Given that the gambling scene in Macau has not been as strong as anticipated, gross gaming revenue (GGR) on the year has suffered. There have been a few bright spots, but, generally speaking, not enough positive flow has come in to keep the numbers attractive. Because of the flatlined gaming market and no visible upside for the last quarter of the year, analysts have been forced to revise their forecasts for the last three months downward anywhere from 3-9%.
Analysts with the Nomura brokerage point out that the gaming market has been “more challenged than expected. They predict GGR for the fourth quarter will see a year-on-year drop of 8%, which is 300 basis points below the -5% market consensus. The analysts predict GGR in the VIP segment will decline 26% year-on-year, compared to a -22% consensus, while GGR in mass gaming will climb 14%. The latter is an improvement over the consensus of 12% growth.
Nomura analysts Harry Curtis, Daniel Adam and Brian Dobson believe that part of the drop could be attributed to the Chinese New Year celebration next year. In 2019, it fell in February; however, it will be at the end of January next year. As a result, many of those who would have otherwise traveled to Macau next month will wait to travel in January to participate in the festivities.
The Sanford Bernstein brokerage has chimed in, as well, asserting that the fourth quarter will see GGR of -7 overall, with a 26% drop in the VIP segment and a 9% gain in the mass gaming segment. The analysts, Vitaly Umansky, Eunice Lee and Kelsey Zhu, stated, “Assuming our estimate holds, full-year 2019 will see GGR -3 percent (VIP -19 percent and mass +11 percent), adding, “Operators remain cautious about recovery prospects for Macau gaming in the fourth quarter, but are optimistic that VIP deceleration is stabilising and (close to) hitting a bottom.”
One other issue that could impact gaming numbers for the quarter is a planned visit by China’s president, Xi Jinping, to Macau next month. That visit is to commemorate the turnover of Macau from Portugal to China and there is a belief that his visit could result in extremely tight security across the city, making it difficult to move freely between venues. There has yet to be an official statement released about whether or not he will definitely be visiting Macau.
Adding to the city’s woes are the protests taking place in Hong Kong, which recently became a little more intense. This led Bernstein’s analysts to explain, “While events in Hong Kong have not had a material impact on GGR in our view, recent escalation of activities have had a greater impact than in the third quarter.”
There is also the matter of the ongoing trade war between the U.S. and China, which has seen its ups and downs all year. This has had both a direct and an indirect impact on Macau’s gaming scene, as it has forced some Chinese gamblers with U.S. markets to slow down and has also softened the Chinese domestic consumer market.
