Gaming | Poor Golden Week show may weigh on October revenue

A slowdown in the VIP segment in the past week may weigh on October gross gaming revenue, according to preliminary industry estimates. Analysts say that gross gaming revenue over the seven-day Golden Week dipped 1% in year-on-year terms, setting up October to become the seventh red month of 2019.

Macau gross gaming revenue touched the lowest level in a year in September, falling just short of 22.08 billion patacas. The month rounded out the first three quarters of the year with a 4.1% contraction over the equivalent period in 2018. At the current growth rate, 2019 is on track to be the first year of negative growth since the anti-graft recession drew to a close in 2016.

However, the mild September contraction was roughly in line with analyst predictions and follows a pattern in previous years of the month serving as a quieter prelude to busy October. Due to a weak comparison base a year earlier when typhoon Mangkhut struck Macau and forced a 33-hour shutdown of the gambling sector, September 2019 was in fact up 0.6% in year-on-year terms.

According to estimates from Sanford C. Bernstein seen by financial analysis website Seeking Alpha, a higher mix of mass-market players and non-gamblers have accounted for most of the visitor growth this year.

The VIP slowdown is representative of broader market trends in Macau as the local government works to shift the focus to mass market and non-gaming amenities, and reduce the city’s dependency on high-roller activity.

In the first six months of 2019, the mass market overtook VIP as the bigger share, rising to about 52% of total gross gaming revenue. But even as its dominance wanes, the volatile VIP segment still wields significant influence on monthly gross gaming revenue.

A double-digit increase in the number of visitors to the SAR this year has failed to translate into both gaming revenue growth and non-gaming visitor spending, leading some observers to remark that the city needs to refine the quality of its visitors.

After a more than 20% rise in the first six months of 2019, visitor growth has showed signs of slowing in the second half of the year. Macau received about 10% more visitors this year during the seven days of Golden Week, according to preliminary data released yesterday by the police authority.

Research group Daiwa said that the growth in tourist arrivals from the mainland this year was disappointing. It predicts Macau gross gaming revenue to fall 3% in October to MOP26.5 billion.

Analysts at JP Morgan Securities (Asia Pacific) suggested last week that October revenue would fall 3%, followed by declines of between 6% and 8% in both November and December. That would imply fourth quarter gross gaming revenue to contract by about 6% year-on-year.

On a brighter note, the analysts at the division wrote “there’s a good possibility that 2019 marks a cyclical bottom [for Macau’s casino sector], and that demand can rebound into 2020 on easy [comparisons], better liquidity in China, and [the] alleviation of 2019 headwinds.”