pairing a forecasted 12 percent rise in mass revenue offset by a 20 percent decline in VIP.
Morgan Stanley, meanwhile, has cut its full-year forecast from minus-1 percent to minus-3 percent.
“Many macroeconomic indicators are suggesting a VIP recovery between now and December, yet VIP revenue has deteriorated further in the past three months,” analysts Praveen Choudhary and Thomas Allen wrote in a client note.
“An even bigger concern is mass revenue, which has remained robust (more than 10 percent growth year-on-year in the first eight months), but could turn slower in fourth-quarter 2019, to single digits.”
They are now forecasting mass revenue growth of 10 percent this year and 7 percent in 2020, while VIP revenue is expected to decline 17 percent this year and 2 percent next year.
“Mass revenue is generally helped by overnight visitations, which, in turn, are helped by increase in hotel rooms, and both of these are slowing down as new capacity additions have been delayed.”
Adding to the uncertainty is a scheduled visit in December from Chinese President and Communist Party chief Xi Jinping to celebrate the 20th anniversary of Macau’s repatriation to China.
Macquarie expects this could dampen gaming revenue for the month by as much as 10 percent compared to last year.
“Over the next couple of weeks, we expect brokers to further reduce 2020 forecasts, taking into account a decline in 3Q/4Q GGR and a delayed VIP,” said analyst Edward Engel.
“Very few investors are anticipating a 2020 VIP recovery,” he said.
In other Macau news, in a move that’s sparked sharp criticism from analysts and legal experts, Macau’s Gaming Inspection and Coordination Bureau (DICJ) has imposed a lockdown on the third-party sharing of any gaming-related information without the regulatory agency’s prior approval.
The directive, which is not being made public, applies to any “transfer of information about gaming activities or operations, including customer personal data” to third parties, in (Macau) or elsewhere, according to the Macau News Agency, which has seen the order.
The DICJ—the agency is known by its Portuguese initials—told the English-language Macau Daily Times: “The purpose of the instruction is to ensure that the transfer of gaming-related information between the gaming companies and the gaming promoters is in compliance with the laws of Macau, in particular the gambling laws, anti-money laundering laws and other regulations, thereby safeguarding the healthy development of the gaming industry.”
The order comes in the wake of a crackdown on the Chinese mainland on online gambling and proxy betting by Chinese nationals in the Philippines and elsewhere.
Some observers, however, see it aimed more directly at quashing access on the part of foreign regulators and media outlets to the kinds of explosive exposes that gripped Australia this summer implicating Crown Resorts in dealings with Chinese gambling promoters and high rollers𑁋some well-connected politically in China𑁋with ties to organized crime, money laundering and other illegal activities.
Local attorney Rui Proença, an expert in data privacy issues, said the use of the term “gaming-related information” suggests a broader scope than “personal data” and suggested the directive would be “transformational in how the operators transfer data and who can access that data.”
An industry analyst, speaking to MNA on condition of anonymity, termed it “at the very least strange.”
“It will have a strong impact, preventing information from being reported, for example, to regulators in other jurisdictions or to hotels owned by concessionaire and sub-concessionaire groups.”
“I am speculating that it has something to do with the recent ‘60 Minutes’ Australian news program, which alleged that sensitive individuals were connected to the casino business,” said Ben Lee, managing partner at Macau-based IGamiX Management & Consulting.
“It might be to prevent information (on these people) from being sent overseas,” said Lee, who suggested also that it was “more applicable to the U.S. operators than the Chinese ones”.
Attorney Jorge Menezes, speaking to the Times, said the directive itself is legally questionable.
“Restrictions on access to data of concessionaires or sub-concessionaires can only be set out by law approved by the Legislative Assembly. Access to information of public entities𑁋and gaming operators are under the same legal regime𑁋is a fundamental right that can only be limited by law, and there are court decisions confirming this.”
He added, “The DICJ has already been defeated in several access of information court cases.”
The DICJ defended the order in a written response to the Times:
“The relevant guidelines do not completely prohibit the transfer of gambling-related information, but only require that they must obtain permission from the DICJ before they can transfer it. If the relevant information on the transfer of gambling is analyzed to be legal and reasonable, the DICJ will grant permission, so there is no restriction on the exercise of statutory rights.”
Menezes disagreed. “Apart from being most likely illegal, it sets a poor standard for the transparency required in gaming activities. The industry will not thrive by having gaming activities and operations carried out in an opaque manner. Transparency and public accountability should play a fundamental role in a successful gaming industry, particularly when suspicions of criminal activities have been raised.”
It is “unusual and clearly inappropriate and disproportionate,” another legal expert told MNA.
“Why these restrictions? To what end? What happened before to justify these draconian measures?
“If the new competition for gambling concessions is coming, what is the framework: Unfair competition or to keep away certain foreign interests, namely Americans?”
