Macau April Casino Revenue Falls 9.5%, Less Than Estimated

Macau’s April casino revenue dropped less than analysts estimated in a sign of stabilization as casinos shift their focus to attracting more casual gamblers and tourists.

Gross gaming revenue decreased 9.5 percent to 17.3 billion patacas ($2.2 billion), according to data from Macau’s Gaming Inspection and Coordination Bureau, marking 23 consecutive months of declines. That compares with a median estimate of a 13.5 percent drop by seven analysts in a Bloomberg survey and a 16.3 percent decrease in March.

Macau casinos have been in a downturn since mid-2014 as China’s anti-corruption campaign and a slowing economy kept the country’s high rollers away from the world’s largest gambling hub. Still, the industry’s mass market revenue has started to bottom out since last year with narrowing revenue declines. Operators such as Galaxy Entertainment Group Ltd., Wynn Macau Ltd. and Melco Crown Entertainment Ltd. are strategically focusing on the more profitable mass-market segment of tourists and recreational gamblers with new resorts.

"The casinos produced another reasonable monthly revenue performance in what is a seasonally slower shoulder month," Tim Craighead, a Bloomberg Intelligence analyst, said in an e-mail after the report. "It still looks to us that the business is stabilizing and the next big catalysts to watch for are the summer travel season and the new resorts from Wynn Macau and Sands China."

The Cotai strip in Macau is home to about a dozen casino resorts. The Macau government has encouraged casino operators to diversify their businesses and forecasts an increase in the proportion of casinos’ non-gaming revenue to 9 percent by 2020 from 6.6 percent in 2014, Teledifusão de Macau reported Tuesday, citing the city’s five-year development plan.

Other casino operators are also looking for new ideas to diversify their business from high-end gambling. The $4.1 billion Wynn Palace will offer air-conditioned cable car rides and Sands China Ltd.’s Parisian will feature a half-size Eiffel Tower replica when they open later this year.

Bloomberg Intelligence’s index of Macau gaming stocks rose 16 percent in the first quarter after about $46 billion of market value was wiped out last year from the city’s six gambling houses. Still, the rally may be unsustainable, said Paul Chan, Invesco Ltd.’s chief investment officer for Asia excluding Japan. The index dropped 3 percent last week.

While the mass market has seen some recovery signs, Macau casino operators are still exposed to the debt-ridden gaming promoters, who lend to high-stakes gamblers, as the local government continues to tighten its regulation on the industry, according to Hong Kong-based Daiwa analyst Jamie Soo. Junkets are still under significant operating pressure with at least HK$30 billion in bad debt still outstanding at conservative estimates, he wrote.