Macau in Figures – A year into the recession

2015_08_Monthly Gross Revenue

One could say that the above graph shows all there is to say about the current state of Gambling in Macau, yet we will come to that as we are deep diving into the current situation. First of all, the month of August has ended and figures for August will be released sometime later in September by DICJ. Until then we can work with what we see above. And what do we see?

  1. The peak gaming revenue was in February 2014
  2. The first sign of a low was in June 2014
  3. The downwards trend has continued (with smaller peaks in between) until July 2015
  4. Lowest point in the downward trend had been June 2014 so far with 17 billion MOP revenue, the same as experienced in November 2010 for the last time.
  5. July 2015, the last month on record logged 18.6 billion MOP, the same as experienced in January 2011 for the last time.
  6. Comparing the low in June 2015 with the peak in February 2014, Macau revenue has dropped by 55% in less than a year.

The following graphs capture  the same set of data in slightly different views:

2015_08 - Comparison of Monthly Growth Rates

The above graph compares total revenue figures (in million MOP) month to previous years’ month. Also here the sudden drop in June 2014 is visible and there had been no month that was able to peak higher than the corresponding season the year before. That includes every month in 2015. That gap was highest in February 2015 as visualized below:

2015_08 - Gap to last year

Whereas one might think that a stabilized graph, as seen between March to July 2015 is a good thing, in reality it is a sign of negative growth as it represents the gap towards the last years revenue figure and if continuing over a year resembles a downward trend.

2015_08 - Monthly Gross Revenue compared to last years month

The above graph, with data from January 2010 all the way to July 2015 shows the growth rate of revenues compared on a month-to-last-years month basis in percentage. Once again, the downward trend is more than visible.

2015_08 - Growth Month to Month and Average

This graph is focussed on comparing growth rates between consecutive months, i.e. January 2015 to December 2014 and gives an indication on the general trend. The more peaks are below the 0% line, the more of a downward trend it is, whereas when there are more peaks above the 0% line, revenues are growing. The red line resembles the average for each half year of each month’s growth/decline percentage. Once again, the downward trend starting in 2014 is visible.

Whereas the above are great representations of probably the most talked about issue in Macau, they are all based upon one single set of data:

  • Revenue of Games of Fortune in Macau

The above alone cannot be representable for the state of Macau is the following is not taken into account:

  • Visitor figures
  • Openings of hotels and casinos
  • Unemployment figures
  • External factors

Let’s have a look at the visitor figures as published for Macau. DSEC has released figures up to Q2 2015 (and the month of July, which is being excluded in our comparison below).

2015_08 - Visitor Figures

Immediatelly visible is a drop in visitors from mainland China. This is also visible when one makes the overall graph for comprehensible:

2015_08 - China vs Rest

Before going into further discussions on any of the implications, let’s review this a little bit further.

  • Peak visitors overall to Macau had been in Q3 2014 (surprisingly in the quarter in which the drop of revenues occurred). The same quarter had also seen the highest amount of visitors from mainland China.
  • Q2 of 2015 is the lowest quarter in the recent downward trend and is the lowest quarter since Q2 of 2013 (i.e. two years)
  • The peak in visitors had actually not just been one quarter, but two quarters, with Q4 of 2014 having had the second highest number of mainland Chinese tourists (and the second highest overall visitor figure as well)
  • Rest of World is pretty stable and Hongkong has not escaped it longterm downward trend.

Let’s have a look at the gambling revenue broken down into visitors (per-head-analysis):

2015 - Revenue Down

Since Q2 2014, revenue per head (i.e. per visitor) is down compared to the previous quarters. No remember that Q3 and Q4 of 2014 had been extremely strong visitor months hereas revenue as sinking, so let’s have a look at an overlap of the figures:

2015 - Visitors and Revenue

What can be seen above is a very dangerous trend: Not only are the overall visitor figures decreasing, but at the same time, the spending per head is decreasing as well. The current spending rate of about 7740 MOP per visitor in gambling revenues is the lowest figure since Q3 2010.

This leads us to our next verification: which major casinos or hotels opened during the recession? Often it is talked about that Macau is adding it’s Cotai 2.0 projects to the market. Galaxy Macau Phase 2 was the first of several large resorts to open. It opened on May 27th 2015. So let’s have a closer look at the months that followed the opening. In particular we are looking at visitor figures to see if an additional casino would attract more visitors:

2015 - Visitors after Galaxy Opened

It is important to note that we want to compare Total Visitor figures on a monthly basis agains the same period the year before and the year before that. We do NOT want to compare consecutive months as that might be a one-time trend, whereas comparing a similar time in the year the year before will give one a clue if there had been an impact or not.

As can be seen above, June 2014 and July 2014 had seen much higher visitor figures than 2015 or 2013. That is in line with previous indications about a peak in 2014. As such whatever stimulus the opening of Galaxy Macau Phase 2 had, it was not enough to get visitor figures back up to 2014 levels. They are however higher than 2013.

Above we have looked at revenue figures and total visitors. We have not yet looked at individual casino’s performances (which would require a little bit of deep research for which I do not have time at hand right now). We can however have a look at the unemployment rates of Macau:

2015_Unemployment Rate

Over the years unemployment dropped significantly and even throughout most of the recession, unemployment was at a record low of 1.7%. Only in the second quarter of 2015 unemployment slightly increased to 1,8%. As such it can be concluded that the recession had no impacts on the employment situation of the Macau workforce.

What are the external factors that caused the above?

Smog in Macau – No more green

That is why Macau never has green plants ~ dust turns them greyish green

In line with my recent post about the current AQI levels in Macau, I would like to present another two photos that left me thinking about the air quality in Macau. The above photo, as well as the below one, are part of my 2015 Smog in Macau photo set on Flickr, in which I collect all screenshots, readings and related photos about pollution in Macau.

The photo above was taken in Macau close to government offices in proximity of the chapel of Our Lady of Penha and Lilau Square. What can be seen is a layer of dust that sits on the leaves of this plant. This is the main reason that Macau is not green and plants, trees and flowers do not look as vivid as e.g. in Europe or other parts of the world.

The second photo, below, shows our balcony’s washing machine. Here, again, dust has accumulated on the cover. This is the accumulated dust of approximatelly two weeks. A thin layer of black and grey. The AQI in recent days reached 150 and above for several hours per day. That is categorized as “unhealthy”.

Once again I recommend everyone to get themselves a PM2.5 protection mask (N95 mask) from a local store. A pack of 50 masks costs about 300 MOP (3M type).

Dust on the washing machine

Smog in Macau – A word of caution – 171 on the PM 2.5 index

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Monday evening, March 16th 2015, the smog is still visible

 

The AQI for PM2.5 reached 171 yesterday in Taipa’s Central Park

Yesterday was a very smoggy day in Macau. Today was not better. Walking outside in Taipa, one could taste the air. Checking out the official SMG website its front indicator showed 40 to 60 on the air quality index, i.e. Good to Moderate. How can that be when one cannot see the sun or blue sky? The answer is further hidden on the SMG website (see definitions):

The calculation period for daily AQI is from 12:00 noon of yesterday to 12:00 noon of today. Each sub-index is calculated from at least 18 hours of sampling data for that period. Otherwise, it is considered to be fallacious. If the AQI is above 100, the pollutant which results in that index will also be indicated.”

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Sunday afternoon, no blue sky, no sun.

What does that mean? It means that the AQI as shown on SMG reflects a 24 hour period for PM 2.5 and NOT the current or real time data. In fact, looking at the concentrations for Sunday one can see the spike starting at morning time:

PM25

Concentration levels for PM2.5 on Sunday

Monday was by far not better:

Concentration levels for PM2.5 on Monday evening

Concentration levels for PM2.5 on Monday evening

These concentration levels are being recorded on a real time basis with an hourly publication on the SMG website within the section ‘Concentrations’. The daily index however is being calculated on a 24 hour basis, backdated to the last noon-to-noon period. Details on the standard way of calculation can be found here. That means when one wakes up and sees the smiley faces and the weather forecast states “mist” or “fog”, one cannot trust these statements.

Monday Evening, Home Page of SMG showing the AQI

Monday Evening, Home Page of SMG showing the AQI

Fog1

Screenshot, taken Monday evening, showing the weather cam and the indication ‘Mist’

 

In fact, let’s have a look at the real time data collected from the very same Taipa Central Park station:

Real time data overview of AQI for Central Park Station Taipa, by AQICN.ORG

Real time data overview of AQI for Central Park Station Taipa, by AQICN.ORG

This website shows the current AQI for the corresponding PM 2.5 concentration in that particular hour. Going from this chart 6 hours of yesterday and over 8 hours of today had been “unhealthy”. And what does that mean? According to Technical Assistance Document for the Reporting of Daily Air Quality – the Air Quality Index (AQI) by the US Environmental Protection Agency an ‘unhealthy’ PM 2.5 figure means:

Increased aggravation of heart or lung disease and premature mortality in people with cardiopulmonary disease, older adults, and people of lower SES; increased respiratory effects in general population

The air quality can change dramatically within a short period of time and due the backdated nature of SMG’s AQI, one can endanger oneself’s health by only following the smiley face picture without checking the accurate real time data provided otherwise.

To summarize:

  • The SMG website shows AQI as a daily average figure that does not represent correctly the real time situation in Macau and Taipa
  • Real time data is available at AQICN (there is also an app for downloading)
  • When the air is unhealthy, please please please wear an appropriate respiratory protection mask

Further information:

Macau – Public Projects – Delay and Overspending

Project Name Budget Current Spending Start of Construction Scheduled Completion Current Announced Completion Delay
Macau Prison (EPM) – First Stage August 2010 August 2013 Unknown >1.5 years
LRT Macau – Phase I Line (Macau-Taipa Line) MOP7.5 billion MOP14.27 billion 2011 2014 September 9, 2017 883 Days
Taipa ferry terminal MOP 500 million MOP3.2 billion 2005 2009 End of 2014 / Not Realized 6 Years

Given recent news on the progress of Macau prison, I decided to collect a few of the most prominent public projects that face delay and overspending. As can be seen all projects are scheduled to complete within the next few years. How this is possible whereas even big projects such as Wynn or Sands’ The Parisian are announcing delays, is another story.

 

Macau – 2014 in review (in figures and graphs)

Endyear2014 - Monthly Gross Gaming Revenue

 

2014 has ended and brought with it a change in Macau which waves are still hitting economy, politics and society. As can be seen in above graphic, monthly gross revenue of Games of Fortune in Macau decreased for the first time since 2010 in a continuous manner. All figures above are in million MOP.

The below graph will show that trend even more clearly with figures for each month next to its’ previous year’s month figure. Beware that the y-axis starts at 20 billion MOP.

EndYear - 2014-2013 Comparison

Another clear picture of the overall trend of declining gaming revenue can be seen in below graphic that compares the growth (or decline) of each month with its previous year corresponding month:

EndYear GrowthDecline

Despite the above decline however, there were more visitors coming to Macau especially in the last months of 2014:

EndYearVisitorGrowth

 

But is this increase in visitors actually beneficial for Macau? An analysis on the basis of spent gaming revenue per visitor shows that the first two quarters of 2014 were the top months since 2009, however the last two quarters (which had most visitors to Macau since 2008) yielded a lower average revenue per person than any quarter since Q1 2012.

EndYearRevenueperperson

Summarizing the above, Macau is facing tough challenges due to the breaking away of the VIP junket market as well as increased visitor numbers from second and third tier cities in China. Will 2015 bring an upwards swing or will the downward trend continue? The first few months and especially the Chinese New Year season will show where Macau is heading this year.

The sources for above information:

Smart Grid Challenges in Macau – A contribution to NGI-102x

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The below is a peer review homework as part of the online course NGI-102x Next Generation Infrastructures by Delft University.

This article describes the problems and challenges of the electricity grid of Macau. In Macau the only electricity supplier and distributor is Companhia de Electricidade de Macau (CEM). They have 220 thousand customers (on a population of roughly 560 thousand inhabitants), a peak power demand of 765.6 MW and a gross electricity consumption of 4409 GWh. As of 2009 the electricity grid is connected to the main grid in mainland China (both 220kV and 110kV) which is supplying more than 50% of the electricity to the SAR Macau. In Macau itself CEM operates an installed generation capacity of 472 MW which contributed 222GWh in 2013. The remaining 4187 GWh came from mainland China. Energy generation in Macau is based on diesel-fuel and gas. No private producers and no renewable energy generation is established. Macau as a country is increasing its land size by land reclamation and as such in the long run also its energy needs. As of 2009 the key performance indicators stood as:

  • SAIDI (average outage duration for each customer served) – 3.7 minutes
  • CAIDI (average outage duration that any given customer would experience) – 15.8 minutes

Hence the current challenges of the grid are:

  • Dependency on external suppliers (i.e. mainland China) over which there are no regulatory or governmental controls.
  • Reliability to be kept the same or improved despite the growth of the network
  • Casino constructions and their expected pressure on the peak load while maintaining supply during peak load / distribution of load
  • Environmental pressure due to energy generation emissions
  • Pressure on current tariff system due to consumers

From my point of view a true smart grid cannot be established within Macau alone as most of the energy generation is happening externally in the Pearl-River-Delta region of mainland China. However there are significant benefits for CEM and Macau if a Macau-internal smart grid can be established:

  • By installation of smart meters of type F5 or higher, flexible tariffs can be implemented while giving the consumers the opportunity to monitor their consumption and usage. This can help
  • Private energy generation for large-scale casinos can be introduced that, given their high energy consumption could help to reduce the peak load.
  • With the incorporation of Hengqin island into the SAR Macau and its hills the opportunity for renewable energy generation is given (wind power)

The above benefits justify in my opinion the implementation of a smart grid in Macau.

References:

Macau – Gaming Revenue Figures – VIP vs. Mass Gaming

MonthlyGrossRevenue

all figures in million MOP

 

As a continuation of my last post on visitor and revenue figures, this post will present further graphical representations of Macau’s gaming market on the basis of DICJ’s revenue figures (as above and below) and individual data showing the current distribution of gaming revenue based on VIP and mass market figures.

Growth - Month to Month

In the first graph of this post you can see the overall growth (and latest decline) in overall gaming revenue in Macau. February 2014 was the top spot with a total of 38007 million MOP overall gaming revenue. In the second graph you can see the development of revenue on a month to consecutive month basis in percentage. As exepcted there is an up and down due to seasonal changes, lengths of individual months, etc. The real picture, as reported in my last post and in the news, becomes however only apparent when one has a look at the development on a month to previous year month basis:

Growth - Month to Last Year Month

 

Revenue growth had been on a more or less constant decline since 2010, resulting in the current negative growth figures.

As raised towards the end of my last post and as mentioned in the newspaper, overall visitor figures are up, with revenues down, suggesting that mass market gamers increased yet VIP gamers withdraw from Macau. What does that mean for the current casino set up in terms of their revenue mix of VIP vs. mass market gaming. Having had a look at individual casinos annual reports I was able to find the following: SJM, Wynn, MGM and Galaxy are sharing information on their VIP and mass market revenue figures.

VIPvsMass

 

And as expected the VIP market segment reveals itself as the dominating source of revenue for these casinos with average percentages of 70% to 80% (based upon the sum of VIP revenue and Mass Market revenue; slots and other revenues not taken into account).

Given the fact that there are 6 new casinos under construction which are all trying to get their share of gamblers it will become a highly competitive market in Macau and only those casinos that are able to switch their revenue and profit sources quickly enough in line with the market developments, will be able to maintain their overall return on investment rates.

Disclaimer: All figures and percentages are given for information only without any guarantee of accuracy. I invite everyone to read the information sources by oneself to get more details.

Update: Graphical representation of VIP revenue in % of overall revenue (incl. slots, etc.)

VIP Revenue in Overall Revenue