Macau Casinos Suffer Fourth Month Of Declining Revenues

The Chinese gambling resort of Macau has just suffered four consecutive months of decline after posting a 11.7% fall in revenues to $3.21 billion in September. The drop was also the biggest experienced by Macau in more than five years.
A whole host of factors have contributed to the startling contraction in Macau’s gambling industry, not least a Beijing crackdown on extravagance and corruption that has kept VIP gamblers away from the resort’s baccarat tables, and instead driven them towards casinos elsewhere in the world, from the Philippines to Las Vegas. Commenting on the situation, Praveen Choudhary, a Morgan Stanley analyst based in Hong Kong, said:
“Since the scrutiny has intensified, gamblers are instead spending time away from Macau. Rich and famous gamblers are lying low and junkets have turned cautious in extending credit to worthy people.”
Other factors contributing to Macau’s falling revenues include disruptive protests by casino staff demanding better benefits and wages, the ongoing protests in Hong Kong, and the new strict smoking laws set to be introduced which now seek to ban all smoking in “mass areas. According to Barclays Research, the stricter than expected smoking ban is likely to have a bigger negative impact than previously forecast, and as the company, explains:
“While previously we had expected just a low-to-mid-single-digit percentage impact to overall gross gaming revenue from the smoking ban (if premium mass areas can still smoke), we would now expect a higher mid-to-high-single-digit impact to overall GGR if smoking is not allowed in all premium mass areas as well.”
In spite of September’s lower revenues, however, casino shares rose sharply on Monday, including Vegas Sands Corp up by 7%, Galaxy Entertainment Group up 6%, SJM Holdings up 5.12%, MGM China up 4.93%, Wynn Macau up 4.44% and Melco Crown up 3.63%. That’s because the revenue fall was lower than the 12% to 13% year on year drop forecast by Macau Secretary for Economics and Finance Francis Tam Pak-yuen, last week.
“Maybe you’re getting to the point where investors are saying OK, just about anything that could go wrong has gone wrong so it’s not much lower than the stocks can go,” explained China Union Gaming analyst Grant Govertsen.