Macao casino revenue falls again in January
02/05/2016|5:37:18 PM|Forbes

January marked Macao’s 20th consecutive monthly decline in gaming revenue compared with a year earlier. Casino revenue in January fell to 18.7 billion Macao patacas (MOP; US$2.3 billion), a 21.4% decline from January 2015, and comes on the heels of Macao’s 34.3% revenue decline last year. Sequentially, revenue in January rose 2% from December, below the historic 5% bump, according to Wells Fargo Securities. Nevertheless, many analysts are suggesting that February, with the Chinese New Year holiday beginning on February 8, could break the streak of monthly declines, based on both slivers of optimism in the January numbers and the absolutely dismal revenue posted last February.

Macao’s January and February revenue are usually best viewed as a single entity due to the Chinese New Year holiday, which moves from year to year. Revenue tends to fall in the weeks ahead of the holiday, then rise during the holiday period, although in recent years, high rollers have tended to shy away from visiting Macao during the congested main New Year days and come later, mitigating the post-New Year doldrums to some extent.

Last year, January and February combined for MOP43.3 billion, or US$5.4 billion, with MOP 23.8 billion in January. Chinese New Year fell during the third week of February, so the preholiday slump was largely confined to that month. This year, the holiday begins on February 8, so the slowdown spilled into January, partly explaining the steepness of the year-on-year decline. Then last year, something unprecedented happened: gaming revenue for the Chinese New Year period was lower than for the period before, MOP19.5 billion, down 48.6% from February 2014, when set Macao set a Chinese New Year fueled monthly revenue record of MOP38 billion, more than it booked in year during monopoly times.

To match last year’s January-February total, gaming revenue for this February will need to reach MOP24.6 billion, a 26% gain year-on-year. Even if you bake in the 21.4% decline for January – remarkably similar to the 21.2% fall for December – to January-February combined revenue, that would decrease the target total to MOP38.4 billion and make the February target MOP19.7 billion, a slight rise from a year ago. That’s an extremely reasonable expectation, given the likely holiday bump in revenue, with a lot of upside potential.

The twinge of optimism in the air is based on more than just last year’s historically low February revenue. Gaming revenue in the fourth quarter of last year rose sequentially for the first time since the first quarter of 2014. The increase was small, MOP453 million, 0.8% above third quarter revenue, and, on paper, it was entirely in the VIP segment. However, with reclassification of mass table to VIP tables to skirt the main floor smoking ban, analysts say the gain was really in the mass market segment, the source of Macao’s future growth, according to the smart money.

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