26th straight month of decline
After almost two years of recession, the gaming industry in Macau is showing signs of stabilization, with monthly year-on-year revenues in the single digits, and sometimes beating analyst expectations.
That’s got Las Vegas Sands Corp. Chairman Sheldon Adelson calling it a bottom, and forecasting a recovery in the near future. During a conference call at the end of July, the billionaire told investors he sees an “ongoing stabilization of the Macau mass market.”
Macau lawmaker Jose Coutinho agreed, telling Bloomberg News, “We are still ahead of Las Vegas three times in terms of revenues. Once it settles down in the next few years we’ll see the trend to an increase in the people that come over from the Delta region and this will make Macau more profitable in terms of gaming.”
Some are not so optimistic. Though gross gaming revenues fell 4.5 percent in July, the smallest drop in five months, analyst Pauline Dan of Pictet Asset Management told Bloomberg, “I would continue to be cautious. From a valuations perspective, it’s hard to make a bullish case.”
And Louis Wong, director of Phillip Capital Management Ltd. in Hong Kong, made the case that a decline in arrests of Chinese officials signals that the Mainland Chinese government may be easing up in its war on corruption in the gaming industry. “The number of arrests decreased quite substantially since the second half of last year,” Wong noted. “There is a correlation between the VIP sector and the crackdown on corruption.”
In his column in Forbes magazine, Muhammad Cohen wrote, “July’s revenue beat expectations, fitting popular narratives that August or September will end the losing streak. That turnaround is supposed to be driven by the openings of new resorts from the fathers of modern Las Vegas and 21st century Macau, Steve Wynn and Sheldon Adelson.”
Though some are worried about oversupply and cannibalization with the openings of Wynn Macau in August, the Parisian Macao in September, and MGM Cotai in January, Cohen wrote, “These new resorts, nevertheless, may shift the so-called ‘new normal’ paradigm by helping Macau maintain its share of the growing pie of Mainland Chinese travelers and expand the city’s destination appeal beyond greater China.”
Meanwhile, an editorial in the Jing Daily suggests not much has changed. As Chinese President Xi Jinping’s anti-corruption campaign continues, “Chinese patrons are cautious of placing their bets at casinos technically located within China—and thus within the reach of government supervision and scrutiny on corruption charges.”
The slump in Macau has other jurisdictions courting Chinese gamblers, including the mass-market players who are now seen as vital to the SAR’s long-term recovery. Jing Daily reported that South Korea is specifically targeting Chinese mass-market gamblers “low-rollers” with gambling opportunities in Seoul and on Jeju island, the top destinations for Chinese tourists in South Korea.
Casino.org, in a report on the July earnings report, saw “some reason for optimism,” saying, the numbers showed “a strong rebound from June’s dismal showing. Revenues in July were actually up 11.9 percent compared to the preceding 30 days. And the 4.5 percent year-over-year decline is actually the second best variance loss in 2016. Market forecasts had predicted Macau to lose 5.5 percent.”
Macau Secretary for Economy and Finance Lionel Leong contends that the city’s prospects for the second half of the year are positive, thanks to the promotion of non-gaming offerings, a linchpin of the government’s goal to diversify the economy.
Coutinho insists that steady, slow growth is the way. “As long as we are still making a profit, as long as we are still three times bigger in gaming revenue than Las Vegas, and we remain No. 1 in terms of revenue from gaming, we will continue to be safe in Macau,” he told Bloomberg. “For the past few years, the Macau people have been crying out for a more stable economy, and not such fast-paced development that leads to social problems. That’s why the government is taking into consideration the Macau people overall.”
The city’s chief executive, Chui Sai On, predicts the local economy will return to growth in 2017, according to a report in the Las Vegas Sun. He is backed up by Union Gaming analyst Grant Govertsen, who said gaming revenue will “finally turn positive by September.
“We expect the growth rate to generally remain positive from that point forward,” he said.
In related news, Galaxy Entertainment Group Ltd. just launched a new mass market gaming area at its StarWorld Hotel, with a 108-seat stadium-style electronic table game area that can offer up to eight live-dealer games featuring baccarat, sic bo and roulette and minimum bets of HKD25 (US$3.22). The gaming area also has 14 live-dealer gaming tables and slot machines.
“Just like any other operator, we have to adjust to the drop of the VIP segment,” said Raymond Yap Yin Min, the company’s director for international premium, premium mass and mass market development. “The industry is consolidating and that consolidation may continue, but it is really the outcome of the transformation of the market to the mass and premium mass segments and to other electronic gaming.”
