Macau Gross Gaming Revenue Outlook Is Mixed as Hope Builds for Possible US-China Trade Agreement

Posted on: June 19, 2019, 07:37h. 

Last updated on: June 19, 2019, 07:37h.

There is cautious optimism from some analysts who follow gross gaming revenue (GGR) in Macau despite recent less-than-enthusiastic data projections.

George Washington University Professor Larry Yu is somewhat optimistic about Macau gross gaming revenue. (Image: YouTube)

This month, the Sanford C. Bernstein & Co. brokerage firm cut predictions for Macau GGR 2019 versus 2018 growth — in June — to between 1 and 3 percent. Earlier, the firm projected a 3 to 5 percent jump during the time frame, according to GGRAsia.

Yet, Larry Yu, a George Washington University business professor, told he is “cautiously optimistic” for Macau GGR growth in 2019.

Tourist Arrivals

“The main reason is the robust tourist arrivals for the first four months [of 2019],” Yu explained. These include: a 24 percent jump in March, followed by a 15.9 percent increase in April, which is equal to about 3.43 million visitors — particularly overnight visitors — that were up by 5.4 percent “as these visitors tend to spend more time in the casinos,” Yu said.

He thinks the data relates most to VIP gambling rather than mass market tourism because “the mass tourist market showed marked increase in the first four months of the year.

“So, clearly the high-impact VIP market affected the slower GGR growth,” Yu added. “This could be also affected by intense competitions in the region for the VIP market, such as Singapore.”

Also, Macau GGR for the first five months of 2019 was about MOP125.69 billion (US $15.6 billion), a year-on-year contraction of 1.6 percent, Sanford Bernstein said.

The firm’s note additionally repeated warnings the United States-China trade tensions may impact Macau’s GGR. “Weaker-than-expected macro data for May, along with the recent heightened tension in U.S.-China trade relations … casts uncertainty over the GGR recovery,” the firm said.

“If a trade war sustains over an extended period, it will likely pose a headwind to China’s economy and gaming spend from China’s high-net-worth individuals in Macau,” the firm further predicted in the note.

But Larry Yu does not think “the trade tension has any significant effect on GGR performance in Macau.”

“I haven’t seen any data or reports on declining US outboard tourists to China or Asia,” Yu said. “The total US visitors to Macau was reported at 201,810 in 2018.  However, the trade tension may affect the Chinese consumers’ mindset and [whether] they decide to visit Macau for gaming and leisure activities which benefit Macau GGR, which is good for Macau. In fact, Macau already witnessed 13.5 percent … [ascension] of visitors from China this year.”

Yu said the surge of visitors from China and Hong Kong — which went up 30 percent — could be also attributed to the long bridge linking Macau, Hong Kong and China.

Beyond the bridge, growth of consuming class in China and opening new casino resorts may lead to long-term growth in mass-markets, Sanford Bernstein predicts.

Macau casinos recently recorded their largest month-to-month GGR decline in nearly three years. April win plummeted 8.3 percent, the biggest percentage drop since June 2016.

The six licensed casino operators reported casino win of MOP23.59 billion ($2.92 billion). That’s more than a quarter of a billion dollars fewer than the gaming venues took in during March.

In April, Fitch Ratings analysts predicted Macau casinos will report flat GGR or single-digit growth in 2019.

Trade Agreement Talks at G-20

Macau gaming may benefit given there is hope that progress can be made on a US-China trade agreement during next week’s G-20 meeting. Chinese President Xi Jinping said he will be open to discuss trade issues with President Donald Trump at the meeting. And Trump plans to have an extended meeting with Xi during the economic conference.

Economist Elliott Morss further told that, “Both Trump and Xi know that an extended trade war would be bad for both countries. So, they are working together to ensure that both will be able to claim a victory from a soon to be reached settlement.”