A top casino exec says Macau’s VIP gambling sector may not be dead forever but signs of a rebound are tough to spot at the moment.
On Wednesday, Las Vegas Sands president Rob Goldstein participated in a Q&A session at the Bank of America Merrill Lynch 2015 Gaming and Lodging Conference in New York. Goldstein said he didn’t have a whole lot of confidence in Macau’s VIP sector rebounding because “the junket model – for now – is broken.”
Goldstein observed that there’d been an “incredible 12-month cycle of pushback” against the Macau casino industry, including the smoking ban, new restrictions on entry visas, a crackdown on money movement and junket operators’ liquidity crunch.
Goldstein acknowledged that “cycles come and cycles go” but said it was “hard for me to see a catalyst to make VIP get strong again.” Goldstein believes Chinese consumer confidence – particularly among those in the upper economic tiers – has been badly shaken by the country’s recent stock market woes, the devaluation of the Chinese renminbi and plummeting real estate values.
Goldstein believes Sands China’s focus on catering to the mass market sector will help shield it from the worst. “We still think our model works today, worked yesterday; it just worked better a year ago … A model built on the very, very high end is more troubling right now.”
Macau’s mass market gaming revenue fell 30.3% in August, while the VIP sector fell 40.4%, although VIP turnover fell 54% and VIP revenue would have been much worse but for a higher than average hold rate. The overall market declined 35.5% in August.
Early indications suggested that September might offer some respite from the relentless cycle of bad news. Sanford C. Bernstein Ltd analysts issued a note on Monday saying average daily revenue at Macau casinos during the first week of September was 14% higher than August’s daily average and was “the most robust week since late May 2015.”
However, the week featured a three-day holiday to commemorate the 70th anniversary of the end of World War II and expectations are that the rest of the month will level off. Deutsche Bank expects gaming revenue to decline 35.2% in September, with the VIP sector to fall 41.8% and mass revenue to shrink 27.2%.