Operators focus on premium mass, mass
In January, Macau’s gaming industry posted its first decline in more than two years, with gross gaming revenues down 5 percent year-on-year to 24.9 billion patacas (US$3.1 billion), according to data from the Gaming Inspection & Coordination Bureau.
But Golden Week, the annual holiday that kicks off the Chinese New Year, started on a good note, with day-one visitation up 21.7 percent year-on-year to more than 88,000.
The Macau Daily Times attributed the January drop to China’s weakening economy, which kept high rollers away from the city’s casinos. Even the bad news was good news: the Times noted that the decline was expected, and was not nearly as steep as the median analyst estimate of 9 percent. GGR in Macau is expected to decline throughout the year as edgy Chinese gamblers refrain from playing.
Macau’s gaming industry is pivoting away from the VIP segment and toward premium mass and mass. Lawrence Ho, for one, CEO of Melco Resorts & Entertainment Ltd., said rooms at all the casino operator’s three Macau properties are sold out for the New Year. Wynn Resorts President and CEO Matt Maddox said the Golden Week holiday will be “the real test for the first quarter. In Macau, it’s inherently volatile and there are peaks and valleys.”
Union Gaming Group analyst Grant Govertsen said his firm “view the market as being more robust than it gets credit for, especially given the timing of Chinese New Year this year. We were impressed with the January results and what seems to have been a fairly strong last week of January despite being in what is normally considered to be the pre-holiday slow period.”
Jefferies gaming analyst David Katz said investors should view Macau “in a measured manner” due to the pressures brought to bear by the Chinese economy and uncertainty associated with the looming gaming license retender. “We view the historically low valuations as fair,” Katz said.
Stifel gaming analyst Steven Wieczynski said his team “continues to forecast gross gaming revenue growth in the range of 2 percent to 6 percent” for the balance of 2019. “By and large we expect the VIP market to deliver a relatively flattish year-to-year comparison, with the mass market pacing growth for the market as a whole.”
Maria Helena de Senna Fernandes, director of the Macau Government Tourism Office, foresees healthy visitation to the city for the Year of the Boar, and expects an “8 percent to 9 percent” year-on-year increase in visitor arrivals for the holiday, helped in part by the opening of the new Hong Kong-Macau-Zhuhai Bridge.
Looking at the market long-term, Las Vegas Sands President and COO Rob Goldstein says Macau’s mass gaming segment has the potential to become a US$30 billion annual business. According to Inside Asian Gaming, during LVS’s fourth quarter earnings call, Goldstein sounded particularly bullish about the SAR. “I’m not capable of telling you what the breakout is in premium versus base, we’ll take it all and we have the assets to take it all,” he said. “It’s a very simple market to understand—it’s a mass, premium mass market driven by scale. The VIP segment will continue to be challenging, I believe. The mass and premium mass will be the driver.”
He said his associates are “long-term believers” in Macau. “This is a very special place. It’s very unique and we are delighted to be there and investing today. We’re and we don’t think there’s a market like it anywhere in the world or a better place to deploy capital.”
Wynn Resorts CEO Matt Maddox says the multimillion-dollar renovation of Wynn Macau, due for completion in late 2019, is aimed at reducing reliance on junkets and focusing on premium mass. “We realized in 2018 that Wynn Macau is doing very well, but it was making a disproportionate share of its money from second-tier junket operators—and that’s not a place where we wanted to invest for the long term,” Maddox said.
“So we began redesigning Wynn Macau, the entire original casino and also remodeling some of the nicest suites in Macau, the Encore Tower Suites. We started that construction in July and in the fourth quarter of this year we’ll be re-launching an entirely new premium mass casino experience that’s open to the water, three new restaurants, 10,000 square feet of additional retail and a new hotel tower that wasn’t just a soft refurb of the Encore tower, but is completely redone like it’s new property.
“We’ll be effectively launching a new property at the end of this year for Wynn Macau, this focus squarely on the business that we believe in for the long term—and that’s the premium mass segment.”
