Macau Casinos Suffer 21% Revenue Fall in January 2016

Following more than five years of growth, Macau’s casino industry suffered its first revenue fall back in June 2014. Since then the rout has continued unabated, and after reporting a 34% drop in business for the whole of 2015, Macau has now experienced a 21.2% contraction in revenues to $2.33 billion in January 2016, marking 20 consecutive months of decline for China’s only legal gambling resort.
Putting a slight positive note on the latest result, the 21.2% revenue shrinkage reported by Macau’s Gaming Inspection and Coordination Bureau was slightly less than the 22% contraction forecast by six Bloomberg analysts. In addition, January is traditionally noted for being a weaker month as the following month marks the Lunar New Year when thousands of mainland Chinese gamblers travel to Macau to spend a week-long celebration starting Febuary 7th. As Wells Fargo analysts McKnight, Adam and Shore explain:
“We note that historically Macau gaming revenues declined in the weeks leading up to the [Chinese] New Year holiday. Last year, for example, ADR fell 15 percent sequentially in the two week period before Chinese New Year, and -8 percent sequentially the year before that.”
Nevertheless, Macau’s woes can mostly be attributed to a slowing Chinese economy, as well as the government’s anti-corruption campaign which has seen the casinos’ best patrons, its high-rollers, stay away from their gambling tables. This has also lead to a dramatic decline in the junket operators serving the Macau market, with their numbers contracting by 23% over the past year. Macau’s casinos have subsequently tried to rebalance their business by appealing more to the mass market, and as a Bernstein Research statement explains:
“Due to improvements in transportation infrastructure and the opening of large scale integrated resorts between 2015-2018, mass will be the driver of rejuvenated growth beginning in 2016 and continuing through the rest of the decade.”
According to Billy Ng from the Bank of America Merrill Lynch, Macau’s revenues will stay flat in 2016 compared to the previous year, although other analysts expect revenues to be between -10% or as high as +1% by the year’s end.