Macau gaming industry looks to new resorts for rebound

Macau's gaming industry is expected to remain depressed until at least the second half of next year when new resorts launch, after enduring one of the sharpest and most prolonged declines in revenue this year that sank the city into a recession. After more than a decade of robust double-digit growth and an exceptionally strong performance last year, China's casino capital is expected to record its first full-year revenue decline. The number of negative factors that converged over the past year prompted one gaming analyst to describe it as "death by a thousand cuts". The liquidity crunch caused by the mainland's anti-graft drive and economic slowdown was compounded by the government's move to tighten rules on using UnionPay cards and again when a junket operator owing HK$10 billion went missing. Other negative bits included a smoking ban on casino floors since October, changes to the transit visa and Hong Kong's pro-democracy protests. Gross gaming revenue fell 19.6 per cent last month, the sixth consecutive month of decline, to a two-year low of 24.27 billion patacas. In October, revenue dived 23.2 per cent, the lowest on record since the government started tracking casino revenue data in 2005. Because of its heavy reliance on gaming revenue, Macau reported its first year-on-year economic contraction in five years in the third quarter. Gross domestic product for the three months to September fell 2.1 per cent, the first quarterly shrinkage since 2009. Casino revenue figures for this month will not be released until the new year. However, Barclays is forecasting a decline worse than last month's because of tighter checks on travellers on transit in the lead-up to President Xi Jinping's visit to mark the 15th anniversary of Macau's handover. The government and analysts are bracing for a muted outlook. Chief Executive Fernando Chui Sai-on has said the government is cautiously drafting next year's budget because of the continuing decline in casino revenue. It is expecting monthly casino revenue of about 27.5 billion patacas, down from 30 billion patacas this year. Industry players still subscribe to a "build it and they will come" model and are forecasting growth will ramp up in the second half of next year when new casinos start to come on stream. "It's been the longest period of time, over two years, without any new openings," Bloomberg analyst Tim Craighead said. Galaxy Phase II is scheduled to launch in the middle of next year, followed by Melco Crown's Studio City and Sands China's Parisian at the end of the year. Craighead cites the historical surges in growth after casino openings. "If you look at casino operators' year-on-year growth averages over six quarters after they launch, Galaxy rose 105 per cent. After the opening of City of Dreams, Melco Crown revenue grew an average of 94 per cent. Sands' was less, just 38 per cent, but the base for Sands was much higher," he said. Next year, table capacity has the potential to increase 27 per cent, slots 38 per cent and hotel rooms 42 per cent. The hotel room supply should act as a key driver of growth as overnight visitors spend five times more than day trippers. However, others are not sure the supply-driven model is intact, particularly after comments from Li Fei, the chairman of the Macau Basic Law Committee and deputy secretary general of the National People's Congress Standing Committee, against the city's over-reliance on gaming. "The overwhelming dominance of gambling in Macau is not in line with the overall interest of Macau … One cannot focus only on Macau's economic growth and tax revenue … one must take into account the socioeconomic safety, stability and developmental interest of the mainland and the whole nation," Li said. A Nomura report on December 11 raised questions over whether Beijing might withdraw its support for Macau as a gaming enclave. "Looking beyond the technicalities of the mid-term gaming licensing review in Macau, Beijing may fundamentally view gaming as a licensed business granted to Macau by itself," the report said. "Further, while many investors seem to think that Beijing can and will keep Macau prosperous, there are two valid questions to ask: whether there is that much Beijing can do to help with the development of Macau and why should Beijing help as local residents in Macau are already better off versus people elsewhere in China and many in Taiwan and Hong Kong. "With the defeat of the [Kuomintang] in the recent Taiwan election and the Occupy Central movement in Hong Kong, we wonder whether Beijing has started to re-examine its overall policy stance towards Taiwan, Hong Kong and Macau over the past decade. "There have been calls for Macau to diversify its economy, particularly for co-operation with the Pearl River Delta region, and develop non-gaming industries."

Macau gaming industry looks to new resorts for rebound

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}More gloom expected for Macau casinos in the first half after negative year from anti-graft drive, UnionPay rule changes and smoking ban

More gloom expected for Macau casinos in the first half after negative year from anti-graft drive, UnionPay rule changes and smoking ban