Macau’s gross gaming revenue is likely to continue to fall this year as the Chinese government continues to stamp out corruption and the effect of tightening regulation begins to manifest itself, says a research report by rating agency Standard & Poor’s.
Standard & Poor’s has lowered its growth forecast for Macau’s gross gaming
revenue in 2015 to a decline of 5% to 10%, compared with its previous expectation of a positive growth of 0% to 5%.
"We believe Macau casinos will experience further short-term pain this year,"
says Standard & Poor’s credit analyst Sophie Lin. "We have lowered our revenue forecast because of the significant impact of China’s anti-corruption campaign and more stringent execution of regulatory controls on gaming activities in Macau than we previously anticipated."
Specifically, Standard & Poor’s expects gross gaming revenue across the sector to drop by 15% to 20% in the first half of 2015, comparable to a 16% decline in the previous six months.
However, revenue will likely grow by mid-to-high single digit in the second half of 2015 as new gaming capacity and additional hotel rooms become available.
Standard & Poor’s says the slowdown of Macau’s gaming revenue growth won’t affect the rating outlooks on major casino operators including Las Vegas Sands, Melco Crown (Macau) Ltd., and Studio City Co. Ltd.
The report points out that the structural shift in revenue towards mass-market gaming and non-gaming activities such as retail and away from VIP gaming will benefit Macau over the long run.
Increasingly diversified growth will make Macau’s gaming industry more sustainable and resilient. The gaming industry still has ample room to grow, given robust growth in Chinese visitation numbers and high hotel occupancy rates.
"We still view the long-term growth drivers for the gaming sector in Macau as
good. Demand should remain firm, thanks to China’s healthy economic growth and its growing middle-class. Improving transportation connecting Macau to
mainland China provides additional support for the industry," says Standard &
Poor’s credit analyst, Joe Poon.