Macau casino revenue rebound expected in 2020

By Charlotte Lee Updated
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2020 is expected to be a better year for the six licensed casino operators in Macau, according to gaming industry analysts.

Gross Gaming Revenue (GGR) for the world’s richest gambling hub stands at $30.56 billion from January through October 2019, which represents a 1.8% decline compared to the same 10 months in 2018.

Analyst Colin Mansfield of Fitch Ratings believes next year will be more prosperous. Speaking with CNBC’s Squawk Box, Mansfield provided a forecast of single-digit GGR growth for Macau in 2020.

“We basically expect the VIP business to remain flat from where we are today. But we really see the mass market more of the longer-term positive that’s impacted from things like growing wealth creation in China and infrastructure improvement in the Greater Bay Area,” Mansfield explained.

He added that the mass market sector is less affected by issues that hinder VIP play, such as the ongoing trade unease between the US and China.

China’s economic growth is at its slowest in 28 years, which has led to a weaker yuan where trade talks with the US add further uncertainty in the People’s Republic.

The financial unrest is also convincing some VIPs to stay away from Macau’s private high-stakes gaming rooms, however in a positive for Macau gaming, the mass market hasn’t been turned off.

Macau is on pace to welcome a record number of visitors this year, with the Government Tourism Office saying that the number of travelers venturing to the Special Administrative Region is up 17% through September to 30.2 million people.

Mansfield says that visitor volume and GGR don’t go hand-in-hand, which was made evident by the surge in travel but decline in casino wins and that could change in the months and years ahead, as Macau becomes more accessible.

“As you get better connectivity … it gets a little bit easier as you move across the border. Things like that will play out positively for the mass market over the long term,” the Fitch gaming industry analyst concluded.

Win projection similar across different financial services firms

Fitch’s single-digit casino win projection for next year is similar with other financial services firms where JP Morgan, Sanford Bernstein and Bloomberg gaming industry analysts all believing that GGR will slide in November and December to cap off a difficult 2019. However, that will make for an easier comparison in 2020.

“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 alleviation of 2019 headwinds,” JP Morgan said in its industry note.

Macau’s GGR record figure came in 2013 when its gaming floors won over $45 billion, with the number at $37.85 billion last year and 2019 on pace for around $37 billion.

Presidents Donald Trump and Xi Jinping are reported to be considering Macau for their next face-to-face regarding their trade war discussions.

Macau casinos won $3.3 billion from gamblers in October, according to numbers released by Macau’s Gaming Inspection and Coordination Bureau.

The figure represents a 3.2% decrease from October 2018 but is up 19% from September’s 12-month low of $2.7 billion in revenue. Of the 10 completed months in 2019, six have seen decreases in year-over-year gaming revenue compared to just four with an increase.

Despite the decrease in revenue for the region this year, most casino operators reported profit gains at the conclusion of the third quarter. Melco Resorts & Entertainment, a gaming organisation with properties almost exclusively in Macau, set records for its mass market gaming operations during the quarter.

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