August gaming revenue in Macau is tracking for a decline of 4 percent to 6 percent year-on-year says a note from investment bank Credit Suisse AG issued in Hong Kong.
If the final monthly tally confirms that prediction, it would mean three consecutive months of year-on-year decline for the city’s gross gaming revenue (GGR).
Such deceleration hasn’t been seen since the first two quarters of 2009, following the global financial crisis in the autumn of 2008. Then, gaming revenue fell 12.7 percent year-on-year in the first quarter 2009, and 12 percent in the second compared to the same period in 2008.
Brokers at Morgan Stanley are now halving their estimates for 2014 revenue growth to 6 percent, from an earlier estimate of 12 percent year-on-year. They cited changes to transit visa rules – whereby some mainland residents used business travel visas issued by other countries to make a side trip to Macau, a practice mainly employed by travellers at the high end of the gambling market – as well as the main floor casino smoking ban due to take effect after the Golden Week holiday marking China’s National Day, at the start of October.
Kenneth Fong, director of equity research for Credit Suisse, said in his latest note for this month’s numbers: “For the week of August 17-24, we believe that the mass market revenue would be down 0 percent to 5 percent week over week while we believe VIP revenue (both volume and luck were not favourable) was down by ~15 percent compared with the week before. As such, we expect that last week (August 18-24) average daily revenue (ADR) could be in the range of MOP850 million [US$106.5 million] to MOP930 million, down from MOP983 million the week of August 11-17.”
Macau’s casino GGR for July dropped by 3.6 percent year-on-year to MOP28.4 billion, said the city’s Gaming Inspection and Coordination Bureau on August 1. That was driven by a 13 percent fall in VIP gambling, Deutsche Bank said in a subsequent note.
July was the first time in more than five years that monthly casino GGR fell in year-on-year terms for two consecutive months. In June, monthly GGR was down 3.7 percent from a year earlier. That was influenced by a 17 percent fall in VIP revenue, said Deutsche Bank.
When a GGR decline was seen in the first half of 2009, the market bounced back strongly in the second half, recording 22.3 percent expansion in the third quarter and a whopping 50.2 percent year-on-year gain in the fourth quarter of that year.
Some analysts at the time attributed part of the reason to the effects of mainland China’s economic stimulus involving large amounts of public money for infrastructure projects. The headwinds for Macau appear to be different this time, with the mass market also showing a sharp month on month deceleration in growth from 24 percent year-on-year in June to 16 percent year-on-year in July.
Karen Tang of Deutsche Bank said in a note in the first week of August offering possible reasons for the slowdown in the mass segment: “This could either be because: (i) the ban on UnionPay mobile devices pushed premium mass players towards junkets for cash access; or (ii) junkets poached premium mass players in view of underlying weakness in VIP demand (triggered by the new round of anti-corruption arrests in Guangdong).”
Credit Suisse’s Kenneth Fong said on Tuesday, referring to the August numbers: “…the mass revenue growth trend for August, as the first full month without the noise of [the FIFA] World Cup, will also be closely monitored by the market. In our view, mass revenue growth would need to be back to the ~25% range to drive a sector re-rating.”
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"We have estimated that on average, the [daily] visitor arrivals for this year’s Chinese New Year break could turn out to be a bit weaker than for the Christmas holiday period"
Maria Helena de Senna Fernandes
Director of the Macao Government Tourism Office