Macau’s gaming industry saw total gross gaming revenues rise 19.1 percent in 2017, according to data from the city’s Gaming Inspection and Coordination Bureau. The total of MOP$265.7 billion (US$33 billion) was also the highest annual amount since the city recorded MOP$351.5 billion (US$44.1 billion) in GGR for 2014 and is the fifth highest of all time.
Last year marked the first year of GGR growth after three consecutive years of decline: in 2016, GGR fell 3.3 percent; in 2015, it dropped 34.3 percent; and in 2014, GGR declined by 2.6 percent year-on-year, reported GGRAsia.
GGR for December 2017 increased 14.6 percent year-on-year to almost MOP22.70 billion. It was the 17th consecutive month of year-on-year gaming revenue growth in the market, but fell short of the Bloomberg consensus of more than 20 percent. Zibo Chen of Macquarie forecast 22 percent growth in December; brokerage Sanford C. Bernstein said average daily revenue for the month fell 5 percent to MOP$732 million from MOP$768 million in November.
The winners among Macau’s gaming operators are those with a presence on the Cotai Strip. Sands China Ltd., Wynn Macau Ltd., Galaxy Entertainment Group Ltd. and Melco Resorts & Entertainment Ltd. have outstripped SJM Holdings Ltd. and MGM China Holdings Ltd., which have yet to open their resorts on Cotai and have seen market share fall as a result. MGM Cotai is due to open this month, but SJM’s Grand Lisboa Palace is not expected to open until late 2018.
Forbes columnist Mohammed Cohen noted that the recovery is “powered by VIP revenue”; the high-roller segment that fled during the three-year decline are now back at the tables in force. “Focusing on volatile, high-volume, low-margin VIP play makes Macau’s climb to its 2014 peak EBITDA levels even steeper,” Cohen wrote. “Higher-margin mass play and non-gaming revenue would make up that ground faster, but most Macau operators still seem to see tourist appeal as a government-imposed burden rather than an opportunity to realign their business and remake Macau.”
However, visitation to Macau is on the rise, with more than 2.8 million tourist arrivals in November, up 9.4 percent over the prior-year period. Importantly, overnight visitors have outpaced day trippers, who do not fill hotel rooms and spend less overall. Macau Business called 2017 “a big year for tourism in the MSAR, with the unveiling of the Tourism Master Plan and record numbers of visitors, topped with the late branding as City of Gastronomy by UNESCO.” The city looks forward to visitation of 40 million per year by 2025, with hotel rooms increasing to 51,900 by the same time (rooms totaled less than 38,000 in 2016).
Beijing recently imposed an annual limit on the aggregate amount of cash people can withdraw from Mainland Chinese bank accounts while traveling. Angela Leong, an executive director of SJM Holdings, conceded that may have negative consequences for the gaming industry, but the fallout could be mitigated by the surge in tourism.
“I think as with the start of any other policy, there will be a certain impact seen here,” Leong said.
Union Gaming analyst Grant Govertsen predicts the new limit will have minimal impact on the industry. “First, the limit of US$15,000 per individual per year (rather than per account per year) would only potentially impact premium mass players, given that lower-tier mass players average annual theoretical GGR contributions lower than $15,000 and that VIP players are playing on credit.
“Second, it is quite likely that many premium mass players have established overseas bank accounts already, which would not be impacted by domestic bankcard restrictions,” Govertsen continued. “Third, we believe that using bankcards to withdraw cash from ATMs has always been more of a last-choice option anyway given the lack of limits on bankcard purchases. Put together, we would not expect there to be any measurable impact on Macau GGR, although perhaps at the margin some very small number of premium mass players could migrate to VIP.”
Bernstein was less confident. “Overall, the new policies may portend further capital controls to come in 2018,” the brokerage stated. “While these new policies may create some headwind to GGR in 2018, the bigger concern would be continued clampdowns on capital movement out of China. The most significant headwinds on GGR would occur if there are limits placed on Macau’s pawnshop system or greater crackdowns on underground banking channels, for example.”
In related news, 90 percent of Macau’s ATMs are now fitted with Know Your Customer measures such as facial recognition technology, according to the Monetary Authority of Macao. Some 1,040 ATMs in Macau are now KYC-compliant, “to enhance the verification of cardholders’ identity as well as to ensure the normal operation of ATM cash,” the authority said. “Irregular withdrawal activities have been stopped since the implementation of the above measures, promoting the security of the financial system of Macau.”
Also in Macau, the South China Morning Post reports that as of January 1, Wynn Palace and Parisian Macao each received permission to launch 25 new-to-market live-dealer gaming tables.
