Macau Casino Revenue Jumps 17% to $3.3BN in August

Macau’s casino market generated gross gaming revenue (GGR) of $3.319 billion in August, marking its second-highest total in more than three years, according to the latest results released by the Gaming Inspection and Coordination Bureau (DICJ). Furthermore, revenue was also higher by 17.1% compared to the same month last year, with that percentage gain beating gambling analyst forecasts for the first time in four months.

Overall, Macau has now enjoyed 25 consecutive months of uninterrupted year-on-year growth dating back to July of 2016 when Macau’s GGR fell by 4.5% to $2.2 billion. At that point the Chinese gambling resort had experienced 26 straight months of year-on-year gaming revenue decline, after which its market has well and truly been on the ascendancy.

Genuinely Stronger Growth

In August, there were a number of factors helping to explain the impressive GGR growth, including continuing “genuinely stronger” demand which saw the industry outpace other important sectors. In July, for instance, Macau GGR increased by 10.3% year-on-year, which despite missing most analysts’ forecasts, still compared favorably to the retail (+9%) and passenger car sales (-5%) markets.

“This seems very impressive, in our view, underlining solid fundamentals and secular growth prospect of Macau’s gaming industry,” commented JP Morgan.

Favorable Comparison

Last month also had a favorable comparison versus August 2017, a month which had one less calendar day, and also saw parts of Asia battered by Typhoon Hato. The tropical storm proved to be one of the strongest to hit Asia in over 50 years, and caused a massive $6.82 billion in damages in its wake. As analyst Grant Govertsen from brokerage firm Union Gaming Securities Asia Ltd, explains:

“Two big typhoons within one week of each other, made for a very favorable calendar this August and hence nice year-on-year growth.”

Positive Outlook

Analysts are predicting a positive outlook for Macau’s casino market going forward. Bernstein and JP Morgan, for instance, are forecasting the world’s biggest casino hub to experience growth of between 13-15% in September, while Morgan Stanley Asia Ltd analysts Praveen Choudhary and Jeremy An have stated that Macau’s revenue is expected to increase by 17% by the end of 2018.

In addition to stronger demand, a more favorable public policy regarding Macau gaming is also expected to provide a boost for its revenues. On September 1st, China’s Ministry of Public Security relaxed certain visa application conditions in order to make it easier for 7.8 million mainlanders to visit Macau, Hong Kong or Taiwan.

Prior to the new rules, Chinese were required to return to the places where they are officially registered before applying for such a visa, which obviously creates significant logistical problems as millions of migrant workers regularly travel throughout the country looking for employment. Furthermore, citizens are now able to renew their passports from the places where they currently reside.

US Trade War with China

One factor that may spoil the positive forecast is the ongoing economic war currently underway between the USA and China. Washington and Beijing have already imposed $50 billion worth of import tariffs on one another, with President Trump also threatening a further $200 billion worth of charges last week.

Needless to say, a trade war between the two economic powerhouses is likely to spill over into a number of different industries, with US owned casinos in Macau one area at risk from collateral damage. Currently, Macau has six licensed gaming operators with 41 casinos on the island, many of which are owned by US companies Las Vegas Sands, MGM Resorts and Wynn Resorts.

While US manufacturing and exporting interests in China are likely to be the first businesses targeted by the Chinese government during a trade war, casino operators in Macau could also be viewed as potentially legitimate targets ripe for retaliation. As Shaun Rein, China Market Research Managing Director, explained recently:

“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.”