Inside Asian Gaming

INSIDE ASIAN GAMING NOVEMBER 2018 10 No cause for doom and gloom www.asgam.com H AVING enjoyed a 26-month run of consecutive year-on- year growth through October, the writing seems very much on the wall that Macau’s winning streak is on the verge of coming to an end. Although September’s GGR growth of 2.8% over the same period in 2017 was heavily impacted by the effects of Typhoon Mangkhut mid-month – particularly the closure of all Macau casinos for 29 hours at the height of the storm – it is hard to deny that analyst predictions of a slowdown towards the end of the year look like coming true. The reasons are at least twofold, coming on the back of China’s own slowing economy and the added pressures of the US–China trade war, which some predict could hurt Macau either directly or indirectly. But are fears of another dramatic downturn similar to the one that decimated Macau’s gaming revenue between 2014 and 2016 justified? Fragile minds still reel in horror at those memories, when annual GGR plummeted from US$45.3 billion in 2013 to US$28.04 in 2016 with VIP revenue slashed in half. However, despite the impending slowdown, confidence remains high that Asia’s gaming hub is far better positioned to cope with global pressures this time around. For starters, concerns over possible retaliation by China against US casino operators operating in Macau – namely Sands, Wynn and MGM – has been dismissed by most analysts. Jonathan Galligan, the head of Asia Gaming and Conglomerates for CLSA, recently stated at an investors’ forum in Hong Kong that “You would need to see the trade war deteriorate significantly before that would be brought on to the table because I don’t think it’s in the interest of China to do that. “I think, ultimately, the Chinese will take a very rational view on Macau. Negatively putting pressure on certain operators is not how you’re going to achieve that ultimate goal and I think the Chinese will probably rise above the rhetoric of the trade spat to recognize that the current competitive environment in Macau doesn’t need political headwinds that would stifle investment.” Macau is also starting to reap the benefits of the government’s push for diversification, with reliance on the more volatile VIP market declining and mass market revenue increasing. Not withstanding September’s typhoon-related difficulties, August GGR recorded a surprisingly strong 17.1% year-on-year growth to MOP$26.6 billion (US$3.3 billion) of which mass proved to be the driving force. “We continue to believe that mass market remains the strongest segment, likely at or north of a 20% growth rate, with VIP remaining in the mid-teens,” said Union Gaming’s Grant Govertsen at the time. The same trend was reflected through 3Q18 as a whole, with figures released by Macau’s Gaming Inspection and Coordination Bureau in late October showing mass baccarat growing 21.5% year- on-year to MOP$25.4 billion. While VIP baccarat still enjoyed a larger share of the pie at MOP$40.1 billion, that figure represented growth of just 3.6% on 3Q17. It is undeniably cause for optimism, with the coming slowdown tipped to be more about market stabilization than any return to the gloomy days of the recent past. If so, that’s great news for Macau. Ben Blaschke Managing Editor We crave your feedback. Please email your comments to bb@asgam.com. EDITORIAL