Macau’s VIP gaming revenues may be in a yearlong slump, but casino operators don’t appear to be overly concerned.
Speaking last week at the MGS Entertainment Show, an annual gaming trade exhibition and conference, Wynn Macau’s Linda Chen said she is “not worried at all” about the ongoing contraction in VIP play.
As 2019 winds down, “It’s going to be a stabilized market,” said Chen, vice chair and chief operating officer of Wynn Resorts’ Hong Kong-listed subsidiary.
Wynn Macau reported a sharp drop in net income in the third quarter on gaming revenue that was down nearly 20 percent, largely on sizable declines in VIP wagering at its Wynn Macau and Wynn Palace resorts.
Citywide, gaming revenues for the year through October stood at MOP246.74 billion (US$30.61 billion), a contraction of 1.8 percent year-on-year, largely because of the slump at the very high end, which observers attribute to a variety of factors: concerns about economic growth in China, the trade war with the U.S., and the financial health of the junket industry, which supplies the credit that fuels the VIP trade.
Historically, VIP counted for the lion’s share of Macau casino win, but it appears to be giving way to the mass market, which this year, for the first time, has accounted for a larger share.
In this respect, Chen noted the “fine line” that exists between VIP and “premium mass,” as the upper reaches of the mass market are known locally, saying, “They’re all good customers. The most important is all of them come to Macau. That is what makes the market sustainable.”
Her optimism about the market’s prospects in the fourth quarter and beyond are shared by other industry leaders.
Wilfred Wong, president of Las Vegas Sands’ Sands China subsidiary, also used the term “stable” to describe his projection for the company’s performance in the months ahead.
Then again, Sands China has targeted the mass market in its massive resort investment in the territory and is the recognized leader in the sector.
“If you look at our third-quarter performance, we are very steady because our mass market is doing very well. I think because we have this balance between mass and VIP, we’re OK,” Wong said.
In other Macau news, chief gaming regulator Paulo Martins Chan has been awarded a fifth one-year term, guaranteeing him an influential role in the process by which the local government will renew or award new casino concessions when the current six expire in 2022.
When he formally resumes his post on December 1, Chan will be the first head of the Gaming Inspection and Coordination Bureau—or DICJ, an acronym derived from its Portuguese initials—to serve under incoming Macau Chief Executive Ho Iat Seng. Ho, the third chief executive of the self-governing Chinese territory, takes office on December 20, the day when Macau celebrates the 20th anniversary of its return to Chinese sovereignty after 500 years of Portuguese rule. The festivities will include a visit by Chinese President Xi Jinping.
The DICJ oversees all aspects of gaming in Macau, mainly the territory’s US$35 billion casino industry, and advises the government on relevant policies.
Chan, a former public prosecutor, has headed the agency since the end of 2015. He succeeded Manuel Joaquim das Neves, who retired after nearly two decades in the position.
The 20th anniversary celebrations could also see a visit by U.S. President Donald Trump, who is expected before year’s end to meet with Xi somewhere in the world to sign an agreement in hopes of ending a protracted trade war. Macau may host the signing, possibly as a show of U.S. endorsement of the “One Country-Two Systems” framework that’s been under assault for months in Hong Kong, which, like Macau, enjoys autonomy in domestic affairs as a “special administrative region” of the People’s Republic of China.
A visit to Macau also would give Trump a close look at the multibillion-dollar casino enterprises developed by two of his largest political donors: Las Vegas Sands Chairman and CEO Sheldon Adelson and Wynn Resorts’ former boss Steve Wynn. MGM China Holdings, a subsidiary of MGM Resorts International, is the market’s other U.S.-based operator.
The VIP slump could prejudice the three U.S. operators when the terms of concession renewal are finalized. But as Fitch Ratings Agency recently assessed it, the notion has been largely discounted “given the large amount of foreign investment, positive local sentiment on the concession-holders (jobs, local investment), and adverse impact an effective nationalization of gaming could have on broader foreign investment in China and its special administrative regions (i.e. Macau and Hong Kong).”
“We came away confident that the government’s approach to the 2022 concession rebid will be pragmatic,” Fitch said.
