Gaming | Lui Che-Woo warns against calling a recovery

It’s still too early to say Macau’s USD29 billion casino industry is rebounding, even after August’s bump in revenue halted a two-year decline, said the billionaire chairman of Galaxy Entertainment Group Ltd., the biggest operator there.
Lui Che-Woo wants to see more-sustained growth before deciding the worst is over, and he believes the best strategy for achieving that is to target mainstream gamblers rather than VIPs, he said in an interview. That would dovetail with government efforts to turn the world’s biggest gambling hub into more of a destination for middle-class tourists.
“While Macau’s gambling industry has hit the bottom, it’s still too early to call it a recovery,” Lui, 87, said. “Give me two more years to see. It takes time to gradually attract more mass-market customers.”
Lui is opting to remain cautious even as Sands’s Adelson and MGM Resorts International Chief Executive Officer James Murren both said that a Macau gambling recovery is underway. Galaxy’s shares have risen 12 percent this year, compared with a 13 percent gain in the Bloomberg Intelligence Macau gaming index.
Macau last month reversed a 26-month decline in gaming revenue with a 1.1 percent increase to 18.8 billion patacas ($2.4 billion), according to the Gaming Inspection and Coordination Bureau. The correction came despite China’s economic slowdown and a crackdown on corruption, contributing to a 16 percent drop in revenue from high-end gamblers during the second quarter of the year.
“There have been strong signs that the market has stabilized, especially the mass market,” said Richard Huang, an analyst with Nomura International in Hong Kong. “Yet the real question is how strong the growth will be.”
Those doubts stem partly from the increasing competition. Wynn Macau Ltd.’s $4.2 billion Wynn Palace opened last month, and Sands China’s Parisian will debut next week. MGM China Holdings Ltd. also plans a new resort in Cotai within coming months.
Galaxy wants to boost revenue from recreational gamblers by as much as 20 percent during the next two years, Lui said. The company last month reported profit that beat analysts’ estimates after opening the city’s first new resorts in three years. It plans to build a theme park and an arena to help lure more families.
“In the past, everyone hoped to have more high-end clients,” Lui said. “Now the number of VIP gamblers has dropped. We’ve provided more new facilities to catch the attention of the mass market.”
Lui demurred when asked about the casino operators’ prospects for having their licenses renewed when they start expiring in 2020.
“It is the government that judges whether we are doing a good job, and it will decide how to deal with the licenses during the renewal,” he said. Daniela Wei, Fion Li, Bloomberg

Table allocations drop

Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau of Macau, approved the additional 25 tables for the Parisian in 2017 and another 25 a year later, as well as 1,614 slot machines. The table allocations are much fewer than the 250 each that Galaxy Entertainment Group Ltd. and Melco Crown Entertainment Ltd. received for their new projects last year.
Macau wants to limit growth in the number of new gambling tables to not more than 3 percent per year through 2023, and also plans to raise the contribution of non-gaming revenue to the casino industry to above 9 percent from 6.6 percent in 2014, according to  Lionel Leong, the region’s Secretary of Economy and Finance, earlier this year.
“While the government says the number of new tables is determined on an individual basis by each project’s offerings, we cannot help but think the table grant might be driven more by the timing of opening and the industry’s then operating environment,” said DS Kim, an analyst at JPMorgan Chase & Co. in Hong Kong.