Macau’s top casino operator warns against calling a recovery in gaming enclave
It’s still too early to say Macau’s US$29 billion casino industry is rebounding, even after August’s bump in revenue halted a two-year decline, said the billionaire chairman of Galaxy Entertainment Group Ltd., the biggest operator there.
Lui Che-Woo wants to see more-sustained growth before deciding the worst is over, and he believes the best strategy for achieving that is to target mainstream gamblers rather than VIPs, he said in an interview. That would dovetail with government efforts to turn the world’s biggest gambling hub into more of a destination for middle-class tourists.
“While Macau’s gambling industry has hit the bottom, it’s still too early to call it a recovery,” Lui, 87, said. “Give me two more years to see. It takes time to gradually attract more mass-market customers.”
Galaxy overtook Sheldon Adelson’s Sands China Ltd. as the market leader with 23 per cent share in the first half of 2016, helped by new family-friendly resorts such as Galaxy Macau’s second phase and Broadway Macau. Lui’s net worth has increased by 10 per cent so far this year to US$7.7 billion, according to the Bloomberg Billionaires Index.
Lui is opting to remain cautious even as Sands’s Adelson and MGM Resorts International Chief Executive Officer James Murren both said that a Macau gambling recovery is underway.
Galaxy’s shares have risen 12 per cent this year, compared with a 13 per cent gain in the Bloomberg Intelligence Macau gaming index.
Macau last month reversed a 26-month decline in gaming revenue with a 1.1 per cent increase to 18.8 billion patacas ($2.4 billion), according to the Gaming Inspection and Coordination Bureau.
The correction came despite China’s economic slowdown and a crackdown on corruption, contributing to a 16 per cent drop in revenue from high-end gamblers during the second quarter of the year.
“There have been strong signs that the market has stabilised, especially the mass market,” said Richard Huang, an analyst with Nomura International in Hong Kong. “Yet the real question is how strong the growth will be.”
Those doubts stem partly from the increasing competition.
Wynn Macau Ltd.’s $4.2 billion Wynn Palace opened last month, and Sands China’s Parisian will debut next week. MGM China Holdings Ltd. also plans a new resort in Cotai within coming months.
Galaxy wants to boost revenue from recreational gamblers by as much as 20 per cent during the next two years, Lui said. The company last month reported profit that beat analysts’ estimates after opening the city’s first new resorts in three years. It plans to build a theme park and an arena to help lure more families.
“In the past, everyone hoped to have more high-end clients,” Lui said. “Now the number of VIP gamblers has dropped. We’ve provided more new facilities to catch the attention of the mass market.”
Lui demurred when asked about the casino operators’ prospects for having their licenses renewed when they start expiring in 2020.
“It is the government that judges whether we are doing a good job, and it will decide how to deal with the licenses during the renewal,” he said.