Macau Casinos Post 8.5% Revenue Increase in November

Grand Lisboa in Macau

Macau’s casinos saw their combined gross gaming revenue (GGR) increase by 8.5 percent to $3.1 billion in November, according to the latest data released from the Gaming Inspection & Coordination Bureau (DICJ). Overall, the result was largely in line with the estimates made by several brokerages who had anticipated a GGR growth of between 5-10 percent.

The Chinese gambling resort has now generated MOP276.38 billion (US$34.31bn) for the first 11 months of 2018, representing a 13.7 percent improvement compared to the same period during the previous year. In fact, Macau’s GGR is currently higher than the MOP265.7 billion ($33.13bn) that was taken for the whole of 2017.

28 Months of Growth

In 2013, Macau’s casino market collected a record $45 billion in revenue, with February 2014 subsequently marking the tail end of the peak after generating $4.71 billion for the month. A slowing down of the Chinese economy combined with an anti-corruption campaign launched by Beijing then caused the industry to suffer 26 consecutive months of decline which lasted from June 2014 to July 2016.

After revenues fell by 2.6 percent in 2014, the following year the market contracted by a massive 34.3 percent in 2015, before returning to a more manageable 3.3 percent decline in 2016. Last year, however, Macau saw its business soar by 19 percent to $33 billion, and since returning to form, the island resort has now strung together 28 straight months of year-on-year revenue increases.

Single Digit Growth in November

Helping November’s numbers along is the recent opening of Hong Kong-Zhuhai-Macau Bridge at the end of October, which connects the three major cities on the Pearl River Delta via a 34 miles (55km) bridge–tunnel system.

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Nevertheless, Macau’s revenue growth was achieved despite a number of factors having the potential to dent its casino market. This includes a slowing Chinese economy and an ongoing trade war with the US which is being closely watched by the country’s high-end VIP segment. As Bloomberg pointed out last month:

“While mass market revenue has maintained solid revenue growth, VIP business has been hit by weakening China property price and stock market turmoil.”

The past three months has also seen Macau’s market return just single-digit growth, including rising by 3 percent in September, 2.6 percent in October, and now 8.5 percent in November. Furthermore, while Fitch Ratings has predicted a “long-term positive outlook” for the gambling enclave, its overall GGR estimate for 2019 is in the mid-single-digit range.

US-China Trade War

President Donald Trump’s ongoing trade war with China has the potential to heap further misery on Macau’s casino industry. To date, the U.S. has imposed tariffs on $250 billion worth of Chinese imports, and threatened to slap a further $267 billion of duties on its goods. In the meantime, Beijing has responded with $110 billion of tariffs on U.S. goods, with the lower amount more a reflection of the current import trading imbalance between the world’s two leading economies.

Chine has tried to redress the imbalance by targeting politically important industries, with agriculture a prime example. Also at risk from collateral damage are those U.S. casino firm with huge interests in Macau, such as Las Vegas Sands Corp, Wynn Resorts Limited, and MGM Resorts International. The Chinese government could plausibly use these companies as targets for retaliation by disrupting their custom, and as Shaun Rein, China Market Research Managing Director, points out:

“It is possible they will ratchet up police surveillance of his [Adelson’s] Macau properties in order to spread fear among high rollers and even middle-class gamblers that they are being checked in on by the authorities. Or they will launch an audit of their books. Either way, a move could be viewed as having plausible deniability that the government cloaks as a crackdown on corruption or tax evasion, as they did against Lotte in China’s battle with South Korea.”

Sands, MGM and Wynn also hold Macau gambling licenses which will expire a few years hence, representing another area of pressure China could exploit in the event of a protracted trade war. Presently, the signs do not look good for an early end, too, with some analysts believing it could last for two to three years.

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