Only 1 percent of those Chinese gamblers in Macau polled in proprietary research by investment brokerage Sanford C. Bernstein Ltd said they would choose not to visit a casino if it completely banned smoking.
“Although an expanded smoking ban may have some negative impact on GGR [gross gaming revenue], the magnitude of such impact would likely not be significant,” said a note on Monday from the firm’s analysts Vitaly Umansky and Simon Zhang.
Last week, GGRAsia quoted Macau legislator Chan Chak Mo – who heads a committee of Macau’s Legislative Assembly responsible for steering the passage of a revised tobacco control bill for the city – as saying that the body had no schedule regarding completion of its report. He added he was unsure whether a final vote on the bill could take place before the Legislative Assembly’s summer break in August.
The bill proposes banning completely any smoking inside the city’s casinos.
Since October 2014, smoking in Macau casinos has only been allowed in VIP rooms or in authorised airport-style lounges on the mass gaming floor.
Sanford Bernstein stated in its Monday note there appeared to be some softening in the Macau government’s tone regarding a total smoking ban. Casino gaming revenue in the city has fallen year-on-year for 22 months in a row, linked, say a number of investment analysts, to factors including China’s anti-graft campaign and the softening mainland economy.
Last year the aggregate casino revenue decline in Macau was 34 percent, although the head of the city’s gaming regulator last month said he expected the 2016 decline to moderate to 10 percent year-on-year.
“Since August 2015, the Macau government has also relaxed its resolute tone on a full smoking ban and would ‘keep an open mind on whether casinos can retain smoking lounges, including in VIP rooms’,” said Sanford Bernstein in its Monday note.
The brokerage added: “Based on customer survey work we did with approximately 1,200 Chinese gaming visitors to Macau, less than 30 percent of customers would be significantly impacted by a smoking ban (although this number increases slightly with higher income levels).”
“Nearly 50 percent of visitors claim to not smoke at all and another approximately 23 percent either do not smoke at gaming tables or only do so rarely. Additionally, only 1 percent of customers would not come to a casino that did not allow smoking, while 15 percent may spend less time gaming,” said Mr Umansky and Mr Zhang.
Turning to estimates for Macau’s April GGR, the analysts said average daily revenue (ADR) for the first 10 days of the month was MOP550 million (US$68.8 million).
Sanford Bernstein said that, assuming an ADR of MOP550 million to MOP580 million for the remainder of this month, April GGR would be MOP16.5 billion to MOP17.1 billion, representing a year-on-year decline of 11 percent to 14 percent.
Cameron McKnight of Wells Fargo Securities LLC said in a Monday note his institution expected – based on run rates to April 10 – Macau’s April GGR to fall 13 percent to 15 percent year-on-year.
Daiwa Securities Group Inc analysts Jamie Soo, Adrian Chan and Jennifer Wu stated in a note the same day that the likely April fall would be 15 percent year-on-year at current run rates, while David Bain of brokerage Sterne Agee CRT put the likely decline at 10 percent.
Telsey Advisory Group’s David Katz and Brian Davis also put the April fall from the prior-year period as likely to be 10 percent.
“Although we concede that there are some less negative elements in market activity, we remain focused on significant growth in supply going forward and the demand necessary to support it, which is at the moment not evident,” said the Telsey team, referring to the launch of four large casino resorts on Cotai between mid-year and the end of 2017.
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Alex Poon and Praveen Choudhary
Analysts at Morgan Stanley