Macau casinos’ VIP and mass market gambling revenue fell at a slower rate in the first quarter of 2016, but analysts believe the market’s fundamentals are “merely less bad” rather than getting better.
On Friday, Macau’s Gaming Inspection and Coordination Bureau (DICJ) released figures covering the first three months of 2016, which showed overall casino gaming revenue of MOP 56.2b (US $7b), down 13.3% from the same period last year.
The troubled VIP gaming market continued to slide, falling 19.3% year-on-year to MOP 30.4b, which sounds terrible until you realize that Q1 2015’s VIP decline was down over 42% from Q1 2014.
Mass market gaming revenue totaled MOP 25.8b, a decline of 4.8% from the same period last year, which also represents an improvement given the 27% year-on-year decline reported in Q1 2015.
As a percentage of total revenue, VIP gaming accounted for 54.1% of the overall pie, down from 58.2% in Q1 2015, and in line with the percentage recorded in Q4 2015.
Mass market baccarat accounted for 33.8% of the total, giving live dealer baccarat a nearly 88% share of Macau’s overall gaming revenue in Q1. Believe it or not, that represents a decline from the lower-90s range that baccarat used to claim before Macau’s 22-month-long revenue decline commenced in earnest.
Just as they observed with the Q4 numbers, analysts suggested that mass market revenue might have increased during Q1 were it not for many casinos having reclassified some of their premium mass tables as VIP tables to circumvent Macau’s new main floor smoking ban.
As for Macau’s also-rans, slots revenue fell 1.7% year-on-year to just under MOP 2.9b, while live multi-game baccarat stations nudged up 1.9% to MOP 547m. Macau Slot’s sports lottery generated MOP 1.35b in football wagers and a further MOP 800m from basketball, while greyhound and horseracing added just under MOP 300m.
SUPPLY TO EXCEED DEMAND AT PRECISELY THE WRONG TIME
While many Macau casino operators have used recent earnings reports to express cautious optimism regarding a potential rebound in the market’s fortunes, analysts have expressed unease about supply exceeding demand as three new resorts prepare to open over the next 12 months.
Those three resorts – Las Vegas Sands’ Parisian Macao, MGM Resorts’ MGM Cotai and Wynn Resorts’ Wynn Palace – are each expected to be allocated 250 new gaming tables, similar to what Melco Crown Entertainment’s Studio City and Galaxy Entertainment Group’s Phase 2 of Galaxy Macau were allocated when they opened last year. Those 750 extra tables will represent a 12% rise over the roughly 6,100 tables in action at the end of Q1.
Macau’s shift to a greater emphasis on mass market gaming would be more welcome were it not for the fact that visitor rates slipped 1% in the first two months of 2016, and a Q4 study showed visitors were spending less on gambling during their stay.
On Wednesday, Deutsche Bank analysts issued a note saying that Macau’s fundamentals “are merely less bad, but haven’t truly improved ahead of a mid-teens supply growth over the next two years and negative visitor volume trends.”
The day before, Fitch Ratings issued its own bearish note, saying that if visitation rates were actually growing, “we believe more optimistic mass forecasts could be rationalised, but relying on sharp accelerations in spend per visitor or a dramatic change in visitor volume seems challenging at this stage,”
