Macau Casino Revenues Forecast to Rise 7% in 2017

In 2016, Macau finally broke a 26 month-long losing streak after posting a slight 1.1% year-on-year revenue increase in August. By the end of November, China’s only legal gambling resort subsequently reported four consecutive months of growth, but considering the market’s previous downward trajectory, even a positive December will almost certainly be unable to reverse this year’s current 4.3% revenue decline.
As a result, after posting a 19% increase in revenues to $45.2 billion in 2013, Macau has experienced a 2.6% fall to $44.1 billion in 2014, a 34.3% revenue drop to $28.93 billion in 2015, and is forecast to decrease by 3.5% to around $28 billion for the whole of 2016.
Nevertheless, the recent uptick in casino gambling revenues is unmistakable, and Bloomberg is already predicting a 7% improvement in business for 2017, with mass market players helping to lift the market. In recent times, Macau has been busy reinventing itself by adding leisure facilities and attractions that are capable of drawing tourists outside China. This has become an increasingly important development as the number of mainland Chinese visitors has started to fall, and as analyst Richard Huang from Nomura Holdings Inc, explains:
“There are definitely more reasons to come to Macau now versus two years ago, and that is the key reason why overnight visitation is growing faster than total visitation.”
However, Union Gaming Group analyst Grant Govertsen has warned that it will be sometime before Macau can shift its economy from being overly reliant on gambling revenues to one in which it is seen foremost as a tourist destination. Case in point, Las Vegas currently derives 62% of its revenues from non-gaming activities, whereas for Macau that figure is just 6%. As Govertsen explains:
“Does the fact that Macau has an Eiffel Tower now brings extra people to the market? Yes, but their main activity here will still be gaming.”
That said, things are certainly looking up again for Macau, and in 2016 its casino shares have soared as investors prepare for a tourist-led recovery. The Bloomberg Intelligence Macau Gaming Index has risen by 27% this year, for instance, with shares in MGM China jumping by 52%, and those of Galaxy Entertainment Group Ltd. up by 36%.