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Analysts remain upbeat despite 20th month of drop in gross gaming revenue

Macao gaming revenue dropped ahead of the Spring Festival but analysts still believe the sector is stabilizing

amid new offerings in the pipeline and demand from mass market gamers.

Casinos in Macao saw gross gaming revenue (GGR) in January tumble for the 20th month in a row, falling by 21.4 percent on year to 18.67 billion Macao patacas ($2.33 billion), the Gaming Inspection and Coordination Bureau of the Macao SAR announced on Monday. Revenue had started to edge down in June 2014.

The slide was at a similar pace as last December, when monthly gaming revenue dropped 21.2 percent to 18.34 billion Macao patacas, closing out a disappointing year in which Macao casinos saw GGR plunge by 34.3 percent, the worst on record.

But Billy Ng, head of Asia gaming, lodging and leisure at Bank of America Merrill Lynch, believes the sector is stabilizing amid rising numbers of mass market visitors attracted by newly opened casinos.

Last December brought an "encouraging and remarkable" sign of growth, because GGR generated by mass market visitors, mainly from the mainland, posted a "high single digit" increase year on year, despite offshore renminbi declining almost 5.5 percent against the US dollar during the year, said Ng. Two new resorts unveiled last year, Galaxy Phase 2 and Studio City Macau, which launched in May and October, respectively, expanded the market, Ng added.

Apart from drawing mainland visitors, the new entrants managed to capture the attention of Hong Kong gamblers.

Once accounting for more than a third of total visitors to Macao, the number of Hong Kong visitors had declined for three consecutive years to total just above a fifth, or 22.4 percent, at the end of December, according to the Statistics and Census Service of the Macao government.

But more Hong Kong visitors chose Macao as their holiday destination last year, especially in the second half. In the fourth quarter, the number of overnight visitors from Hong Kong soared by 20 percent on year to 791,282, while in December, their numbers rocketed by 30.1 percent on year to 310,828.

"That's a key difference. Macao is becoming more affordable," said Ng. "Although there is no way for average Hong Kong gamblers to spend as much as the mainland VIPs, the Hong Kong market has responded to all the promotions the casino operators run in the city."

However, Aaron Fischer, head of consumer and gaming research at CLSA, argued in a January report that the new supplies failed to drive "material growth" in GGR for the entire gaming industry in Macao.

Fischer indicated that for 1 percent GGR growth expected for the sector, there would be 5 percent revenue contraction for the existing casinos and 6 percent growth in revenue from the new ones.

Five new resorts are in the pipeline at the Cotai Strip, Macao's new gaming high street, of which four are expected to open their doors this year. Last November, Wynn Resorts Ltd postponed the opening of its newest property in Macao, Wynn Palace, by three months to June 25 this year citing construction delays.

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(HK Edition 02/02/2016 page8)