Lerner on Las Vegas outlook:
“On the back of about 4 percent visitation decline here in 2008, and high single-digit decline in gaming revenues, we think 2009 is a mid-single-digit revenue decline year, maybe a bit more than that. That assumes no second-half economic recovery or macro recovery.
“When you cross that with room-supply growth in Vegas, which we recently revised downward, it’s more troubling. 2009 will see about 3 percent room-supply growth.
“While that’s less than the roughly 4 percent historical room-supply growth in Vegas, a decline in demand and probably a further decline in spend-per-visit doesn’t match well with an increase in supply, so more pressure on room pricing here in Vegas.”
Lerner on casino picks:
“We like MGM in 2009 on the casino front, especially and particularly as they resolve, I hope and think, liquidity and leverage issues. We certainly like Wynn as a best of breed on the casino side. A market-share taker in a tough environment I would suspect, plus very strong balance sheet that I think they’ll use to advantage themselves additionally as markets expand outside of the U.S.”
On fourth-quarter results:
“We should be expecting any impairment or any other charge that was going to happen,” to be booked in the quarter ended in December 2008.
Tang on Macau’s outlook:
“We are pretty negative on Macau in 2009. We expect that gaming revenue would decline for the next 18 months. For the last three months, Macau gaming revenue has come down marginally by about 3 percent.
“We think that first-quarter drop will be very sharp, it could come down 20 percent year on year and remain in the double- digit level for the rest of 2009, and then easing off to single- digit declines in 2010.
“The overriding important driver for VIP growth in Macau remains the availability of gambling credit to the VIP customers. This is where the market has underestimated the negative impact.
“Naturally these junket operators need to cut back their lending to maintain the loan-to-asset ratio. This has obviously impacted the junket operators’ willingness to lend. Even if they want to lend, their ability to lend is also reduced” as Chinese gamblers take longer to repay loans, preventing junket operators from lending the cash to others as quickly.
“This factor could get worse as more and more of their customers lengthen their credit cycle. We are very negative on the VIP growth in Macau for this year, it can come down 25 percent year on year similar to the contraction back in 1998.
“Overall we are negative on the demand side for Macau because we think that the VIP contraction will be dragging down the overall market despite any potential help on the visa relaxation or the mass market.”
Tang on Singapore:
“We don’t think Singapore is a big threat to Macau. They do target pretty different geographic areas. We think Singapore will be more looking to Chinese demographic living in Southeast Asia.”
Lerner on Singapore:
“Singapore is going to be at the very least a marginal issue for Macau.
“The competitive advantage at the high end for Singapore is the dramatically lower gaming tax. All-in, 12 percent gaming tax maybe enables Singapore to offer higher junket commissions than what will end up happening in Macau post-commission caps.”
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