Low hotel rates a worry for Sands China: Wells Fargo
Brokerage Wells Fargo Securities LLC has warned that the ongoing decline in Macau hotel rates might signal a softening in mass gaming revenue for casino operator Sands China Ltd.
“Our proprietary forward room rate survey shows forward hotel rates dropping to the lowest levels we’ve seen since we started tracking rates last August,” analysts Cameron McKnight, Robert J. Shore and Daniel Adam wrote in a Thursday note.
They added: “Forward rates correlate highly with Sands China’s mass revenues. Our forward survey could suggest pressure on Sands China’s mass revenues in March and the second quarter.”
Average hotel rates for Sands China in March are the lowest since August 2015, according to Wells Fargo. In March, a night at one of the hotels in Sands China’s Macau properties cost on average HKD1,204 (US$155); in August last year, the average price was HKD1,674.
“Our survey is 80 percent correlated with Sands China’s mass revenues, though we stress the sample is very small,” the Wells Fargo analysts said.
Market wide average hotel rates in Macau are down 24 percent month-on-month in March, the brokerage stated. Its research pointed to a month-on-month decline of 3 percent in April “and basically flat [hotel rates] from there”.
The Wells Fargo analysts noted that the lack of a significant positive inflection in May hotel rates “could imply a relatively weak” performance for Macau’s casinos in the upcoming Labour Day holiday period surrounding May 1.
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