Feb. decline marks Macau's worst gaming revenue month since 2011

9 March 2015

Maybe February was rock bottom in Macau.

Macau casinos suffered a 49 percent decline in gaming revenue during February — the market’s single-worst monthly decline on record. Despite what is normally a lucrative time period, the annual Chinese New Year, the region reported an overall gaming revenue total of $2.44 billion, a figure not seen since 2011.

“This would seem to be at the high end of the most recent consensus expectations and represented a volatile month that stepped outside of historical trends, which is a likely theme for 2015,” said Union Gaming Group principal Grant Govertsen.

The gaming revenue decline was Macau’s ninth straight monthly drop, and most analysts expect the trend to continue into the summer.

Sterne Agee gaming analyst David Bain tried to put the month into perspective for American investors. MGM Resorts International, Las Vegas Sands Corp. and Wynn Resorts, Limited all operate casinos in Macau and are expanding their holdings.

Bain suggested February would indeed mark the bottom.

“March growth should be less bad than February, and April less bad from March,” he said.

Analysts knew going into the month there were challenges. In February 2014, Macau casinos collected a single-month industry high of $4.8 billion, buoyed by the “Year of the Horse” Chinese New Year celebration.

The 2015 “Year of the Goat,” so far, hasn’t been as bountiful.

Macau has experienced double-digit decreases in each of the past six months. In December, gaming revenue fell 30.4 percent to $2.9 billion, which had been Macau’s largest-ever single month decline. January’s revenue drop was 17.4 percent.

Macau’s casino industry has suffered since June. A crackdown on corruption by the Chinese government has focused on junket operators who bring high-end baccarat gamblers to the casino’s ultraexclusive private gambling rooms. Several operators have been linked to Chinese organized crime triads.

“There were numerous contributing factors, although we believe the biggest culprit for the weak month was the already-troubled VIP segment,” said Govertsen, who is based in Macau. “Ultimately, while we believe there was a pickup in VIP headcount, gaming volumes just weren’t there.”

In 2014, Macau collected $44.1 billion from gamblers, a decline of 2.6 percent over 2013’s record $45.2 billion. The year marked the first time revenue fell on a year-over-year basis since American companies began operating in the Chinese Special Administrative Region in 2003.

Still, Macau far outranks both Nevada and Singapore as the would’s largest gaming revenue-producing market.

The Beijing government of President Xi Jinping wants Macau to diversify its economy beyond gambling. New casinos are required to increase their nongaming amenities, such as retail, dining and entertainment.

Las Vegas Sands and Wynn Resorts rely on Macau for the vast majority of their quarterly earnings. Both companies, as well as MGM Resorts, spun off their Macau holdings into separate publicly traded companies on the Hong Kong Stock Exchange.

The three Nevada gaming companies are moving forward with new developments on Macau’s Cotai Strip region: Las Vegas Sands’ $2.7 billion Parisian, Wynn’s $4 billion Wynn Palace and the $2.9 billion MGM Cotai.

Other Macau casino operators have Cotai projects under development, including Hong Kong-based Galaxy Entertainment’s expansion of the Galaxy resort and Melco’s Studio City complex.

“We continue to believe growth should return to the market in the second half of 2015 as comparisons ease significantly post-May 2014 and as new supply is added,” said Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski.

Macau is the only place in China where casino gambling is legal. China ended billionaire Stanley Ho’s casino monopoly in 2001.

Related Links
MGM Resorts International Ownership Details
Wynn Resorts Ownership Details
Macanese Gambling


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