Operator News
China – Fitch pitches Macau growth to be at 13 per cent in 2018
By Phil - 23 February 2018
Fitch Ratings believes Macau’s gaming revenue growth will come in at a solid 13 per cent this year, down from 19 per cent in 2017, driven by 16 per cent growth in the mass market segment and 10 per cent in VIP.
Fitch said that the market is about equally weighted to each of these segments.
“Our forecast assumes a rapid deceleration from 36 per cent growth in January 2018. The more conservative full-year forecast takes into account more challenging year over year comparisons later in the year and the more volatile nature of the VIP segment, which grew 27 per cent in 2017.”
Fitch’s stronger mass market forecast is in large part driven by new luxury room capacity geared toward the premium part of the market coming online in 2018. Notable openings include MGM Cotai this month, the Morpheus tower at City of Dreams this spring and the conversion of rooms to suites at the Parisian throughout 2018. Longer term, mass market growth will be anchored by additional hotel capacity beyond 2018; an upward trend in the average length of stay by Macau visitors; infrastructure developments in and around Macau; China’s growing middle class; and China’s pivot toward a more service based economy.
Infrastructure developments include a bridge connecting Macau to Hong Kong set to open in mid-2018, a light rail going through the Cotai section of Macau slated to open in 2019 and an intercity rail link being built from Guangzhou connecting directly to the Cotai section of Macau.
Fitch added: “While we are more cautious on the VIP segment, which declined nearly 60 per cent from peak to trough in the recent downturn, we feel it is now more sustainable. Much of the recent downturn was driven by a corruption crackdown in mainland China. High net worth gamblers now appear to better understand the current policy environment and are more willing to gamble in Macau. Junkets, a major conduit of VIP gambling through credit extensions and relationship-building, have been consolidated, and are more disciplined and more regulated. Still, caution is warranted given the segment’s reliance on credit and some credit tightening measures taking place on the mainland.”
“We do not believe the gaming concession expirations in 2020 for MGM Resorts and SJM Holdings and in 2022 for the other four Macau operators are a major risk. We think the government will take a pragmatic approach to renewing (or re-bidding in technical terms) the concessions, emphasizing future non-gaming investment and promotion of local employees by the concessionaires. That said, there is a risk that new concessionaires will be permitted or that the government will look to extract some form of additional consideration.”
