The expected fall in baccarat revenue in the Las Vegas Strip in 2016 will continue to impact major casino operators there, although the rate of decline is likely to soften, says a note from Deutsche Bank Securities Inc.
“Given our expectation of continued headwinds related to mainland China patrons, we expect further declines in baccarat revenue in 2016, before a flattening out in 2017,” said analysts Carlo Santarelli and Danny Valoy in a note on Tuesday.
The analysts expect 2015 baccarat revenue in the Las Vegas Strip (pictured) to have declined by about 15 percent year-on-year, with 2016 estimated to be down about 5 percent.
November baccarat revenue of US$109.6 million in the Strip was down 14.1 percent year-on-year. For the 12 months to November 30, baccarat revenue was off 21 percent from November 2014, show data from the Nevada Gaming Control Board.
The Las Vegas Strip, in Clark County in the state of Nevada, is the main gaming destination in the United States.
Analysts have said the Strip’s baccarat results have experienced volatility in the past few months because of a slowdown in Chinese players, partly related to the anti-corruption initiative in China and the monitoring of Chinese visitors to Las Vegas. The table game is the gambling pursuit of choice for many Asian customers visiting Las Vegas.
After expanding throughout the 2012-2014 period, baccarat drop as a percentage of total Strip drop peaked in 2014 at 17.9 percent, according to Deutsche Bank’s note. “In the year to date, baccarat drop as a percentage of the total mix is down sharply year-over-year at 15.2 percent,” said Mr Santarelli and Mr Valoy.
“With baccarat drop down [about] 15 percent in the year-to-date in 2015, comparisons are starting to ease,” they said, adding that September 2014 “was the first month of negative baccarat volume trends”.
“We believe operator strategies to shift marketing efforts within Asia, coupled with easing compares, will soften the rate of decline in 2016,” they added.
The Deutsche Bank team however suggested “a lower mix of baccarat” could help “in reducing volatility in results and favour operators with a more domestic focused approach on the gaming floor”.
Tuesday’s note also stated that play in the Strip from U.S. clients is expected to remain strong.
“With slot revenue up 5.1 percent in the year-to-date, as slot mix has helped hold percentage, and domestic table revenue (excluding baccarat) up 1.5 percent on similar drop growth, 2015 is shaping up to be the best domestic gaming trend year since 2011,” said Mr Santarelli and Mr Valoy.
“We expect domestic trends to remain favourable as we forecast low single digit growth in both 2016 and 2017,” the analysts said, adding that they expected the non-gaming segment to continue to grow this year.
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Chairman and chief executive of Melco Resorts and Entertainment