Crown arrests spark turbulence
Macau is on a roll. Gross gaming revenue in the world’s top casino jurisdiction rose 8.8 percent to 21.8 billion patacas (US$2.73 billion) in October, reports the city’s Gaming Inspection and Coordination Bureau. A group of seven analysts polled by Bloomberg News predicted growth in the 5.5 percent range.
The positive numbers have created new momentum in the city, which is emerging from a slump that started in summer 2014 and continued for 26 dismal months. August was the first month in more than two years that the industry reported a rise in year-on-year gaming revenues.
GGR of $2.72 billion made October the best month for Macau in nearly two years (revenues increased 7.4 percent in September and 1.1 percent in August). Some analysts credited Golden Week for the boost; the seven-day national holiday at the start of October drew almost 1 million Chinese tourists to the former Portuguese territory, the only place in China where gaming in legal.
“The strong beat of the monthly gaming revenue is very likely due to the decent performance of both the mass market and the VIP business, and it will improve market sentiment,” said gaming analyst Richard Huang of Nomura International. And new casinos on Macau’s Cotai Strip will continue to buoy the market into 2017, he told Bloomberg.
Casino shares rose accordingly, with MGM China Holdings up much as 5 percent and Sands China gaining up to 4.3 percent. The Bloomberg Intelligence Macau Gaming Index rose as much as 2.4 percent, reported the news outlet.
Union Gaming analyst Grant Govertsen predicts gaming revenues in the city will continue to grow. Macau could see a spike of 11 percent for the month of November, he said.
But some analysts aren’t convinced a full recovery is in the offing. “On the whole, we have somewhat mixed feelings on the October GGR and encourage investors to temper their enthusiasm accordingly,” said Stifel analyst Steven Wieczynski.
“Though better than expected GGR performance is clearly a positive sign, our market sources suggest the majority of the strength was VIP-driven. We acknowledge the volatility inherent in the VIP business and suspect operators may have ratcheted up promotional efforts to help stimulate demand in order to support the recent new openings.”
He was referring to the August opening of Wynn Resorts’ $4.2 billion Wynn Palace and the September opening of the $2.9 billion Parisian Macao, a Sands China property. A new $3 billion casino from MGM will open next year.
According to Reuters, a swift rebound is unlikely in Macau “due to slowing market growth and infrastructure bottlenecks.” But Cardplayer.com called the recent results a “winning streak” for the city, which plunged into recession after Chinese President Xi Jinping launched a full-scale crackdown on corruption, graft and money laundering. Xi also demanded that the city diversify its economy beyond gaming.
And other observers say the recovery could be hindered by the recent arrests of 18 Crown Resorts employees working in Mainland China, including Executive Vice President Jason O’Connor. In a headline, the financial website Motley Fool said the recovery could be “dealt a body blow” if the arrests send VIP players back into hiding.Shouldhigh rollers decide once again that it’s unsafe to play in Macau, “that would deliver a gut-punch to the renaissance,” according to the website.
Casino News Daily agreed, saying the arrests havesent ripples of concern throughout the global gaming industry. Jan Jones Blackhurst, head of government relationships for Caesars Entertainment Corp. in Las Vegas, said the situation could make gaming operators gun-shy.
“The lawyers are all over watching this,” she said. “Everyone is backing way off until we totally understand the concerns of the government.”
The Wall Street Journal said the Crown scandal “is reverberating from Macau to Las Vegas and beyond.” And lawyer Dan Harris said he is advising some clients not to travel to China, much less set up offices there.
“Fifteen years ago, not many companies got caught. China didn’t have the forces in place to catch these people, and they probably didn’t have the desire,” he said, adding that China has begun to “step up its game.”
