Macau gambling extends industry’s recovery to a sixth consecutive month in January, but falls short of estimates

Signs also show high-stakes players are coming back to the tables as VIP gambling rises 13pc in the last three months of 2016

PUBLISHED : Wednesday, 01 February, 2017, 5:20pm
UPDATED : Wednesday, 01 February, 2017, 10:08pm

Casino revenue in Macau increased in January, extending the industry’s recovery to a sixth consecutive month, while falling short of analysts’ estimates.

Gross gambling revenue rose 3.1 per cent to 19.3 billion patacas (US$2.4 billion), according to data from Macau’s Gaming Inspection and Coordination Bureau.

That compares with the median estimate of an 8.5 per cent rise by eight analysts surveyed by Bloomberg and follows an 8 per cent increase in December.

Casino stocks fell on the news, with Wynn Macau dropping as much as 4.5 per cent and Sands China losing as much as 2.8 per cent in Hong Kong trading. SJM Holdings decreased 2.6 per cent and MGM China Holdings slipped 2.4 per cent. The Bloomberg Intelligence index of Macau gaming shares dropped 2.6 per cent, paring this year’s gain to 1.5 per cent.

The world’s biggest gambling hub is switching gears to woo tourists and casual gamblers with family-friendly resorts, including Wynn Macau’s US$4.4 billion Palace casino featuring a synchronised fountain show and Sands China’s US$2.9 billion Parisian with its Eiffel Tower replica.

While a recovery has been gathering momentum, the new casinos have been drawing visitors at the expense of some older properties.

“Macau’s latest wave of new resorts poses the classic gambler’s risk-reward dilemma,” said Bloomberg Intelligence analysts Brian Egger and Margaret Huang. “Additions are key to Macau revenue recovery and long-term growth, yet entail challenges.”

Macau’s latest wave of new resorts poses the classic gambler’s risk-reward dilemma...Additions are key to Macau revenue recovery and long-term growth, yet entail challenges
Brian Egger and Margaret Huang, Bloomberg Intelligence analysts

Those challenges include new resorts posing a cannibalisation threat to other Macau peninsula properties and margin pressure as a hotel surplus increases room rate cuts, according to the analysts.

Las Vegas Sands Corp President Rob Goldstein said last week that its $2.9 billion Parisian casino in Macau gained traffic and posted net revenue in its full quarter of operation while denting patronage at its Sands Cotai Central property.

Betting volume from high-stakes players was softer than initially expected during the first few days of the Chinese New Year holiday, while the “luck factor has been unkind” to some casinos in January, said Macau-based analyst Grant Govertsen of Union Gaming Group.

“The reality is that we’ll need to wait for the February results to get a better picture of current trends on the ground given Chinese New Year straddles both January and February,” he said.

Gambling revenue in Macau might also have been hit slightly harder by seasonal factors. The average daily revenue at Macau’s casinos in the week ahead of Chinese New Year slowed more than had been anticipated, analysts led by Vitaly Umansky at Sanford C. Bernstein & Co wrote in a note last month.

“The first two days of the Chinese New Year holiday are generally slower, especially in high-end play, than the remainder of the week long holiday period,” the analyst wrote.

“If the slow down leading into Chinese New Year over the next week is more pronounced than expected, the monthly GGR estimate could fall short of our current expectation.”

Still, there are signs high-stakes players are coming back to the tables in Macau. VIP gambling, measured by revenue from the baccarat card games favoured by high-stakes gamblers from China, rose 13 per cent in the last three months of 2016, marking a turnaround since the first quarter of 2014.

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