Macau Casino Revenue Pushed to Two Year Low by Typhoon Mangkhut

Macau Casinos Pushed to Two Year Low in September by Typhoon Mangkhut

Macau’s casino market rose by a mere 2.8% to $2.73 billion in September, demonstrating that uncontrollable forces of nature are just as capable of affecting its performance as macroeconomics factors, such as a slowing Chinese economy. The ‘act of God’ responsible for the dramatic single digit gain was Typhoon Mangkhut, the most powerful tropical cyclone of the year to date, which formed in Asia on September 7th before hitting Mainland China, Hong Kong and Macau on the 15th and 16th.

Impact of Typhoon Mangkhut

The destructive impact of Typhoon Mangkhut was more pronounced in Mainland China and Hong Kong, where it killed more than 69 people, and has caused estimated damages in excess of US$1 billion. While authorities there are still struggling to clean up after the devastation, Macau’s experience was described as “immaterial” in comparison.

Nevertheless, the local government wisely took precautionary measures ahead of its expected arrival. This included forcing all of the island’s 42 casinos to shutter their operations on the weekend of September 15/16th, representing the first time they have been required to do so since gambling licenses were issued back in 2002.

Fortunately, just 40 people were injured in the typhoon, while 21,000 homes were left without power in Macau. Economically speaking, the island’s casinos took a $186 million hit to their revenues as a result of their closure, and the time it then took them to get their operations back up and running, as well as the corresponding drop off in visitors coming from the battered mainland. As Union Gaming analyst Grant Govertsen commented:

“With the benefit of hindsight, and in the context of the damage in Hong Kong being much more severe than in Macau, we believe the period of time that was needed to get casinos back to normal extended well beyond the Monday morning re-openings.”

Macau Casinos Just 2.8%

Macau casinos generated revenues of $3.3 billion (+17%) in August, marking its highest monthly revenue collection of the year. In September, however, revenue dropped to just $2.73 billion, representing a severe 17.3% month-on-month decline. Nonetheless, year-on-year revenue still came in higher at 2.8%, and completes 26 straight months of revenue growth for China’s only legal gambling hub. As a result, revenue is currently up by an impressive 15.9% for the first three quarters of 2018 compared to the same period a year ago.

Golden Week Underway

According to Union Gaming, Macau’s casino market is forecast to grow by 7% to $3.5 billion in October. Helping to boost its number is the National Day Golden Week, with the week long festivities starting on October 1st, marking the date in 1949 when Communist leader Mao Zedong established the People’s Republic of China. According to the latest data, though, the celebrations have gotten off to a slow start with Macau’s 3-to-5-star hotels currently just 40% occupied, compared to 80% around the same time in 2017.

Macau-Hong Kong Bridge

Another major boost to Macau’s casino market will also begin in October after the Hong Kong-Zhuhai Macau Bridge (HZMB) officially opens to traffic, in the process linking all three major cities. The 34-mile (55km ) long bridge–tunnel system cost around $2 billion to complete, and is expected to reduce the 4.5 hour travel time from Hong Kong to Zhuhai or Macau to just 40 minutes. In addition, travelers can expect monetary savings as the previous ferry ride required to visit Macau cost HK$220 (US$28), falling to HK$130 (US$16) for a coach ride, while the bridge will only cost HK$80 (US$10) to use.

There is likely to be good news in store for property owners in Macau, too. According to Raymond Kwok, associate director at Guo Du Real Estate, residential properties are set to see their values jump by 5-10% as early as next year, with a more pronounced 30% increase predicted for the island’s retail properties.