Macau casino revenue fell to the lowest in more than four years amid China’s slowing economy and a graft crackdown that deterred high rollers. A surprise easing of Chinese travel restrictions to the city may bring some relief.
Gross gaming revenue in June fell 36.2 percent to 17.4 billion patacas ($2.2 billion), according to data released by Macau’s Gaming Inspection and Coordination Bureau. That beat the median estimate of a 38.3 percent drop from six analysts surveyed by Bloomberg. The government this week said June revenue is expected at between 16 billion to 16.5 billion patacas.
The last time casinos got so little money from gamblers in the world’s largest casino hub was in November 2010, when monthly revenue was also at 17.4 billion patacas. Analysts expect loosening of the travel restrictions, which they saw as a major reason for Macau’s casino downturn, will help support the market which has now fallen for 13 consecutive months.
The data “was very bad, but at least not worse than feared,” DS Kim, an analyst at JPMorgan Chase & Co., wrote in a note today. “Along with visa relaxation, this news should help improve the sentiment on the sector.”
The decline in June has eased for a fourth straight month since February, when gaming revenue plunged 48.6 percent for the worst monthly drop on record. The year-to-date drop is 37 percent.
The Macau government announced overnight a reversal of the transit visa policy that was tightened exactly a year ago after it was used by some high rollers and junket agents to gain multiple entries into the city.
The visa move will benefit casino operators before the summer holidays and peak seasons later this year, CICC analysts Chris Kwai and Haofei Chen wrote in a note on Wednesday, adding they expected the government to issue more supportive policies in the second half for Macau’s economy while keeping gaming revenue regulated.
From July 1, mainland China passport holders transiting through Macau are allowed to stay in the city longer and more frequently. They can stay seven days in Macau, up from five days, and gain second entry within 30 days, rather than 60 days.
Macau casino operator Melco Crown Entertainment Ltd. surged 9.7 percent in New York trading, the most in more than three years after the visa easing was announced. Las Vegas Sands Corp. and Wynn Resorts Ltd., which rely on their Macau units for at least 60 percent of their revenue, closed 4.9 percent and 5.1 percent higher, respectively. The Hong Kong stock exchange is shut Wednesday due to a public holiday.
Still, there’re still concerns of further impact from the government’s proposed comprehensive casino smoking ban that would expand to include VIP rooms and eliminate airport-style smoking lounges that are currently allowed on mass gaming floors.
Casino operators have been hoping for a revival in Macau’s fortunes with the opening of new projects, as weakness in the Chinese economy and Beijing’s widening crackdown on graft continued to weigh on gambling revenue.
While Galaxy Entertainment Group Ltd. had said on June 16 that performance at its new casino expansion was weaker than expected, analysts expect the former Portuguese enclave may yet see a stronger recovery with the opening of another new project, Melco Crown Entertainment Ltd.’s Studio City, due later this year and featuring Asia’s tallest Ferris wheel and a Batman ride.
“We still hope that the combination of Galaxy Phase 2 and Studio City can be enough of a draw to catalyze a turn, along with other factors, later this year and into next,” said Bloomberg Intelligence analyst Tim Craighead.