Macau gaming revenue dips 37 percent, 12th straight monthly drop

Macau’s casino industry has experienced 12 straight monthly gaming revenue declines — and more are on the way.

Casinos in the Chinese gambling enclave collected $2.5 billion from gamblers in May, a drop of 37 percent compared with the same month a year ago, Macau’s Gaming Inspection and Coordination Bureau said Monday.

The dip was the eighth straight double-digit percentage decrease and the fourth-straight month the market had declines of 30 percent or higher. In February, Macau gaming revenue declined 49 percent, an all-time single-month record.

Union Gaming Group director Grant Govertsen, who is based in Macau, said the trend suggested “a baseline” had been established. But he cautioned that a potential government-mandated, full-scale smoking ban in Macau could further erode the market.

“We aren’t expecting further material downside from here, smoking ban notwithstanding,” Govertsen said. “However, we acknowledge that trends could still be choppy for some number of months to come before we see any breakout to the upside.”

Over the weekend, the Chinese capital of Beijing implemented a much stricter no-smoking law than was enacted in November. Smoking is now banned in all public spaces, including restaurants, offices and public transport.

Govertsen said Beijing also closed 14 smoking lounges at the Beijing Capital International Airport, replaced by 17 designated outdoor-smoking zones.

He said that was a bad sign for Macau casinos, which have smoking lounges on their main casino floors.

“Beijing’s tough stance on smoking could provide the Macau government with enough political cover to carry out their plans for a full smoking ban,” Govertsen said. “Previously the Macau government has made comments that the full smoking bill could be introduced early next year.”

Analysts expected Macau’s declining gaming revenue trends to continue into the summer.

Gaming revenue in Macau is down more than 37 percent over the past 12 months. Macau casinos reported the market’s first-ever annual decline in 2014, when gaming revenue fell 2.6 percent from 2013’s all-time single-year record of $45.2 billion.

Analysts are predicting casino revenue could top out at between $30 billion and $35 billion when 2015 is in the books.

Las Vegas Sands Corp., Wynn Resorts Ltd., and MGM Resorts International all operate casinos in Macau and cited poor results from the market with hurting first-quarter earnings. All three companies are building multibillion-dollar hotel-casinos on Macau’s Cotai Strip.

A government crackdown on corruption since last year has slowed high-end gaming play in Macau.

“We remain neutral as the market adjusts to a new normal,” Wells Fargo Securities gaming analyst Cameron McKnight told investors.

Last week, the Galaxy resort, which is owned by Hong Kong-based Galaxy Entertainment, opened its second phase. But government gaming regulators only allowed 150 table games to be added to a casino expansion built for 500 tables games.

“Developments around Galaxy’s opening have significant read-through on the entire sector, as the market will likely use them as a proxy for other projects,” Deutsche Bank gaming analyst Andrew Zarnett told investors.

Wynn Resorts’ $4 billion Wynn Palace is scheduled to open in the first half of 2016, the first of the new casinos operated by Nevada-based companies to come online.

Shares of Wynn closed at $98.29 Monday, down $2.40, or 2.38 percent, on Nasdaq. Las Vegas Sands closed at $49.95, down 88 cents, or 1.73 percent, while MGM Resorts closed at $19.58, down 47 cents, or 2.34 percent. Both companies are traded on the New York Stock Exchange.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.