Macau Experiences New Growth Pains at the End of a Two Year+ Streak

Published March 8, 2019 by Lee R

Macau Experiences New Growth Pains at the End of a Two Year+ Streak

Macau often slows at this point in the year, but new factors are driving the drops this year.

Macau gambling revenues have dropped, for the first time in two years.

End of the Streak

The Chinese island territory saw gambling revenue drop 5 percent in January, with the waning of the appetite for gambling and slowed economic growth as result of the US trade war blamed for the first drop in more than two years.

Totals

The totals for the month came in at 24.9 billion patacas ($3 billion) revenue, versus 26.3 billion patacas for the same period a year ago, according to Macau’s Gaming Inspection and Coordination.

Factors

Other local factors include a smoking ban that came into effect on Jan. 1 along with “muted sentiment” among VIP players ahead of Chinese New Year holidays in February. Analysts had predicted a 12 percent drop in growth.

Heavy Economic Reliance

Located on China's Southern coast, Macau is well known as the country’s only legal casino hub. Casino taxes accounted for over 80 percent of the jurisdiction's revenue.

The Streak

The last decline in GGR dates back to July of 2016, snapping a 29-month streak of year-on-year GGR growth. Last month in December, GGR had risen a very robust 16.6%, with total GGR for 2018 reaching $37.57 billion, a healthy 14% higher than 2017.

Analysts Predictions

Most analysts still have things turning around, but Macau might have to wait all the way until the second half of 2019 to see the growth, when single digit GGR growth is prognosticated to return.

What happened to VIPs?

The VIP sector has showing flat or receding growth the entire second half of 2018. The drop in demand for VIP junkets and the rise in online sales are conflicting against growth.

Private Operator Struggles

Private operators are slipping in Macau as well. Wynn resorts revealed Q4 profits to be 3.1% down year-on-year, with net income at $814.8 million, 8.4% lower than 2018 with the $584.2 million attributable to the operator representing a 21.8% drop.

More Private Drops

Analysts are predicting the premium segment in Macau which includes Wynn resorts will fall another 10-15% in 2019.

Outlook

With drops visible and predicted in Macau, the strength of their casino offerings may have to carry the jurisdiction while things balance out, and more promotion of online offerings will likely surface at some point in the balancing period.

See also

Macau Casino Revenues Freefall on Chinese New Year

Skrill Attributes Growth to Online Casinos

Jackpot Party Launches Two New Slots

Welcome New Year with an Online Casino Bonus

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