The unsung mecca of Asian gambling, while America has Las Vegas and Europe has Monte Carlo, China has Macau and the Cotai Strip. Stanley Ho’s initial project looks poised to take the crown as the world’s foremost gambling destination in the coming months. After a surprisingly tumultuous last couple of years, Macau is projected to break a casino record with growth in 2019 expected to exceed its previous best of $45 billion. Recent events, however, have called this into question and now look a little less certain- but if the projections hold, the former Portuguese colony could see themselves becoming the market leader very soon!
Macau’s year-on-year growth has been reasonably steady over the last couple of years with notable boosts in certain areas (particularly 2013 which was the islands previous best year), but an increased pressure from President Xi Jinping to tackle corruption lead to a heavy blow to the areas profits around the late 2014-early 2015 mark. Macau suffered three consecutive years of decline in gross gaming revenue (GGR) dropping by 2.6% in 2014, 34.3% in 2015 and 3.3% in 2016. This negative trend was due to pressure on the boat operators who ran junkets to transport VIPs across to Macau in President Jinping’s efforts to stymy corruption. This lead to widescale closures, while there had been 250 junket operators, today that number is just 126- but once the pressure began to ease a little, growth has begun to return to the area with quite impressive results!
In 2017, the total growth for the entirety of Macau was 19% compared to 2016 with multiple consecutive months of growth, 18 months long in fact extending into 2018. This sort of growth dramatically made up for the decline of the last three years as Macau and finished the year with a $33 billion win, soon closing the gap on its previous record of $45 Billion in 2013! This is most likely due to a combination of an ease in President Jiping’s efforts to clampdown on any corruption, which has re-assured the fears of VIPs enough for them to return and bring high roller money to the table. Additionally, China itself saw real estate prices rise which translates to a sense of wealth and accessibility for those with properties. But with 2017 in the rear mirror, projections for 2018 and 2019’s growth began to come in, sources predicting growth for Macau in either the high single digits or middle teens.
Two months in and we have some data to parse through. January achieved the largest year-on-year increase in almost four years with an impressive 36.4% growth. This boded very well for the projections as a median analyst’s forecast predicted only a 27% growth, a significant increase on what was expected. With this in mind, the growth in February seemed significantly lower with the rate being just 5.7% which; while still an improvement, it is a little less impressive and was below the expected growth from the same group of analysts – their median expectation was around 9%. This inconsistency is unexpected as Chinese New Year and the opening of the new MGM casino both occurred in February and would have been expected to promote growth. Nevertheless, the average of the past two months is still a positive trend and implies growth continues apace.
While we’re still in March, the predictions are positive – after revising the figures based upon the performances in January and February, the current expected value is around the mid-teens. Deutsche Bank Securities Inc predicts growth of approximately 17.3%, adding that after the holiday season and the National People’s Congress (first session of China’s legislative body), the full five weekends of March and the VIP Junket Dinners will boost the potential for profits. While it’s early days, the predictions all seem to believe Macau’s looking at a healthy boost in March and for the year ahead.
While the current prediction is that by 2019 Macau will have beaten its previous record of 2014, it’s also projected that the growth will continue! Analysts at Morgan Stanley believe that number could hit $53 billion by 2022, which would be massively exceeding the expected record breaking 2019. While there are a number of factors that could limit this growth such as expiring licenses and an (admittedly unlikely) adjustment to Macau’s relationship with mainland China, it seems likely that Macau will soon be seeing a return to their 2014 might!
