Six things to keep from 2014’s gaming year

Is 2012 the ‘new normal’? Investors and the government were quick to justify the record drop in revenues last year as ‘an adjustment’ of the casino industry, while the current level of revenues is seen now as the ‘new normal’. Casinos made an average of MOP25 billion per month in the fourth quarter, the same as 2012’s monthly average. The amount of revenues generated by the VIP segment, Black Jack and slot machines in 2014 were equal to 2012. The skyrocketing performance of Macau in 2013 will likely go down in the history books as the best year ever for the industry in terms of growth rates – from revenues to stock price to profits. Following a 2013 to remember, the industry is going back to reality, or, as the Government says, the ‘new normal’. And the new normal is 2012. Of course, some say that despite the headwinds, 2014 was still the second best year ever in Macau for casinos. The industry made a staggering MOP350 billion in revenues in 2014. But that year was not meant to be second but the best year ever with revenues soaring 15 per cent to MOP400 billion. In the end, 2014 came up MOP50 billion short. The gains in 2013 were ‘lost’ last year.
VIPs saved 4th quarter It’s ironic that the most-hit segment in terms of bad news was the one that saved the last quarter’s performance. Or at least, prevented a steeper fall. VIP revenues stayed flat in the fourth quarter at MOP46 billion, the same as the previous quarter. The drop of 20 per cent in mass revenues was the main driver of the plunge. The next quarters will show if the VIP market has already bottomed and if the anti-graft campaign launched by Beijing will continue to divert high rollers away from here. The VIP segment could probably have benefited in the fourth quarter with some casinos moving tables from premium mass floors to VIP to avoid the smoking ban.
A mass(ive) problem In the end, the mass market delivered the biggest surprise. Despite 2014’s overall figure being positive (revenues totalled MOP140 billion against MOP120 billion in 2013), the last quarter revealed some worrying signs. Mass revenues have been dropping since the second quarter of 2014 and in the last quarter they declined to MOP29 billion from MOP36 billion (3rd quarter).
The slowdown in the mass segment, the most profitable one in Macau and where operators are betting more, could mean problems ahead as the segment probably continues to weaken this year.
The 50/50 market has to wait With the VIP segment registering double digit drops during 2014, investors believed that Macau was on its way to becoming a 50/50 per cent (VIP / Mass) market sooner than expected. However, fourth quarter figures revealed a different trend. VIP market share increased to 61 per cent, a nine-month high that compares to 56 per cent in the third quarter. If mass revenues continue to fall and VIP stays flat (per fourth quarter) the 50/50 market has to wait.
Slots immune to 2014 crisis Slot machines in Macau made more money in 2014 with less machines than in 2013 or 2012. Last year, the segment generated MOP14.4 billion from 13,018 available machines. This compares to MOP14.3 billion in revenues generated by 13,106 machines in 2013. In particular, last year’s performance compares to 2012, when the segment made MOP13.2 billion using 3,000 machines more (16,585). For slots, 2014 was quite an efficient year.
Lottery scores big
with World Cup A World Cup year means big money for sports lotteries and in 2014 the performance was simply the best ever. The football matches held in Brazil during June and July drew the attention of thousands of gamblers here that preferred to bet on Messi and Ronaldo than to play baccarat.
Football sports lottery revenues totalled MOP589 million last year, almost 60 per cent more than in 2010 (MOP380 million) when the previous tournament was held in South Africa. In the second quarter alone, the sports lottery here made MOP205 million in revenues, half of 2013’s total.