Gambling Analysts Caution About Macau

Many gambling analysts predict that Macua the gambling metropolis of the Far East’s revenue will drop from 42% to 15% in 2012.

Maybe it’s a bit premature to slam a market that increased by 42% in 2011 and harvested a revenue in excess of $32.5 billion which is 5 times more than the GGR revenue generated on the Las Vegas Strip in 2011. Analyst reckon that if Macau does not diversify her product it might just cost her in the long run. Since August 2009 GGR in December 2011 was the smallest, when casino revenue increased by 17 percent due to the global recession and Beijing’s move to clamp down on visa entry into Macau.

Macau Might Experience A Slump

Grant Govertsen union gaming analyst said the major talking point of 2012 is ‘whether or not the carpet is going to be pulled out under the VIP market’. Analysts predict that the growth for the coming year is going to be much lower; Wells Fargo analyst Cameron Mcknight predicts an 11 percent growth whilst Aaron Fischer, head of consumer and gaming research at CLSA estimated a 15 percent growth. Local casino operators are more positive. Lawrence Ho, co CEO of Melco Crown believes GGR will grow by an additional 15 to 20 percent and Galaxy Entertainment deputy charmain  Francis Lui Yiu Tung predicts that the market will increase by an additional 25 percent this year.

PricewaterHouseCoopers Hong assures partner Ivan Ng is of the opinion that cash rich operators are planning further developments. “The development of the Cotai Strip in Macau has been hot and will get even hotter, Ng said. The Cotai Strip will continue to be the main battleground for the Asia Pacific gaming market, with operators seizing more land whenever they can for further expansion.”

Standard & Poor’s credit analyst Joe Poon agrees by saying, “Gaming operators are better positioned then they were in 2008 to accommodate risks associated with investments in new gaming developments and any moderation in gaming demand. We expect operators in the region, with their improving financial capacity to aggresively bid for casino licenses and to invest billions of dollars into gaming projects. We estimate that Macau’s gaming market will increase in gross gaming revenue between 10 to 12 percent for 2012.”

In order to improve Macau’s accessibility a high speed rail service between Zhuhai, which borders Macau to Guangdong provincial capital is taking place, whilst a 50km, $10.4 billion road link, including a 23km bridge is being built across the delta from Hong Kong should open in 2016. Last year Macau had 28,002,000 visitors up by 12.2 percent in 2010, 25 million visitors came from mainland China. People stayed on average  1.53 nights compared to 3.9 nights in Singapore. The majority of observers believe that SAR’s success lies in its diversity of products offered.

Galavis & Company managing director Jonathan Galaviz warns, “It’s critical that Macau starts drawing visitors from other destinations and not only from China. The intra-Macau competition between the various operators there will intensify over the coming years especially in the region of Cotai.”