Macau Could Take a Hit Due to Trade War

The director of the Macau Economic Association has said that the city could face “heavier pressure” in the coming year due to trade tensions between the U.S. and China.

Macau Could Take a Hit Due to Trade War

“An economic typhoon”

Trade tensions between the United States and China could bring “heavier” economic pressures to bear on the territory of Macau and its gaming industry, according to a report in the Macau Daily Times.

Joe Lao, director of the Macau Economic Association, said, “I would describe it as an economic typhoon. Signal one is now being hoisted.”

In September, Deutsche Bank cut its 2019 growth outlook for Macau from 11 percent to 4 percent due to concerns about the VIP segment. DB said Macau is at the start of a downward earnings cycle because of the trade war and the decline in the yuan, according to Bloomberg News.

Zhang Jianhua of the Economic Affairs Department of the Liaison Office called the international economic trend “complicated. The local gross gaming revenue slightly dropped and private large scale investments significantly declined. It is necessary for us to further strengthen the study of Macau’s economic trend.”

But Sands China Ltd. sees smooth sailing ahead, despite the trade war and the looming retendering process for Macau casino concessions, according to Inside Asian Gaming. Rob Goldstein, president and COO of the Las Vegas Sands Corp., said as much during the company’s third-quarter earnings call. “We’ve seen it all over the years,” said Goldstein, speaking about the trade tensions. “We’ve seen these restrictions, union pay issues, junket difficulties, border restrictions, the great recession—and we’re in 2018 and we’re probably going to deliver over US$3 billion of EBITDA.

“And we keep growing,” Goldstein continued. “We keep reinvesting. We have a highly diversified business which is number one in virtually every segment there, from EBITDA to mass revenue to premium mass revenue to slots, hotels. Our business is stable and strong. And we always believed and we still believe there’ll never be another market as powerful as Macau.”

In the next few years, the gaming concessions of operators in Macau will expire: SJM and MGM in 2020, and Sands China, Galaxy, Melco Resorts and Wynn in 2022. “We’re going to spend US$2 billion in the next couple years,” said Goldstein. “If there is not a bigger vote of confidence than that, I don’t know what that is. We believe strongly today, we believe strongly tomorrow, we believe our concession renewal is not at risk.”

Meanwhile, a new report cited by Macau Business contends that gaming plays “little to no role” in getting a patron to feel “attached” to a particular integrated resort. The study conducted by the Institute for Tourism Studies polled 500 tourists from Mainland China, Hong Kong and Taiwan.

“It is interesting to note that gaming was found to have no significant impact upon any dimension of place attachment, suggesting that casino-resort visitors’ participation in gaming did not affect their emotional bond with the place,” the study observed. Instead, “positive emotions, particularly the ‘light pleasure’ emotions,” were the “most effective factors shaping visitors’ place attachment. This finding suggested that the operators of casino resorts should continue to develop more and better non-gaming hedonic activities and facilities for visitors.”