Analysts in the gaming are placing wagers that the turnover from VIPs as a percentage of the GGR (overall gross gaming revenue) for Macau may likely fall next year. This is the third successive year revenues would fall, in addition, they added that the profile of the mass market in Macau will remain strong.
Last year, revenue from these VIP players made up for 55 per cent of the GGR in Macau’. Analysts from Nomura expect this number to fall to 46 per cent in 2019 before it would fall to 42 per cent in 2020. Among the 6 concessionaires from Macau, Wynn Resorts Ltd, and Galaxy Entertainment.
According to the analysts from Nomura:
“The two companies have been underscoring their deliberate shift to VIP mass, which should continue.”
The experts note the move to premium mass gaming is driven by changes in the tastes of gamblers. In addition to increased inspection by Beijing regarding financial transactions carried out by high-end players. The People’s Bank of China (PBOC) – which is the nation’s central bank – in recent times increased the daily transfer limit to the mainland bank from Macau to $11,400 from the previous $7,140.
Mass Market Winner
According to Casino, the details we’re getting from analysts in the industry is that the operators in Macau are likely to see a rebound in earnings in the first six months of next year. This means that the forecasts may likely be exceeded, assuming the economy of China can post growth of 6 percent and above.
Analysts are putting their hopes on the second-half theory because of the fact that Beijing will ease visa controls this month. These controls limit the number of visits to the gaming city, in addition to expectations that 2020 is an election year in the United States, trade tension between the two largest economies in the world will cool off.
Assuming the mass and premium mass demographics of Macau perform up to or exceeds expectations in 2020, Las Vegas Sands will come out the winner in a situation like this. The operator of 5 casinos in the region, Sands, as the leading mass-market provider, is more protected from VIP volatility than rivals such as Wynn and Galaxy.
Approximately 90% of LVS’ earnings in the region are gotten from mass and premium mass players and non-gaming sources.
More Supply Needed
As it’s been noted, lack of room supply is a problem for Macau operators, especially when it comes to getting the significant chunk of the mass market. Analysts from Macquarie believe mass market earnings needs to increase by a mid-teens percentage in 2019 to reinforce the notion that the demographic is not very cyclical, a feat that could be hard until new rooms come onboard.
This could be hard next year together with limited net new hotel supply, but we believe openings at the end of 2020 and at the start of 2021 could be the catalyst,” said the analysts.
LVS’ Londoner Macao is likely to open in the middle of 2020, bringing new rooms to the industry, and that venue is scheduled to add suites before the year comes to an end.