Macau’s casino resorts may be on the cusp of a revenue recovery as their challenges give way to potential catalysts for growth.
Much has gone wrong during the past 18 months including China’s anti-corruption push and a mass-market smoking ban, leading to a 37 percent tumble in second-quarter gaming revenue.
However, there are signs of a recovery as China’s real estate prices improve, annualized comparisons ease and new casino resorts open.
Property is a large part of Chinese households’ net worth, so a wealth effect should follow fluctuations in home prices.
The relationship between Macau casino revenue growth and Chinese home price changes bears this out.
Guangdong province, which neighbors Macau, generates almost 30 percent of the city’s visitors.
With the province seeing property prices recover, that bodes well for Macau’s gambling tables.
Year-on-year comparisons also get easier for the mass market gambling segment beginning in the fourth quarter.
The segment saw a big fall in November after the implementation of a smoking ban on main gaming floors.
While other economic factors also played into the decline, the ban directly impacted how long smokers can play before needing to leave the floor for a cigarette break.
Most importantly, Cotai will progressively transition from a massive construction site into an integrated resort destination with many new non-gaming attractions.
These should help reinvigorate visits, lengthen stays and drive more gambling.
Galaxy Macau launched the second phase of its expansion in late May and Melco Crown’s Studio City is set to debut in October.
Next year, Wynn Palace, MGM Cotai and Sands China’s Parisian will follow.
The views expressed in this article are those of Tim Craighead and Margaret Huang, gaming analysts at Bloomberg Intelligence.
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