Macau Casinos Expect Lower Revenues during Golden Week 2018
Macau casino operators are concerned that this year’s Golden Week public holiday could produce disappointing attendance and revenue figures. The 7-day holiday typically leads to a spike in Macau’s casino revenues for October.
Golden Week is a celebration of the establishment of the modern state of China. Celebrations run for a full week, beginning the Monday nearest October 1 and running through the next Sunday.
Mainland tourists visit the former Portuguese colony, which had become China’s casino destination spot since gambling was opened to international operators in 2002. Macau is the world’s leading casino city, surpassing Las Vegas in gaming revenues several times over.
With integrated casinos built by Chinese companies like Galaxy Entertainment and Melco Resorts, along with IRs by American companies like Las Vegas Sands, Wynn Resorts, and MGM Resorts, Chinese mainland tourists flock to Macau to play in its casinos, visit its attractions, and shop in its designer retail outlets.
Sanford C. Bernstein Analysis
Zhen Gong, Vitaly Umansky, and Kelsey Zhu of Hong Kong’s investment research firm, Sanford C. Bernstein Limited, warned that the public holiday could have disappointing revenue figures. The three analysts looked at “remaining room availability” throughout Macau and it showed a surprising number of vacancies.
The analysts said Macau bookings “looked strong going in“, but they now believe casino revenues could mirror 2017’s revenues, which in their diplomatic language had not led to “outsized gross gaming revenues”.
Gong, Umansky, and Zhu wrote that Golden Week “is shaping up to be weaker than initially expected.”
JP Morgan Securities Asia Pacific Report
The three men found that only 17 of the 27 hotels it surveyed were fully booked for the 6 days considered pivotal for the holidays. Sanford C. Bernstein Limited thus predicted no more than a 6% rise year-on-year for October 2018’s aggregated gross gaming revenues.
Analysts for JP Morgan Securities Asia Pacific Limited predicted similar numbers recently. Sean Zhuang and DS Kim, JP Morgan Securities Asia analysts, expect to see a 5% year-on-year growth for October 2018, which they see as minimal growth for the sector. D.S. Kim wrote in a report on Monday, said the disruptions were temporary and should not be a cause for long term concerns.
Kim’s report for JP Morgan Securities said, “The Typhoon Mangkhut and casino suspension were the obvious drag, but underlying demand in VIP was softer than expected as well. Though not a big surprise, this does suggest the market will need to lower VIP expectations for the fourth quarter and next year.”
Gaming Inspection and Coordination Bureau Data
Despite Kim’s pronounced, the September numbers caused downward press on Macau casino stocks on the Hong Kong Stock Exchange. In September 2018, the year-on-year growth for the month was only 2.88%. Macau’s gaming regulator, the Gaming Inspection and Coordination Bureau, reported a 2.88% growth from 2017.
Casino executives, along with the financial analysts who cover the gaming sector, say that lower numbers were expected, because Macau had shown tremendous growth throughout 2017. In such circumstances, lower growth can be expected, because the previous year’s benchmark was higher than usual. September 2017 saw Macau recovering from Typhoon Hato, so numbers were down more than one would have expected. 2.88% growth from a troubled month therefore is alarming.
As DS Kim suggested, Typhoon Mangkhut was the main culprit in September 2018. Bloomberg News calmed fears of a wider sale-off, but did note that Macau had it weakest revenue figures in over two years.
The news led to a selloff of Macau casino company stocks in mid-September. Analysts said Typhoon Mangkhut caused the closure of Macau casinos throughout an entire weekend, which is the time of the week casinos make most of their revenue. The slowdown in the Chinese economy also is considered a factor.