China's gambling mecca hit a lucky streak in December with Macau casino revenues
Revenues jumped 19.6% year-on-year, to a record $3.5B for the month
Macau is the only place in China where gambling at casinos is legal
China’s gambling mecca hit a lucky streak in December with Macau casino revenues jumping 19.6 per cent year-on-year, to a record $3.5bn for the month, marking a positive end to a year of slowing growth in the industry.
December revenues boosted overall gross sales for 2012 to $38bn, an increase of 13.5 per cent on the previous year but two-thirds lower than growth of 42 per cent in 2011.
Macau is the world’s largest gaming market and the only place in China where gambling at casinos is legal.
Nevada, the US state that is home to Las Vegas, generated gaming revenues of $980m in October, the latest month for which data are available, compared with $3.45bn in Macau during the same period.
Aaron Fischer, head of consumer and gaming research at broker CLSA, said Macau’s gaming market had enjoyed a “pretty good year”. He said that casinos had swapped high-octane growth for “better-quality growth”, citing the roughly 30 per cent increase in mass market gaming revenues. Customers on average spent more in many casinos, he added.
However, 2012 will be remembered as a difficult year for Macau, following a period of explosive growth. The low point came in July, when gaming revenues grew just 1.5 per cent year-on-year amid a slowdown in the Chinese economy, which has lasted seven consecutive quarters.
Analysts at Fitch attributed the lower rate of revenue growth in 2012 to tight credit conditions on the Chinese mainland, which limited spending by the VIP customers who account for about 70 per cent of Macau’s gaming revenues.
Casino operators are hoping that growth in the mass market segment will help offset further weakness in “VIP spending”. The VIP segment is heavily reliant on the ability of junket operators to lend money to gamblers, whereas mass market betting relies largely on gamers’ own funds.
Macau’s gaming industry faces challenges in the coming year including the scheduled implementation of a smoking ban and expectations of an anti-corruption drive on the mainland from the new leadership. Revenue growth is expected to slow further in 2013, with Macquarie analysts forecasting a 7 per cent increase year-on-year.
However, infrastructure developments such as the expansion of Macau’s border crossing with China and the extension of a high-speed rail link with the mainland Chinese city of Zhuhai are expected to boost visitor numbers.
Last year saw the opening of Sands China’s Cotai Central resort, the last new casino development to open until 2015 under government restrictions. However, Sands China is among those with new casinos already in the pipeline. It plans to open The Parisian, a French-themed gaming hub with 3,000 hotel rooms and a replica of the Eiffel Tower, in early 2016.
Hong Kong-listed shares of Macau casino operators rose on Wednesday, with SJM Holdings adding 1.6 per cent and Sands China climbing 3.2 per cent to a record high.