Inside Asian Gaming

JANUARY 2018 INSIDE ASIAN GAMING 23 “Macau VIP surprised just about everyone in 2017 by not only maintaining positive growth but in fact surging as the year progressed – a fact that completely changes the outlook for the VIP segment in 2018.” “This is very important in the context of what we see as a sustainable mass market led recovery. While we are very happy to finally see VIP turn positive we remain cautious on the outlook for this segment, which is driven by increasing concerns on Beijing’s stance on capital flight.” Govertsen has argued that a recent reclassification of gaming tables in Macau has skewed government data towards VIP, so while VIP in 4Q16 officially grew 12.7% and mass market 8%, those figures were, he said, essentially “backwards.” He wasn’t alone in exercising caution over the segment either, with analysts from brokerage Sanford C Bernstein stating in February that they were “becoming more concerned about China government actions to stem capital outflows.” “If such actions target Macau, the headwinds could be material,” they added. Instead, Macau VIP surprised just about everyone in 2017 by not only maintaining positive growth but in fact surging as the year progressed – a fact that completely changes the outlook for the VIP segment in 2018. Despite earlier concerns over VIP due to its renowned volatility, Govertsen believes growth through 2018 is likely to come in at around 20% growth even taking into account a likely slowdown towards the back end of the year. “We would expect to see VIP growth maintain around the 30%- plus level for 4Q17 and into 1H18,” he told Inside Asian Gaming . “As comps get tougher in 2H18 we look for the year-on-year growth rate in VIP GGR to moderate … ultimately we expect the full- year to see approximately 20% growth in VIP GGR.” According to Govertsen, there are a myriad of factors favoring VIP at the moment, including “more and more high-end customers returning to the market” and the fact that Macau’s junkets are “flush with liquidity, which ultimately begets greater VIP volumes. “Effectively, what we’re witnessing is the opposite of the 2014- 2016 downturn that saw a host of negative factors all working in concert in a downward direction.” The VIP resurgence has been reflected by the health of Macau’s junket operators, whose numbers tumbled during the height of the city’s two-year downturn frommore than 213 licensed junket operators IN FOCUS