A report in Bloomberg News says Macau may be finally reaching the bottom of a more than two-year recession. And once it reaches bottom, the city hopefully will begin to bounce back.
Bloomberg looked to encouraging economic indicators like a marked softening in the contraction of Macau’s gross domestic product. The city, which relies on gamblers for about two-thirds of economic output, saw GDP shrink 7.1 percent in the first quarter, compared with the 13.3 percent drop in the three months through March.
Before the data was released, Macau gaming stocks saw gains, led by Sands China Ltd., which rose 3.5 percent to HK$31 (US$4) by the close of trading. The Bloomberg Intelligence Macau gaming stocks index rose 1.4 percent. And gross gaming revenue fell 9.2 percent for the second quarter, the lowest drop since the third quarter of 2014.
Even so, the city’s newest resort, the $4.2 billion Wynn Palace, which opened in August, is not drawing the throngs of tourists Chairman and CEO Steve Wynn hoped for. The mass gaming floor “felt slow” compared to other openings, said Union Gaming analyst Grant Govertsen in a research note. And the resort’s splashy debut did little to move the needle on VIP play.
The winners on the Cotai Strip “ought to be the two operators that are bringing new supply online, namely Wynn Macau and Sands China,” Govertsen wrote, but added, “Even if they don’t grow market share, they will be market-share takers.” And high rollers at the Wynn resort may be simply migrating from Wynn’s older casino on the Macau peninsula, analyst Praveen Choudhary of Morgan Stanley said in a note.
Morningstar analyst Chelsey Tam said this is “a very critical period for the markets to gauge the overall well-being of the gaming industry. We are going to see premium resorts such as Four Seasons Hotel Macao and City of Dreams come under pressure from additional supply from Wynn Palace. Galaxy Macau is also not immune.”
She said MGM is “more competitive, owing to its strong sales force, marketing analytics as well as leadership, while it is nearly impossible for SJM to maintain market share against such a fierce competition.”
Govertsen said Melco Crown “faces the most serious challenge over the next several quarters. It will have its hands full trying to defend against market share losses to Wynn Palace, not to mention Parisian Macao, and then MGM Cotai next year.”
The South China Morning Post anticipates “a battle royal” among the city’s six gaming concessionaires as new properties continue to open on Cotai. Last year Galaxy Entertainment opened its Phase II and Broadway expansions, followed by Melco Crown’s Studio City. The Parisian Macao, a Sands China property, is due to open September 13. And new properties from MGM Resorts International and SJM Holdings are set to come online in 2017 and 2018.
The Post says market watchers are looking for a significant rebound in Macau’s gross gaming revenue and excitement about the new openings have led to “months-long rallies” for Macau stocks. BNP Paribas’ Gabriel Chan has predicted that GGR will finally show signs of growth when the August results are in, and September should follow suit.
