Macau casinos took in MOP24.3 billion (US$3.04 billion) in November, a year-on-year drop of 19.6% against a tough November 2013 comp of +21.3% and the lowest monthly total since September 2012.
The decline marks the sixth straight month that revenue has underperformed 2013, according to data released Monday by the government’s Gaming Inspection and Coordination Bureau.
Combined, the declines have brought year-to-date growth to a level nearly flat with last year at +0.3%.
“November has come in a little below our baseline, and we would expect December to be roughly similar, or a range of MOP24 billion to MOP25billion,” Union Gaming Research Macau said in a client note. “This translates to December y/y of -25% to -28%. On a full-year basis, this puts [revenue] on pace for a decline of 2%.”
The world’s largest casino market has been reeling since the spring from a combination of factors that are severely impacting volumes of play from mainland China, the casinos’ largest source of gaming revenue by far. A widespread crackdown by the central government on corruption and capital flight is wreaking havoc with the market’s dominant VIP and high-limit mass-market sectors. Players also are making fewer trips to the city as a result of stricter enforcement of third-country visa rules. Hong Kong’s pro-democracy protests, now in their second month, are also deterring visits from China.
Slowing economic growth and tighter credit conditions on the mainland are playing a significant role as well. A new report by Reuters says junket operators are having to wait up to one year to recover on markers extended to VIPs. The news agency quotes junket consultant Tony Tong as saying junkets usually collect on credit within 30 days but now are holding an increasing amount of bad debt.
“The business model looks near broken,” said Hong Kong-based Standard Chartered analyst Philip Tulk.
Bloomberg, meanwhile, reports that the gaming slump has begun to take its toll on the larger Macau economy, which shrank 2.1% in the third quarter, the first quarterly contraction since the global financial crisis of 2009.
The revenue outlook heading into 2015 isn’t much brighter.
“Given the timing of Chinese New Year, (February 19 versus January 31 last year), we would expect January to be much like the final months of 2014, or around MOP24 billion to 25billion (down 13% to 17%),” UGRM said.
“We would then expect 100% of the Chinese New Year benefit to hit February 2015, but are still expecting a decline of 20% or more y/y (on an extremely tough +40% comp). Finally, we would expect March to look a lot like January. All in, we would not be surprised to see 1Q15 [revenue] decline in the low 20% range.”
