Macau gaming revenue suffered its largest year-on-year decline in almost three years in April.
Figures released by the territory’s Gaming Inspection and Coordination Bureau showed the casinos winning MOP23.59 billion for the month (US$2.92 billion), down 8.3 percent from April 2018.
It was the third year-on-year decline in the last four months, and analysts blamed it on a number of factors: mainly softness in the VIP sector, a couple of glitches in the 2019 calendar (namely, one fewer Sunday than last year), and a tough comparison against last April’s 27.6 percent increase.
Taken altogether, they resulted in a fall-off that was not unexpected. The consensus was minus-8 percent and significantly better than the worst-case scenario of minus-12 percent. And though revenue year to date at MOP99.74 billion ($12.34 billion) is down a combined 2.4 percent, analysts are confident the months ahead will see the world’s largest pure gambling market returning to positive territory.
“Clearly, VIP continues to decelerate even as mass catches a tailwind,” noted Union Gaming Group analysts Grant Govertsen. “While not an ideal scenario given the negative headlines, the reality is, if there has to be weakness we want to see that in the low-margin, low profit-contributor VIP segment.”
Brokerage Nomura Instinet, which had forecast a decline in the range of 3 to 8 percent, said it expected positive growth to resume once Macau “laps the tough +28 percent comp” from last year.
China’s weeklong Labour Day holiday, which commenced May 1, is expected to provide another big boost, especially with a weekend at the tail end of it. The Macao Government Tourism Office said visitor arrivals could surpass last year’s by 20 percent, and most casinos reported especially strong advance hotel bookings.
“Comparisons get significantly easier,” said Jefferies gaming analyst David Katz. “Looking forward, May should produce more positive trends given the dynamics of the easier comparisons, improving China macro-economy, holiday shift and bullish management commentary.”
Stifel gaming analyst Steven Wieczynski forecasts the market to grow revenues between 1 percent and 4 percent for the rest of 2019, while Govertsen noted that mass-market growth, up nearly 20 percent year on year, “continues to roll along”.
“By and large, we expect the VIP market to deliver a modestly negative year-over-year comparison, with the mass market pacing growth for the market as a whole,” Wieczynski said, although he tempered that by adding that construction disruption from Las Vegas Sands’ $2 billion remodeling of its Sands Cotai Central complex coupled with Wynn Resorts’ plans to add a non-gaming hotel to Wynn Palace could impact business.
Govertsen also pointed to the August election of a new chief executive for the territory as a potential moderating factor.
“As we look out through the balance of the year, we are slightly revising our full-year forecast to low single digits (from mid-single digits) with VIP, of course, being the wildcard that could materially change this forecast in either direction,” he said.
