Macau casinos are facing a bleak lunar new year celebration, with analysts projecting February’s revenue could fall as much as 40% year-on-year. The comparison was always going to be difficult, given February 2014’s record MOP 38b (US $4.75b) haul, but the new year of the sheep appears to be entering this world already shorn.
Annual comparisons are doubly tricky given the lunar new year’s habit of spanning the January-February period, so most analysts opt to lump the two months together. UBS analysts believe the combined January-February period will fall between 27% and 32% this year.
Daiwa Securities analysts suggest the already troubled VIP sector could witness a 50% year-on-year decline in February. Worse, mass market gamblers are finding it increasingly difficult to get to Macau thanks to further transit visa restrictions that kicked in last month. Daiwa reported that eligible travelers were facing up to three-hour waits at Macau’s border gates, only to be denied entry.
Daiwa also reported that Macau casinos had yet to put their dealers on standby notice for mandatory overtime and some large junket operators have reduced their forward hotel bookings by 50%. Bottom line, Daiwa says this lunar new year “will be marked by poor liquidity, a decline in player quality and a drop in frequent customers.” So, er, happy new year?
Wells Fargo analysts believe Macau’s struggles are firmly in line with the aims of China’s President Xi Jinping, who reportedly doesn’t intend to let Macau overheat as it did in 2013, when it posted annual growth of 18.6%. China’s economy is expected to grow by an annual 6% to 7% over the next few years and Macau will apparently only be allowed growth of a few points beyond that range.
Wells Fargo qualified its predictions by saying that, in Macau, “nothing is static and transparency is low.” But the bank has already struck a far more pessimistic tone for 2015’s prospects, projecting negative growth of 12%. Wells Fargo noted that there were more optimistic forecasts out there, but “few point to hard evidence as to why growth will resume.”
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