SJM refocusing on mass
Macau’s gaming industry has been battered by recession for more than two years, with 26 straight months of revenue decline on a year-on-year basis. But the early indicators for August are promising, according to a report from Union Gaming.
Based on gaming play for the first week of the month, Union predicts GGR a year-on-year drop of just 0.5 percent. “While early monthly numbers have been less reliable in recent months, signs continue to suggest that the Macau market has stabilized in the literal sense and is at least declining at a narrowing rate,” the firm reported.
The statement continued, “We believe the context for the opening of new properties in the coming weeks is therefore positive,” referring to new resorts slated to open on the Cotai Strip: the Wynn Palace, Parisian Macao and MGM Cotai.
Wynn Macau Ltd.’s $4.1 billion Wynn Palace is scheduled to debut August 22, after several delays. Sands China Ltd.’s $2.7 billion Parisian Macao is expected to open in September. MGM Resorts, meanwhile, has delayed the opening of its new MGM Cotai resort until the second quarter of 2017, and has also announced it will offer no VIP gaming rooms at the $3 billion resort.
“We’re envisaging opening with only mass tables,” said MGM China CEO Grant Bowie. “That’s obviously the basis of where we see the future of Macau, and that’s the decision we’ve taken at this time. We’re going to walk forward as being a mass-only property.”
Bowie added that the Cotai resort has room for up to 500 gaming tables. But the local government has been notoriously stingy with its table allotments of late, granting a reported 100 tables for the opening of the new Wynn Palace, which may have hoped for four times that number. It also gave fewer tables than expected to Galaxy Entertainment’s Phase II and Broadway, and Melco Crown’s Studio City. Studio City also opened with no VIP tables, but reportedly plans to add them in the near future.
“Clearly we now see the market is changing and we have to adapt to those changes and that’s what we’re seeking to do in collaboration with the government,” said Bowie. “I’m very positive that our property in Cotai will be given sufficient products, sufficient tables to cater to the customers we need and we’re going to be successful.”
Since mid-2014, Macau has been on order from the Mainland Chinese government of President Xi Jinping to reduce its reliance on gaming, which historically has contributed about 80 percent of the city’s tax revenues. To that end, the city government has raised the entry threshold for junket promoters, banned proxy bets and enforced the 3 percent cap on new-to-market tables. It also plans new, stricter penalties for violations of gaming law.
While traffic should pick up on the Cotai Strip in the coming months, Bloomberg News reports that homegrown operator SJM Holdings was the poorest performer of the territory’s six casino stocks during a rebound in prices in July. The reason? According to the publication, some analysts contend that SJM is “stuck in the past,” with a revenue base that is “too exposed to its 400 VIP gaming tables.”
SJM too plans a new Cotai resort, the $3.9 billion Grand Lisboa Palace, which won’t open until well into 2017. That may change the company’s fortunes, as more than 90 percent of its floor area will be dedicated to non-gaming activities. It will include a theme park being developed by Angela Leong, the wife of SJM founder and Chairman Stanley Ho.
Also in Macau, junket operator Neptune Group Ltd is expecting to record a significant loss for the year that ended June 30, citing the tough environment for VIP rooms and a reluctance to extend credit.
