Macau casinos are enjoying better than expected gaming revenue numbers during the Golden Week holiday period, according to analysts’ reports.
Visitation to Macau during the annual Chinese holiday was doing well until Typhoon Mujigae disrupted travel channels. Despite this setback, Credit Suisse analysts say anecdotal reports put average daily revenue at the casinos between MOP 800m to 900m (US $$100m – $113m), above both Credit Suisse’s forecasts and those of the broader market.
Credit Suisse said inquiries with several junket operators indicated VIP betting volume was up between 60% and 110% from September’s daily average volume. The analysts said this should help refute concerns that junket liquidity would tighten dramatically following the insider theft scandal that rocked the Dore Entertainment Co Ltd junket last month.
Daiwa Securities concurred, saying its reports indicated a “strong” Golden Week performance, with good betting volumes in both the VIP and mass market segments. Well Fargo Securities noted similar average daily revenue numbers, but noted that while these were up significantly from September, they were down one-third from 2014’s holiday figures.
Since Macau’s market peaked in February 2014, VIP gross gaming revenue is off nearly 60% and its share of Macau’s overall revenue has dropped over 15 points to around 55%. But conventional wisdom held that gains in the mass market – which doesn’t rely on junket operators and thus has always offered higher margins for casino operators – would mitigate the precipitous VIP decline.
Not so, according to Deutsche Bank, which said the mass market’s increased share of the overall pie hasn’t led to an improvement in overall margins. For one thing, Macau’s visitor levels have fallen over 3% in the first eight months of 2015. Reduced occupancy rates have put downward pressure on room prices and labor unrest has boosted casino staff wages. And the casinos’ luxury retail shops have a lot fewer VIPs browsing for pricey trinkets, which has pushed down rental revenue.