acau last year posted its first annual decline in gaming revenue, as VIP gamblers avoided the city amid China President Xi Jinping’s anti-graft campaign, and as the country’s economy slowed. The industry may face another 8 percent drop this year, a Bloomberg survey showed, after last year’s 2.6 percent fall.
“The biggest culprit for the weak month was the already-troubled VIP segment,” Grant Govertsen, an analyst at Union Gaming Group, wrote in an e-mail. “While we believe there was a pickup in VIP headcount, gaming volumes just weren’t there.”
VIP customers may have made a conscious decision to stay away from Macau given the potential for increased scrutiny by Chinese authorities during the holiday period, according to Govertsen. Revenue will recover in the second half, he wrote.
Sands China rose 1.7 percent at the close in Hong Kong trading, while Wynn Macau gained 2.4 percent and MGM China Holdings climbed 3.2 percent. Galaxy Entertainment Group added 2 percent, the second-best performer on the city’s Hang Seng Index, which slid 0.7 percent.
The February figures had come in better than estimated as gambling revenue strengthened in the last few days of the month, Phoebe Tse, an analyst at Barclays based in Hong Kong, wrote in a note. Analysts had expected declines of 50 percent to 56.3 percent.
Macau’s casinos raked in an all-time record of 38 billion patacas in February 2014, a year-on-year jump of 40 percent at the time. Last month’s decline brings monthly casino revenue back to levels last seen in early 2011.
“There is a good case for a recovery later in the year” as monetary policy easing spurs the Chinese economy, Tim Craighead, a Bloomberg Intelligence analyst in Hong Kong, said in a telephone interview. “The launch of new resorts that attract mass market gamblers, and easier comparisons” from the year-earlier period would also help, he said.
China cut interest rates on Saturday, as it sought to combat a slowdown in the world’s second-largest economy, ahead of an annual gathering of the legislature this week. The nation’s Communist leadership typically uses the occasion to unveil its goals for the year.
Analysts are looking forward to the opening of new projects on Macau’s Cotai strip later this year by operators such as Galaxy and Melco Crown to boost industry revenue. “On the plus side, all operators maintain a very positive medium term and no drastic action has been taken” such as increased discounting or higher spending on promotions, Aaron Fischer, a Hong Kong-based analyst at CLSA, wrote today.
All casino operators “are very comfortable with capital expenditure plans for new projects” and said they still expect the new resorts to deliver returns on invested capital of well over 20 percent, Fischer wrote in a note to clients.
Melco Crown is touting a Batman ride among other Hollywood-centric features at its Studio City casino resort on Macau’s Cotai strip, while Galaxy’s expansion in the same area will recreate New York’s Broadway theater district. They’re hoping more mass market tourists will be drawn to the city, amid the government’s push for Macau to diversify from gambling.