Macau casino operators will need more hotel capacity in order to overcome “bottlenecks” caused by spiking demand at weekends and public holidays, says a report from brokerage Sanford C. Bernstein Ltd.
Citing a recent meeting with Daniel Briggs, senior vice president of investor relations for Las Vegas Sands Corp – parent of Macau operator Sands China Ltd – the brokerage said such weekend demand for accommodation was mainly coming from the mass market, while Macau’s traditional core trade in VIP gambling had filled up hotel rooms on weekdays.
“While in 2012-2014, the weekday business was dominated by junket business with largely day-tripper mass mixed in… weekend business was all the people coming on vacation (mass players), premium mass and VIP players,” noted Sanford Bernstein analysts Vitaly Umansky, Zhen Gong and Yang Xie in their Friday document.
“Currently, almost all the mass [market] recovery has come from play on weekends and holidays. Operators will need more hotel capacity and at some point in the future [more] gaming capacity,” they added.
Macau had 36,200 hotel rooms of all categories – including those in guesthouses – as of October 31, a year-on-year increase of 14.6 percent, according to data released on November 30 by the city’s Statistics and Census Service.
As of the end of the third quarter 2016, there were 14 hotel projects under construction in Macau and 38 projects undergoing government approval, according to an announcement by the city’s Land, Public Works and Transport Bureau on November 20.
They would together provide close to 14,500 new hotel rooms for Macau. The bureau’s statement didn’t give estimated completion dates for the new hotel projects.
Several new casino resorts have opened in Macau’s Cotai district this year, pushing up the total number of hotel rooms available in the city. Wynn Macau Ltd’s 1,700-room Wynn Palace and Sands China’s 3,000-room the Parisian Macao, launched on August 22 and September 13 respectively.
Japanese brokerage Nomura had said in a July report that Macau was likely to experience what it termed a “slow grind” recovery in demand for casino services following a two-year decline: a recovery pattern similar to that seen in Las Vegas following the global economic crisis of 2007-2008.
A number of investment analysts have noted that in Las Vegas demand for gambling typically peaks at weekends, with the casino resorts there relying on conventions to drive hotel occupancy and earnings on weekdays.
Sanford Bernstein noted in its Friday report: “Macau will have more convention and exhibition [business] in the future, but better transportation infrastructure for and support from the Macau government are needed for MICE [meetings, incentives, conferences and exhibitions] to be successful.”
Banking group Morgan Stanley said in a Thursday report it was raising its estimate for 2017 Macau casino gross gaming revenue growth from 2 percent to 10 percent. It also said that it expects the casino industry’s earnings before interest, taxation, depreciation and amortisation (EBITDA) to grow by 13 percent next year.
“We think mass revenue can sustain at high single-digit growth in the medium term, driven by infrastructure, visitation, spending per visitor… increased focus of the casino operators to develop premium mass/direct customers, diversification, and increase in supply of non-gaming amenities,” said analysts Praveen Choudhary, Alex Poon and Thomas Allen.
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Inward direct investment – from outside investors – into Macau’s gaming sector in 2019