Macau Handover Celebration Prompts Visa Restrictions, Could be Another Drag on VIP Revenue

Ahead of the December celebration commemorating the twentieth anniversary of Macau’s handover from Portugal to China, authorities on the mainland are restricting visas, thereby limiting visits to the gambling hub. That potentially throws another wrench in operators’ efforts to bolster sagging revenue among VIP gamblers.

The observance of the transition to Chinese control from Portuguese oversight does not start until late December. But with an influx of Chinese dignitaries, including politicians, expected to arrive in Macau in the coming weeks, officials on the mainland began implementing tighter visa policies on Nov. 22, sooner than was expected.

Specifically, from our understanding, players coming to Macau through the individual visitor scheme (IVS) or packaged tour visa can come only once during the period (November 22 to December 20),” said Credit Suisse in a recent research note.

The Creidt Suisse analysts believe that the segments that would be most affected by the more stringent visitation policy are high-end gamblers and premium mass players. Those are vital spending demographics to Macau concessionaires, because VIPs and premium mass gamblers account for 70 cents of every $1 in gaming revenue generated on the peninsula.

Bad Timing

News that Beijing is clamping down on visits to the Special Administrative Region (SAR), the only Chinese territory where gambling is permitted, comes against the backdrop of declining fourth-quarter gross gaming revenue (GGR) estimates, which many analysts attribute to lethargy among high end gamblers.

Earlier this week, Nomura Instinet said November will be Macau’s worst GGR month of 2019, forecasting GGR of $2.79 billion to $2.85 billion, which equates to a nine percent year-over-year slide at the midpoint of that range.

Prior to that forecast, Bernstein analysts trimmed fourth-quarter earnings estimates for the six Macau operators. Both research firms cited weakness among VIP players as the primary catalyst for the downward revisions.

Macau GGR “is so far tracking an 8 to 10 percent year-on-year decline for November,” according to Credit Suisse. “That said, we still see low market expectation and undemanding valuation with stable fundamentals as drivers for 2020.”

Xi Visit?

There’s some speculation that the earlier-than-expected implementation of Macau visa controls could be a sign that Chinese President Xi Jinping is planning to visit the SAR for the handover ceremonies.

Earlier this year, it was revealed that government security personnel were evaluating whether or not they could deploy the necessary protocols on Macau to ensure Xi’s safety. Xi did visit the gaming center in 2014 to mark the fifteenth anniversary of the region coming under Chinese control. But some market and political observers have said that unrest in Hong Kong could keep him away from Macau for this year’s festivities.

Near term, we believe the traffic control ahead of the potential President Xi’s visit and the fact that large players who are likely to avoid entering Macau in this sensitive period should hurt the Macau GGR,” according to Credit Suisse.

VIP and premium mass players are most impacted by the visa controls because they visit Macau more frequently than other gamblers.