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Up to 4.6-pct GGR hit from casino smoke ban: Macau govt

Sep 24, 2015 Newsdesk Latest News, Macau, Top of the deck  


Up to 4.6-pct GGR hit from casino smoke ban: Macau govt

Macau’s Health Bureau has said in a written reply to a Macau legislator that it expects – if implemented – a full smoking ban in the city’s casinos would result in a 2.7 percent to 4.6 percent reduction in casino gross gaming revenue (GGR).

It is the first time the authorities in the city have said publicly what they think would be the economic impact on the local casino industry of such a ban.

The news was reported on Thursday by public broadcaster Rádio Macau. The report quoted the written reply saying the assessment was done in conjunction with Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau. The government forecast was based on estimates regarding the percentage of Macau gamblers that are smokers and the potential impact of a reduction in the number of their visits to casinos.

Macau’s GGR for the first eight months of the year was tracking at an aggregate 36.5 percent fall from the equivalent period in 2014, weighed down by factors including an anti-graft drive in China and a slowing economy there.

In June, a note from Deutsche Bank AG mentioned a possible impact of 10 percent to 15 percent on Macau VIP revenue under a total smoking ban, adding that when Macau mass gaming floors were designated no-smoking areas in October 2014 – with the exception of gaming-free enclosed smoking lounges  – mass gaming revenue fell 12 percent sequentially.

Smoking is currently permitted in VIP gaming areas.

Union Gaming Securities Asia Ltd said in a note on Thursday that it acknowledged there was at the time of writing a lack of information available to it regarding the methodology of the government’s impact assessment. But the institution said a “reverse engineering” of known data suggested an impact nearer to the higher end of the government’s estimate, namely a circa 5 percent loss of GGR.

“Based on our observations of smokers in Macau, the average time to smoke a cigarette is typically less than three minutes. However, given that the smoking ban would necessitate persons leaving a casino and going to a sidewalk, the time per cigarette is likely to more than double to something like eight minutes (if not more),” wrote Union Gaming analyst Grant Govertsen.

His assessment assumed the documented market split of 45 percent of Chinese adult males being smokers, and 2 percent of adult Chinese females. Additionally the analysis assumed that a male Chinese smoker consumed about one cigarette per hour over 16 waking hours per day; and a female Chinese smoker had nearly 13 cigarettes per day, or 0.8 of a cigarette per waking hour, and that the average Macau casino customer mix was 85 percent males and 15 percent females.

“We therefore estimate that the average male will spend 6.2 percent of his time smoking while the average female will spend 0.2 percent of her time smoking… [and so] we estimate that a total of 5.3 percent of total [casino] customer time will be ‘lost’ while smoking,” wrote Mr Govertsen.

But he added: “We actually don’t expect to hear a lot about the smoking ban over the coming months, which we would categorise as ‘no news is good news’ for the time being.”

The Macau government might reconsider its position regarding a tabled ban on casino smoking lounges, depending on the results of a public consultation, said Macau’s Secretary for Social Affairs and Culture, Alexis Tam Chon Weng, in comments to local media on August 6.

Brokerage Sterne Agee CRT had mentioned in a note on September 17 the possibility of such a ban only being implemented in late 2016 or early 2017. It cited the source of the information as checks with several Macau legislators.


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