Third quarter VIP gross gaming revenue (GGR) in Macau fell by 38.0 percent year-on-year to approximately MOP28.99 billion (US$3.63 billion) from MOP46.77 billion in the year-prior period, according to official Macau government data published on Friday.
Mass-market GGR, including slots and electronic table games, fell by 29.7 percent in the quarter to MOP25.38 billion from MOP36.08 billion in the year earlier period. In the second quarter, the rate of year-on-year contraction in the mass market had been 30.2 percent.
Friday’s data show third quarter mass-market GGR, including slots and electronic table games, improved by 0.3 percent sequentially. Revenue from mass baccarat fell 32.4 percent year-on-year in the three months to September 30, but improved 0.8 percent from the previous quarter to MOP18.76 billion.
“Combined mass and slots GGR had previously declined sequentially every quarter since the first quarter of 2014, so the flat story this quarter is, in our view, cause for optimism as it relates to stability in this very important high-margin segment,” analyst Grant Govertsen of Union Gaming Securities Asia Ltd said in a note following the release of the official results.
Macau’s accumulated casino GGR for the first nine months of 2015 stands at MOP176.02 billion, a fall of 36.2 percent from the prior-year period, according to official data. September marked the 16th straight month of GGR retreat measured year-on-year and the lowest monthly tally in five years.
The official split between VIP and mass play is only released every quarter, typically several weeks after the end of the reporting quarter. VIP revenue accounted for 53.32 percent of casino GGR in the three months to September 30, down from 55.51 percent in the previous quarter and from 56.45 percent in the prior-year period.
Union Gaming said in Friday’s note that the official split between VIP and mass gaming revenue “does not take into account the ongoing reclassification scheme first instituted in the fourth quarter of 2014 by certain operators who are running premium mass games as VIP in order to allow smoking”.
“When we adjust third quarter 2015 reported GGR for these reclassifications, we estimate that mass and slots accounted for 51 percent of GGR in the third quarter of 2015, which marked the first time VIP has not accounted for a majority of gaming revenue in Macau,” said Mr Govertsen.
“This is a milestone event that represents the future of Macau. We would look for this trend to continue for the foreseeable future,” he added.
A note earlier this month from Deutsche Bank Securities Inc suggested that the idea that Macau mass-market gambling is an inherently high-margin business doesn’t stand close scrutiny.
“The mass gaming segment has anywhere from a 20 to 30 percentage point margin profile advantage relative to VIP. However, a meaningful pick up in mass revenue, as a percentage of the mix, has not led to improving [property] margins,” said analysts Carlo Santarelli and Danny Valoy.
(Updated at 4.21pm, Oct 16)
