August Breaks Spell

The city’s gross gaming revenue increased 1.1 per cent in August to MOP18.8 billion (US$2.4 billion), according to data released yesterday by the Gaming Inspection and Co-ordination Bureau (DICJ). This followed a 4.5 per cent decrease in July.
So far, August is the second best month of this year, following February, when some MOP19.5 billion was taken in. For the eight months ended August, Macau has an accumulated gross gaming revenue of MOP144.4 billion, a drop 9.1 per cent compared to the first eight months of 2015.
Gaming revenue has been falling since June 2014 amid China’s economic downturn and the government’s crackdown on corruption, which has scared off high-rollers from the Mainland.
Operators in Macau have been shifting their focus to tourists and recreational gamblers by adding more non-gaming facilities as competition to attract visitors intensifies.
Casino shares rose, as investors now look to see whether operators can sustain the momentum through a key holiday week. Wynn Macau Ltd. rose as much as 8.2 per cent, the biggest intraday gain in more than a month, while Sands China Ltd. advanced by as much as 4.6 per cent. The benchmark Hang Seng Index rose 0.8 per cent.
No swift rebound
Improving visitation over the Summer helped bolster the mass market segment, which has become a key focus, given the dearth of VIP gamblers on Macau’s plentiful baccarat tables.
Gaming revenue for the segment recovered in July, rising 3.2 per cent, compared to an 11 per cent drop for the high-roller VIP market, according to data compiled by Bloomberg Intelligence.
A swift rebound is unlikely, say analysts, who caution that the new properties, which include a half-ascale version of the Eiffel Tower and an aerial gondola ride, will be impacted by slow market growth and infrastructural bottlenecks.
“We believe it is much more difficult to ramp up a new property in a low growth environment, based on Studio City’s and Galaxy Macau Phase II’s performances,” said Praveen Choudhary, an analyst with Morgan Stanley in Hong Kong, citing the examples of last year’s openings by the aforementioned, both of which failed to boost the overall market.
New properties
There also concerns that the raft of casino resorts being completed in the newer Cotai district will result in intense competition, especially for existing casinos on the Macau Peninsula. Sands China Ltd.’s Parisian casino is due to open later this month, while MGM China Holdings Ltd.’s resort in Cotai is scheduled to open next year.
“We need to wait for at least one more month to see if growth can be sustained, and if new casinos will bring more visitors during the peak Golden Week,” China International Capital Corp. analyst Chris Kwai said in a telephone interview following the results. “Compared with no growth or even a slight drop, a slight uptick makes a big impact upon market sentiment.”
Wynn Palace, the US$4.2 billion luxury casino featuring a US$100 million synchronised fountain show and US$200 million-worth of art and Chinese antiques, is perceived to be off to a slow start after its August 22 opening. With Macau’s high-stake gambling segment still in decline, new projects such as Wynn’s are taking market share from the existing base, said Union Gaming Group LLC analyst Grant Govertsen.
“It has largely cannibalised other properties, including their own on the Peninsula,” CLSA Ltd. analyst Marcus Liu said, referring to Wynn Palace. “The October holiday will be the true test of whether the new property, together with The Parisian, can grow the market.”