Aaron Fischer
Credit Lyonnais Securities Asia’s (CLSA) regional head of consumer and gaming research Aaron Fischer says that 2015 will be another “tough year” for Macau, with the gross gaming revenue (GGR) of the city expected to head further south. However, Fischer predicts that recovery will start in the second half of 2015, following the completion and opening of several casino resort projects, and he believes the figures will turn around in 2016.
Speaking at the Global Gaming Expo 2015 press conference yesterday, held in the City of Dreams resort, Mr Fischer described last year as “the perfect storm” for Macau, with various issues putting pressure on gaming revenue. He believes that the biggest problem in 2014 was the lack of new hotel rooms and gaming tables, resulting in an inability to meet new demand. He also named the anti-corruption campaign in China, the changes in immigration policy, and the slowdown of the Chinese economy as other factors that contributed to last year’s fall in revenue.
Fischer said that they forecasted a weak performance in the gaming section in the first half of this year, with a GGR year-on-year drop of 29 percent in the first quarter and 20 percent in the second quarter. “Unfortunately, we’ve had some very weak revenue data come out over the last six to nine months. We think that’s going to continue for the first six months of this year. In fact, the first quarter will be among the worst months on record…We think February will represent the trough of the bad news because in February 2014, that was the record [high] month and the growth rate was up 40 percent,” he said.
He spoke to the media on the sidelines of the event and predicted that the GGR in 2015 will be down by 9 percent year-on-year. Nevertheless, he believes that this year will be “a tale of two halves,” with the first half’s GGR down by 20 to 30 percent and some recovery in the second half of the year. “One of the main drivers for the improvement in news flow is the opening of new projects. So we have Galaxy opening phase two in the third quarter of this year, and then we have Melco Crown opening the Studio City project. And after that we have the Parisian opened by the Sands, [as well as Wynn’s and MGM’s]… These new projects are going to start accelerating the growth rate in Macau. So the beginning of 2015 will be a bit difficult, second half [of the year] and year 2016 will be a fantastic year,” he said, adding that there will likely be an overall 22 percent GGR growth next year.
Furthermore, the analyst suggested that the increase in hotel rooms is a crucial factor
in driving up Macau’s gaming revenue. He noted that the hotel room occupancy rate is very high, indicating a strong demand, with people who want to spend a night here unable to secure a room.
Nevertheless, he said that “the glory days are over” and people will not see another annual GGR growth rate of up to 40 to 50 percent like in 2010 and 2011, as the base is already very high. “Those days [with] very high growth [rates] are definitely behind us. We will start seeing more normalized growth rates going forward, which would probably average in the next few years somewhere in the teens, between 10 to 15 percent”, he said.
Fischer also claimed that the revenue generated by VIP guests, which has been the major force pushing the city’s gaming revenue upward, has already peaked, and the future of Macau lies in the mass market in casino and non-gaming sectors.
Even though he conceded that the investment return for the new projects in Macau is dropping, he said that it is still three times higher than the global average.
In terms of developing the non-gaming sector in the city, Fischer said that it is a good policy for the government to encourage casino operators to invest in non-gaming items by rewarding them with extra gaming tables if they meet the administration’s demand. “The government doesn’t have to spend money on the [developing the non-gaming sector] themselves. They can ask the casino operators to spend the money on the activities,” he suggested, adding that this strategy works well in other markets such as Singapore. He also predicted that during the renewal of the gaming concession, the government will favor the gaming concessionaires who have put effort into developing non-gaming projects. He thinks that all six licenses will be renewed, although he is not such whether there will be a seventh. “Maybe there could be one license issued to one of the local companies here. There has been talk of Macau Legend getting one of the licenses, but it’s [still just] rumors,” he said. “For the most part, I think it is going to be the status quo, with these six licenses renewed. But there might be changes in terms. Our best guess is the gaming tax increases, from maybe 39 percent up to 43 percent.”
In addition, the consultant said that while there is “no chance at all” for any Asian country to achieve a market size like Macau’s, Fischer thinks that several markets have the potential to be huge, such as Japan. He described the country as “the holy grail of opportunity”, with a possible market size similar to that of Macau.
dicj refutes internet rumors
The Gaming Inspection and Coordination Bureau (DICJ) released a statement rejecting Internet rumors that claimed the government will bar local residents from entering casinos in 2016. The rumors, circulated on Facebook, suggested that Macau residents who want to work in gaming-related fields must first be licensed by the authorities. Gaming industry workers are also prohibited from gambling. In a short statement released yesterday, DICJ denied the rumors and stated that according to a law that came into force in November 2012, people under 21 years of age are forbidden to enter casinos.
new features in g2e 2015
The G2E 2015 exhibition will take place between May 19 and 21 at the Venetian Macau. Josephine Lee, senior vice president of the event’s organizer – Reed Exhibitions Greater China – revealed that this year’s G2E will feature more exhibitors and highlights. Ms Lee said that the number of exhibitors will increase by 15 percent to around 150. The area of the exhibition will also increase by 30 percent. She expected that the number of participants will surge by 20 percent as well, and that more non-local participants will join the exhibition. “For example, we are going to have more participants from Philippines, Vietnam, Russia, Cambodia and India. We estimate that there will be around 10,000 participants,” she said. As for the highlights, Lee said that there will be more non-gaming entertainment equipment and business solution products on display.
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