Slowing decline

Revenue from VIP gaming in Macau casinos fell 19.35 per cent in the first quarter of the year, at MOP30.38 billion (US$3.8 billion), compared to the same months in 2015, according to official data released on Friday.
The figure is indicated by VIP baccarat gross gaming revenue, a breakdown of the revenue per gaming product segment, provided by the Gaming Inspection and Co-ordination Bureau (DICJ).
The latest data also shows that mass market gross gaming revenue, including mass table games, slots and live multi games, fell 4.8 per cent year-on-year in the first three months of this year to MOP25.79 billion. The decline in the corresponding period of last year was 27 per cent. Also, in the first quarter of 2015, VIP baccarat revenue declined 42.1 per cent year-on-year.
The high rollers continue to be the source of most of the revenue from Macau casinos, amounting to 54.1 per cent of the total in the first quarter. Yet, its weight also continues to fall, as in the same period in 2015 VIP game weighting was 58.15 per cent.
In comparison with the last quarter of 2015, VIP gaming revenue increased 2.68 per cent, while mass games grew 2.21 per cent between January and March, the period covered by a week of celebrations for the Chinese New Year accounting for more betting in Macau casinos.
As reported by DICJ on April 1, for the first quarter of 2016 total gross gaming revenue in the SAR fell 13.3 per cent year-on-year to MOP56.18 million.
Reclassification
Table games reclassification has resulted in VIP gross gaming revenue declines being understated, and have overstated declines in the mass market, according to analyst Grant Goversten of brokerage Union Gaming Securities Asia Ltd.
“However, given that table games reclassification have understated mass performance by 700 basic points to 1,000 basic points since late 2014, we estimate that after adjusting for this effect, mass / slots gross gaming revenue actually grew around 3 per cent to 4 per cent year-on-year in the first quarter of 2016,” the analyst said in a note released on Friday.
“We are looking for this trajectory to continue through 2016 and we remain biased to the upside as it relates to our forecast for 7 per cent to 8 per cent mass market gross gaming revenue growth in 2016,” Mr.
Govertsten added.
The Union Gaming analyst also indicated that he estimates combined mass market and slots gross gaming revenue eclipsed VIP gross gaming revenue for the third consecutive quarter and looks for this trend to continue for the foreseeable future with a current forecast for mass / slots to capture 57 per cent of the gross gaming revenue pie in 2016.
Mr. Govertsten also pointed out that baccarat “only” accounted for 88 per cent of total gross gaming revenue in the first quarter, representing the fourth consecutive quarter at this level. Prior to this, baccarat accounted for 91 per cent or 92 per cent from 2010 onwards. “This suggests to us a slightly more diverse customer base,” said the analyst.
Reliance
Revenues from casinos have been falling since mid-2014 and, being the main industry of the Special Administrative Region, have fueled the fall of Gross Domestic Product (GDP).
In 2015, Macau’s GDP fell 20.3 per cent, in what was the first annual contraction of the economy since 1999 when the administration of the territory was transferred from Portugal to China.
The forecasts of the International Monetary Fund (IMF) released last week point demonstrate a further decline of Macau’s GDP this year of about 7.2 per cent. However, the IMF forecast for the region’s economy predicts a return to growth in 2017.
The drop in gaming revenue has been linked to the anti-corruption campaign launched by Beijing, which seems to have removed the high rollers from Macau casinos, the only region in China where gambling is legal.
The authorities in Macau and Mainland China have advocated the diversification of the regional economy to make it less dependent upon the industry and, within this, less dependent upon high rollers.