Macau Casino Revenue Drops Less Than Estimated on Holiday Boostby
February decline was smallest on record amid 21-month slump
Casino operators turning more to mass market to offset VIPs
Macau’s casino market shrank less than analysts’ estimates in February, as an increased number of tourists to the city over the Lunar New Year holiday helped ease a slump that’s lasted for almost two years.
Gross gaming revenue was 19.5 billion patacas ($2.4 billion), according to data from Macau’s Gaming Inspection and Coordination Bureau. The 0.1 percent decrease was the smallest since the downturn began, and compares with the median estimate of a 2 percent drop from six analysts surveyed by Bloomberg and the 21.4 percent decline in January.
Chinese high-rolling gamblers have laid low since President Xi Jinping started an anti-corruption campaign in 2013, ending a decade-long Macau boom that propelled the city’s casino revenue to seven times more than the Las Vegas Strip. Since then, operators such as Galaxy Entertainment Group Ltd. have opened resorts aimed more at tourists and mass-market gamblers, in hopes of lifting gaming receipts from their five-year low.
Macau casino shares reversed earlier losses after the monthly data was released, with Sands China Ltd. up as much as 1.9 percent and Wynn Macau Ltd. rising as much as 1.6 percent in Hong Kong trading. The Bloomberg Intelligence Macau casinos index rose as much as 0.4 percent, after falling by 2.1 percent in the morning.
“The fact that the market almost grew in February despite continued VIP woes leads us to believe mass market increased nicely year-on-year in February, which is what investors likely need to see more of,” Union Gaming Group LLC analyst Grant Govertsen wrote in a note. Still, he expects gambling revenue to drop further in March and April, by 13 percent and 6 percent respectively, before returning to growth in June.
Revenue from VIPs, as measured by their favorite baccarat card game, have fallen to near the level of other gamblers as Macau’s government tightened scrutiny on junket operators, middle-men who organize trips for high-end Chinese gamblers and lend them money to bet with, in effect skirting China’s currency controls.
Sands China President and Chief Operating Officer Wilfred Wong predicted last week Macau’s casino industry would stop its decline as early as February thanks to increased gambling over the weeklong Chinese holiday that started Feb. 8. The deputy chairman of Galaxy Francis Lui echoed Wong’s optimism, after his company posted fourth-quarter earnings that beat expectations.
Despite the downturn, Macau remains the world’s largest gambling hub, with revenue in 2015 about five times that of the Las Vegas Strip. The Chinese city’s gambling houses have shifted their focus to become more Vegas-like, in an attempt to draw more tourists by providing more non-gaming facilities.
Galaxy’s newly-opened Broadway casino-hotel and a Batman ride in Melco Crown Entertainment Ltd.’s Studio City helped the two operators grow their share of the mass market gambling segment in 2015. The $4.1 billion Wynn Palace will offer air-conditioned cable car rides and Sands China’s the Parisian will feature a half-size Eiffel Tower replica when they open later this year.
Macau’s transition from high-end gamblers to mass market tourists will lead to a more seasonal volatility in business however, as fewer VIPs take up the weekday traffic, Bank of America Merrill Lynch’s analyst Billy Ng wrote in a note.