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Macau gambling revenue breaks two-year downward trend with one percent August rise

September 1, 2016 | By Reuters
Casinos are seen in a general view of Macau

HONG KONG (Reuters) – Macau, the world’s biggest casino hub, posted a 1.1 percent rise in gambling revenue in August, the first positive monthly year-over-year growth in more than two years, after the opening of Wynn Macau’s $4 billion resort in the southern Chinese territory.

August marks the first upward tick for the former Portuguese colony since May 2014, after monthly revenues plummeted to five-year lows due to slowing economic growth in the world’s second largest economy. A major anti-graft campaign also kept the very rich from openly flaunting their wealth.

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Macau, the only place in China where casino gambling is legal, is set for another multi billion casino resort this month with U.S. billionaire Sheldon Adelson’s Sands China $3 billion Parisian resort. Improving visitation over the summer helped bolster the mass market segment, which has become a key focus after a dearth of VIP gamblers on Macau’s plentiful baccarat tables.

Gambling revenue was 18.8 billion patacas ($2.4 billion), government data showed on Thursday, at the top end of analysts’ expectations that varied from a drop of 3 percent to a 1 percent growth.

A swift rebound is unlikely, say analysts, who caution the new properties, which include a scale version of the Eiffel tower and an aerial gondola ride, will be impacted by slow market growth and infrastructure bottle necks.

“We believe it is much more difficult to ramp up a new property in a low growth environment, based on Studio City’s and Galaxy Macau Phase 2’s performances,” said Praveen Choudhary, analyst at Morgan Stanley in Hong Kong, citing the examples of last year’s openings from Melco Crown and Galaxy Entertainment, both of which failed to boost the overall market.

Government data this month showed Macau’s gross domestic product dropped 7.1 percent on-year in the second quarter, compared to a 13.3 percent drop in the first. The territory is heavily reliant on casinos with gaming revenues contributing to over 80 percent of government revenues.

The new projects have a specific mandate to diversify away from gaming, like in Las Vegas where dining, shows and entertainment have become the main growth pillars. However up until now Macau has not been able to make a significant shift away from gaming.

(Reporting by Farah Master; Editing by Muralikumar Anantharaman & Shri Navaratnam)

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