A less than 1% increase in Macau’s monthly gaming revenue figure didn’t surprise the investment community.
Typhoons, ongoing protests in Hong Kong against the Chinese government, continued fears over the China-U.S. trade war, and the soft Chinese economy all played a role in driving down Macau’s gaming business in September.
“With so many headwinds facing the Macau market in September, we aren’t surprised the actual Macau gross gaming revenue came in below expectations,” Stifel gaming analyst Steven Wieczynski told investors Tuesday. “We believe (high-end play) sluggishness continues to pressure the overall market.”
Macau’s Gaming Inspection and Coordination Bureau said casinos collected $2.7 billion from gamblers in September, an increase of 0.6% from a year ago. Most analysts expected a 1% percent revenue hike.
However, the increase ended two straight months of declines and marked only the third time in 2019 that Macau reported a positive month. For the first nine months of the year, Macau’s gaming market is down 1.7% and analysts said the region might be challenged to match last year’s $37.6 billion total.
Macau recorded two consecutive years of gaming revenue increases in 2017 and 2018, which followed a prolonged slump of three years.
“October forecasts have already been tempered, with the Street forecasting gross gaming revenue down 1% year-over-year as we compare against a strong Golden Week holiday last year,” Macquarie Securities gaming analyst Edward Engel told investors. “Despite visitation and hotel occupancies expected to be higher this year, operators and junkets have noted lower spend per player expectations.”
Jefferies gaming analyst David Katz noted the market’s “current headwinds” are “hard economics and soft in terms of confidence.” However, he said the year’s last three months could see “a more positive trajectory” through stimulus efforts offered by the Macau government and “resolution to the negative political context.”
Las Vegas Sands, Wynn Resorts and MGM Resorts International all operate casinos in Macau. Sands is spending $2 billion over the next two years on renovating and enhancing its Macau properties, primarily on rebranding the Sands Cotai Central into The Londoner Macau, a $1.35 billion London-themed resort.
Wynn Resorts is also spending $2 billion in Macau to add non-gaming enhancements to a site near the Wynn Palace, including two new hotel towers totaling 1,300 rooms and the Crystal Pavilion complex, which will include an art museum, gardens, an entertainment theater and food and dining venues.
Wieczynski noted the one positive out of September was the increase the casino industry is seeing from the middle income/mass market customer base. The Hong Kong protests may have played a role in driving down high-end play.
#LASTcall – Analysts: Macau casinos may be challenged to match 2018’s revenue total. –@howardstutz, CDC Gaming Reports. https://t.co/9vUpJNPd25 #CDCgaming
— CDC Gaming Reports (@CDCNewswire) October 1, 2019
“We believe the mass market grew in the mid-single digits during the month while (high-end) fell 10% to 15%,” Wieczynski told investors. “What remains encouraging from the mass side of the business is that visitation trends continue to be healthy, even with all the noise around the Hong Kong protests continuing to linger.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
