MACAU BUSINESS
officials to “flood the market with new gaming capacities” and induce “unwanted, excessive and unhealthy competition” among the six operators, the analysts, led by Jamie Soo, said in a research note.
Minimal impact The limited table capacity will likely not have any
material impact upon the recovery of the gaming market, which has plunged by more than one-third in the past two years. “The more the gaming tables do not necessarily mean the higher the revenue,” said Davis Fong Ka Chio, director of the Institute for the Study of Commercial Gaming at the University of Macau.
He observes that the utilisation rate of gaming
tables in some new projects is only about 20-30 per cent, given the current sluggish market demand. “In this case, any new tables will not increase the revenue
but [operating] costs,” he reasoned. Vitaly Umansky, an analyst at brokerage Sanford C. Bernstein Ltd., also expected a negligible impact from fewer than expected tables for new projects because operators could transfer excessive and used tables from existing properties to the new resorts. While the authorities only granted 100 tables to Wynn Palace for the opening with 50 more tables permitted in stages over the next two years the company has shifted 250 tables from its existing property on the Macau Peninsula – Wynn Macau – to the new Cotai project. “There may be issues with the lack of gaming
capacity in the more distant future when the market returns to several years of growth,” said Umansky, “but now and for the next few years gaming capacity should not be a [constraint] to growth.”
Hitting bottom
Macau gaming revenue is expected to resume mid-single digit growth next year after finding a footing in a historic slump of more than two years, say analysts and industry players. Gaming revenue in the territory had nosedived since June 2014 with a slowing economy and the crackdown on corruption in Mainland China keeping high rollers away from the gambling mecca. But a 1.1 per cent growth in August finally reversed the losing streak of 26 straight months. Speaking during a press conference in
September at the grand opening of The Parisian Macao, the latest project of gaming operator Sands China Ltd. in the city, U.S. gaming magnate Sheldon Adelson noted: “Based upon the [hotel] pre-bookings we have [and] based upon the convention bookings we have I think we have essentially hit the bottom.” “Now, if it’s sustainable for a long-term pick up, I can’t answer this question,” said the chairman and chief executive of Las Vegas Sands Corp., parent of Sands China, adding, though, that he was “optimistic”.
This upbeat sentiment is echoed by Karen Tang, head of Asia gaming and hotels at investment bank Deutsche Bank AG, who described Macau as “now at the start of a mass-led [gross gaming revenue] recovery.” Her conclusion is based upon a 5 per cent growth in gaming expenditure per visitor in the second quarter of this year, the first expansion since the July-September period of 2014. As some VIP gamblers who have sidestepped
the city in the past two years begin to return as premium mass players - who nevertheless bet as much as US$300,000 (MOP2.4 million) a day - Ms. Tang expects mass gaming revenue to jump 10 per cent in the second half of this year before accelerating to a low-teen growth percentage next year.
20 OCTOBER 2016
Brokerage CLSA Ltd. also maintains a bullish outlook following the opening of two new projects by Wynn Macau Ltd. and Sands China in Cotai during the past two months. After plunging 34.3 per cent last year, gaming revenue will contract 6 per cent this year, said CLSA in a recent research note, before achieving 6 per cent growth for both 2017 and 2018. When asked about the gaming forecast for next
year, the city’s officials have kept mum. Paulo Martins Chan, director of the Gaming Inspection and Co-ordination Bureau, only noted that they would “work hard” to achieve growth as the city aims to attract more middle class tourists than traditional high rollers. In an interview with Macau Business last month, he said: “We don’t see any external factors that are favourable to an increase but at this moment what we should do is to prepare ourselves, revise the law and better regulate the environment in order to prepare for the next boom.”
And when will that be? International rating
agency Fitch Ratings believes it might take several years. Alex Bumazhny, senior director at the agency, said the mass market would be the main driver of the Macau gaming industry in the future but warns there will be no “V-shaped recovery”. In the latest gaming review of Macau in
September, Bumazhny posited that the local market would achieve a “mid-single digit growth” in the next few years starting 2017, having decreased 5 per cent this year. “With this growth rate it would take Macau more than nine years to return to the prior gaming revenue peak [when the revenue hit MOP360.75 billion in 2013],” he said. But the analyst warned that any changes in
macroeconomic and regulatory conditions on the Mainland would disrupt the recovery of the Macau gaming market, which is dependent upon Mainland gamblers. “For this or a similar scenario to play out, China must avoid a hard landing”, he concluded.
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