Macau Travel Numbers Improving this Month, Say Analysts

This could finally be the month Macau visitation numbers and gross gaming revenue (GGR) markedly turn for the better, according to industry analysts. But the world’s largest casino center still faces challenges.

On Thursday, the Macau Gaming Inspection and Coordination Bureau said September GGR slumped 90 percent on a year-over-year basis, extending a string of monthly declines of that amount or more. But the $277 million posted by the six concessionaires was a 66 percent improvement over August.

With the Golden Week holiday starting yesterday, and with mainland China renewing issuance of individual visit scheme (IVS) as of Sept. 23, some analysts are optimistic Macau tourist data will improve noticeably this month.

We expect the visitation to increase over the next several months. Visa processing times in China are being done manually and are often taking over 10 days to complete (and sometimes even longer),” said Bernstein analysts. “Visitation from China should begin to rise by mid-October. But Golden Week is likely to be subdued.”

Any uptick in visits this month to the world’s largest gaming mecca is likely to come without the help of Hong Kong. The special administrative region is still imposing 14-day quarantines on travelers arriving from Macau or mainland China. Hong Kong, which is pushing for a travel bubble with Macau, accounts for 15 percent of annual visits to the casino destination.

Volatile Rebound Factors

Travel figures are just one part of the Macau rebound equation. Analysts and investors are also monitoring the quality of those arrivals, meaning how many of those gamblers classify as VIP or premium mass players.

“While mass visitation and GGR trends have been improving, there isn’t enough mass volume at this point to really matter,” said Stifel analyst Steven Wieczynski in a note. “Nobody knows when the VIP/premium mass trends will reverse course. But until that happens, we expect the market to remain depressed.”

He agrees with the Bernstein assessment that Golden Week is likely to be calm while noting that it could take another two to four months before Macau GGR markedly turns for the better.

“It’s still anybody’s guess as to what the next few months of GGR will look like. While the casinos are operational and visitation is improving, we believe play levels will remain depressed for the foreseeable future,” the Stifel analyst said.

Getting Better, But Room to Improve

The bottom line for Macau’s still-depressed gaming industry is that October should be less bad than the prior six months. Bernstein is forecasting a year-over-year GGR decline of 70 percent, which is dreadful, but significantly less than the drops in the second and third quarters.

For investors looking for action on the region’s recovery, Wieczynski recommends Las Vegas Sands (NYSE:LVS), the largest Macau operator, and one that’s more levered to mass market than VIP trends.

“We believe LVS’ unrivaled scale and investments for the future position its Macau business to remain a leader in the world’s premiere gaming market for the foreseeable future,” said the analyst. “Additionally, the company’s impeccable balance sheet not only adds a level of safety and security to the story but also favorably positions the company to successfully pursue any global integrated resort development opportunities of size that come along in the future, in our view.”