The latest prognosis for Macau casinos is dire in the short term, much more healthy in the long run. Speaking at this week’s Global Gaming Expo (G2E) Asia 2015 press conference at Melco Crown Entertainment’s City of Dreams resort, CLSA analyst Aaron Fischer said he expects Macau’s Q1 gaming revenue will be “among the worst months on record.”
Fischer expects Q1 revenue to fall 29%, with February being particularly grim given comparisons with February 2014, which enjoyed a 40% revenue surge. Fischer expects a further 20% fall in Q2 before things start to pick up in H2 as new properties by Melco Crown and Galaxy Entertainment Group open up. That said, the damage will have already been done, leaving 2015’s annual take down around 9%.
However, Fischer says 2016 will be “a fantastic year” thanks to more new venues opening. Fischer believes 2016 will likely enjoy a 22% year-on-year revenue boost over 2015 but Fischer cautioned that anyone expecting a return to the “glory days” of 40-50% annual growth would be sorely disappointed.
While casino operators will cheer a return to growth, Fischer says the upcoming casino concession renewal process could bring an increase in gaming revenue tax. Macau already has the region’s highest tax rate at 39%, but this may swell to 43%. If there’s any consolation, the first of these concession renewals doesn’t come due until 2020.
Fischer doesn’t expect any problems with the six current concessionaires getting their licenses renewed. Fischer said he’s heard rumors that Macau might issue a seventh concession to Macau Legend, which currently operates under a “service agreement” with concessionaire SJM Holdings, but Fischer nonetheless expects Macau regulators to maintain the status quo.
Fischer also suggested that there was “no chance at all” for any of the new Asian gaming jurisdictions to rival Macau’s market dominance, with the possible exception of Japan. Fischer referred to Japan as the “holy grail of opportunity” for casino operators, although he probably didn’t intend to imply that Japan’s likelihood of passing casino legislation was on par with the Monty Python knights’ chances of ever finding that mythical chalice.
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