More Moderate Growth

Alice Kok
圖 PHOTOs eduardo martins
Revenues from the gaming industry are on the upward trend again
Revenues from the gaming industry are on the upward trend again, but analysts believe the historical figures prior to 2014 are unlikely to repeat themselves
 
 
The gaming market seems to be on an upward trend again. Some even say the historical levels before 2014 could return in a couple of year’s time, once Cotai is at full speed. Yet, the analysts contacted by CLOSER are cautious in their projections, believing in a mass market driven growth, and uncertain of the measures the Central Government will continue to issue.
 
Macau struggled for more than two years, since mid-2014, with gaming revenue growth decreasing on a monthly basis, as China’s economy slowed and the anti-corruption crackdown led high-rollers to avoid this gaming hub. By mid last year however, revenues were picking up, showing some signs of recovery. 
 
Bloomberg’s Asia gaming analyst, Margaret Huang, believes “it will be difficult for Macau to return to the historic 2013 revenue peak, as it was driven predominantly by the market’s reliance on the VIP segment”.  Still, with new resorts now targeting mass or premium mass clientele, it is “more likely that profit will recover faster given the segment’s higher profitability.”
 
Once Cotai is finished, Ms Huang says “it will be critical” for all operators to work together to grow the market. Yet, whether each company can manage its business amid more competition will all depend “on the business mix (VIP versus mass)” and operating efficiency. “We believe the more successful operator will likely be the one that has a product to cater to the full range of clientele.”
 
In the meantime, the VIP market is now picking up after a “prolonged period of contraction,” probably because “wealthy Chinese are coming back to Macau”. Nonetheless, she believes “the segment will certainly grow to a point where it will become steady,” but, until it reaches the stabilized level, “there will be more volatility” in terms of revenue. In addition, “there aren’t as many new drivers for that segment versus mass market,” with the latter sector still being “the predominant driver for a market expansion.”
 
Non-market factors
 
In May 2014, Andrew M. Klebanow, senior partner at Global Market Advisors LLC, was quoted by the media as saying that, “given its current trajectory, Macau’s gaming revenue could reach US$100 billion by 2024”.  Yet, less than one month later, China’s crackdown on corruption began, leading the market to a “sudden and precipitous decline”. Mr Klebanow is now “reluctant” to make “further predictions”. 
 
One thing he has learned: “If Macau’s casino industry was purely market driven, it could certainly return to its pre-2014 rate of growth. The problem is that Macau’s gaming revenue performance is driven in no small part by public policy. China’s Central Government has and will continue to determine the pace of Macau’s growth”.
 
Looking at the market factors and at the current trends, Mr Klebanow says that once Cotai is fully finished, “the market will take some time to fully absorb the room capacity”. Public policy makers will “probably turn their attention to improving connectivity and visitation to and from Hengqin Island”. Ideally, a visitor to Macau or to Hengqin “will be able to cross borders for 24-48 hours without a visa” and that would “significantly boost tourism for both markets”. 
 
As for the future, Mr Klebanow says Macau casinos “have learned important lessons regarding their over-reliance on junket operators,” as the volatility of the VIP market “drove operators to further improve their premium mass marketing programs”. Despite that, “junket operators will continue to play an important role in Macau’s future gaming revenue performance”.
 
Carlos Siu Lam, an associate professor in the Gaming Teaching and Research Centre at the Macau Polytechnic, believes “it appears difficult for the junkets to contribute as much to the gaming revenue as before, with the powerful crackdown on corruption and the tightened regulation and enforcement of the national policies”. 
 
Plus, with the Central Government’s efforts on financial reform, the internationalization of the renminbi and the ongoing reform of state-owned enterprises, “it’s likely that China will become stronger and its citizens be more financially able to afford the gaming and entertainment in Macau.” 
 
As a result, Mr Siu believes “it’s possible that Macau can reach the peak before, if we have greater number of tourists, and/or greater amount of bets with the increased wealth of the mainland Chinese”. The problem behind this equation may be whether “Macau’s infrastructure and facilities are ready to accommodate the increase and facilitate these mainland Chinese for an enjoyable short trip.”
 
 
In Brief
 
More gaming in 2016
The participation rate in gambling among Macau residents reached 51.5 percent in 2016, according to a survey published by the Institute for the Study of Commercial Gaming at University of Macau. It was two percent more than in the previous survey conducted in 2013. The study was commissioned by Macau’s Social Welfare Bureau.
 
MJC moves to Roosevelt
The Gaming Inspection and Coordination Bureau (DICJ) has received a request for the Macau Jockey Club (MJC) casino to move to the new Roosevelt Hotel property, in Taipa. DICJ noted to Business Daily newspaper that it had received the application from gaming concessionaire SJM Holdings and “it is still under processing”.
 
> Gaming in the elections
Cloee Chao, president of the New Macau Gaming Professionals Association, has submitted her nomination list to run in the coming legislative elections. She claims she will strive for a Union Law and for benefits for gaming workers. The group has proposed eight individuals to run in this year’s election, with the order of nominees to be determined at a later stage.