Resurgence in Macao’s casino revenue growth may occur with the opening, in rapid succession, of eight mega projects, starting in the middle of 2015. The long-held thesis that growth is constrained by the supply of hotel rooms will again be put to the test
Macau Gaming Index, a barometer of the sector published by Bloomberg Intelligence (BI), fell from the one-year high of 772.78 last March to a low of 387 on Jan 21.
The decelerating economy on the Chinese mainland is not favorable for the gaming industry and the political atmosphere, amid a crackdown on corruption, is also having a choke effect, especially for high rollers, said a Barclays report published in January.
Mainland gross domestic product (GDP) grew only 7.4 percent in 2014, and the World Bank estimates GDP growth this year to further slide to 7.1 percent. Given the historical correlation between Macao GGR and key mainland macro indicators, the continued weakness in the mainland macro economy will lead to less chance of strong recovery in player sentiment, the bank said.
The anti-corruption campaign, targeting extravagant lifestyles of bureaucrats, has been in place for more than 18 months, since being announced in mid-2013. The environment could continue to cause certain VIP players, and some premium mass-market players, to be more cautious about going to Macao, the bank pointed out.
“We believe these sensitive players might only come back if the anti-corruption drive eases. For now, however, there is no clear sign when the campaign will wind down.”
Separately, the mass market has also been hit by the changing of rules. Last July, a new restriction cut the maximum stay for mainland visitors on a transit visa from a week to five days. And for those not going to really transit to another destination, only a single day of stay would be granted upon a second entry within two months, and entry denied outright the third time.
The rules affect frequent visitors who are average players, and the number of arrivals excluding group tour visitors is declining.
What’s more, a smoking ban on mass-market floors was implemented on Oct 6. Following that, mass-table revenues turned to negative growth in October for the first time in five years and declined for three months in a row. “The smoking ban negatively impacts players’ length of play and size of bet,” the Barclays report said.
However, the pain will likely not ease in the short term. At the end of December, as the former Portuguese colony celebrated its 15th anniversary of handover, President Xi Jinping called on the government of the SAR to show “greater courage and wisdom” to “strengthen and improve regulation and supervision of the gaming industry”.