Galaxy Entertainment Blames Macau VIP Play for Seven Percent Net Revenue Drop in First Six Months of 2019
Posted on: August 14, 2019, 01:00h.
Last updated on: August 13, 2019, 05:05h.
Galaxy Entertainment, one of six casino license holders in Macau, says slowing VIP play in the world’s richest casino hub is responsible for the company’s net revenue drop of seven percent in the first six months of the year.
The Hong Kong-based casino operator reported that net revenue fell seven percent January through June 2019, compared to the same six-month period in 2018. Net revenue totaled HK$26.2 billion ($3.34 billion).
Galaxy said that while the mass market is performing adequately, the VIP segment has proved challenging.
The overall market in Macau remains relatively stable despite a decrease in VIP volumes due to increasing regional competition, ongoing trade tensions, and a slowing Chinese economy. We continue to reallocate our resources to the highest and best use and focus on growing the higher margin mass business,” Galaxy Entertainment Group Chairman Dr. Lui Che Woo said.
As for the second quarter, net revenue was down five percent to $1.68 billion.
Galaxy owns its namesake integrated casino resort on the Cotai Strip, as well as the StarWorld Hotel, located downtown on the Macau Peninsula. The company additionally controls the Broadway Hotel and its entertainment district, and operates the Waldo, President, and Rio casinos in the enclave.
Galaxy, along with the five other Macau casino holders – Sands, MGM, Wynn, Melco, and SJM – is expected to receive a new operating license when its current concession expires in 2022.
Trade, Economy Keeps VIPs Away
The slowing of VIPs in Galaxy’s Macau casinos certainly doesn’t come as a surprise. Lui – the Chinese billionaire estimated to be worth over $12 billion by Forbes – said the introduction of smoking lounges in high roller rooms, the slowing national economy, and increased competition are all culprits.
It could be worse, the billionaire said. The Galaxy chairman revealed that strong play in the mass market and a bit of “good luck” in the house’s favor on the tables cut losses.
Galaxy’s financial statement reveals that total VIP gross gaming revenue (GGR) was down 25 percent in the first half to $1.89 billion. However, some of those losses were offset by general public play, which saw casino win increase eight percent to $1.86 billion.
Tariff Delay Surges Markets
The seemingly unending trade war between the United States and China is creating economic unease not only across Macau, but countries around the globe.
The trade standoff between President Donald Trump and China President Xi Jinping is partially responsible for the VIP slowdown in Macau. As a result, high roller win dropped more than 20 percent last month across all six operators, with total mass and VIP GGR coming in $3.03 billion, a 3.5 percent decline.
Macau received some good news on Tuesday after the Trump administration announced a delay in imposing an additional 10 percent tariff on $300 billion worth of Chinese imports. The new date for such implementation is being pushed back from September 1 to December 15.
The tariff delay sent stock markets surging. In the US, the Dow climbed 1.44 percent, and NASDAQ 1.95 percent. In China, markets had already closed for the day, but are expected to rebound today.
Lui concluded, “In the longer term, Macau’s VIP business will remain competitive.”
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