The good news: declines didn’t rise to 30 percent
The news wasn’t good, but it wasn’t surprising. Last week, Macau’s gaming industry racked up its 17th consecutive month of decline.
On the bright side, gross gaming revenue dropped 28.4 percent from 2014, the first time since January that the losses have been under 30 percent. GGR fell from MOP 28.06 billion in October 2014 (US$3.5 billion) to MOP 20.06 billion (US$2.5 billion) last month, according to Pokernews.com.
On the dark side, the dip came despite the October 27 opening of Melco Crown’s $3.2 billion Studio City resort on the Cotai Strip, and the traditionally lucrative Golden Week holiday.
“We continue to see a bifurcated Macau market, with mass-market gaming volumes stabilizing aided by a modest improvement in overall visitation, and VIP market pressures persisting,” said Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski in a note to investors.
Wells Fargo Securities analyst Cameron McKnight said it’s unlikely that Studio City—which opened without a VIP room—will grow the market, and he is doubtful about the positive impact of the 2016 debuts of three other megaresorts: the $4 billion Wynn Palace; Las Vegas Sands’ $2.7 billion Parisian; and the $2.9 billion MGM Cotai.
“Demand is the bigger problem, not supply, and we continue to believe the Macau market has not yet stabilized,” McKnight said.
Bloomberg News reports that the Hollywood-themed Studio City “is already experiencing its share of difficulties,” but the website CalvinAyre.com said Melco Crown has the “best fundamentals” of any large resort in Macau and predicted the company’s stock “will be the fastest long-term gainer” in the jurisdiction.
In recent weeks, Wynn Resorts Ltd. Chairman and CEO Steve Wynn made noise—and global headlines—when he complained about table caps in the city. “None of us are really clear on what our environment is going to be like going forward, and it makes planning and adjusting almost a mystical process,” said Wynn in an earnings call. He went on to call the caps “ridiculous” and “outrageous,” and earned a summons from the Macau government, which gave Wynn executives a lecture about compliance.
Wynn wants 500 tables at his Cotai property, but that could be wishful thinking at this point. When it comes to Cotai, Studio City and Galaxy Entertainment Group both were shortchanged in the gaming table department: Galaxy received 150 tables for the openings of its Phase II and Broadway resorts, when it hoped for 400, but it has been informed it may add an additional 100 tables. Studio City got 200 tables, and can add 50 more in January.
“Here in America we would never have a Las Vegas of the diversity we’ve had if the city had told us how many tables we could spread,” Wynn said. “The table cap is the single most counterintuitive and irrational decision that was ever made.”
Despite the turmoil, Alvin Chau Cheok Wa, head of the city’s largest VIP junket runner, Suncity Group, told public broadcaster TDM he’s confident that Macau will rebound, and that includes its VIP segment. “We will keep investing in other regions, but that is not related to the situation in Macau or to isolated incidents” such as the Dore Entertainment theft, said Chau.
“The VIP room model is now becoming better. Times have changed. When the tourism and mass-market rises, we will rise relatively,” said Chau, who spoke after representatives of the Macau Junket Operators Association met with Secretary for Economy and Finance Lionel Leong Vai Tac.
The meeting pertained to new guidelines for junket operators now being considered by the city’s Gaming and Inspection Coordination Bureau. The regulator said all junket operators would have to submit monthly accounting reports starting in 2016, as well as detailed files on personnel.
The head of the junket association, Kwok Chi Chong, said the group supports the changes. “We hope to have laws that are appropriate for the industry to develop more healthily,” said Kwok, according to GGRAsia.
