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?

Macau in Figures – Visitors to Macau Q2 2014

TaiwanKorea

The Macau Daily Times has published the official visitor figures of DSEC for the first half of 2014. Whereas the official Q2 report for 2014 is not yet released (on the time of writing), the figures for January to June 2014 in conjunction with the Q1 2014 report can be used to determine individual figures for Q2 2014. As usual MDT is not analysing the figures in relation to its historical data and hence I would like to present further information to bring the visitor figures into correlation.

First, it is stated that Visitors from mainland China (+15%), Taiwan (+2%) and the Republic of Korea (+18%) increased year-on-year, while the number of visitors from Hong Kong (-6%) decreased.

Whereas the individual comparisons are correct, one needs to go one step further and have a look at the longterm development. As can be seen in above graph, Taiwanese visitor figures are on a slow decline since 2009. Hence the +2% might be just a slight peak up in an overall downwards trend.

Next, Korea is reported +18% year-to-year (226 thousand vs. 267 thousand) which is in line with the overall trend since 2009.

ChinaHKGQ2

Once again, China is leading the pack with most visitors and the figure is once again climbing. Hongkong however is tender further downwards.

Second, MDT is reporting about Long-haul visitors from the United States (15,317) registered a year-on-year increase; on the contrary, the number of arrivals from Australia (6,899), Canada (4,422) and the United Kingdom (3,908) all marked decreases.

EnglishSpeaking

As astonishing the figures might be on the shortterm, in the longterm it becomes clear that nothing has really changed. All four English-speaking countries go through seasonal ups and downs, however stay more or less in the same bandwidth of visitors.

Note: It is not clear how e.g. bluecard holders are being counted as visitors or non-visitors. I.e. would the American workforce of Wynn count as a visitor everytime they go for a weekend to Hongkong and come back? If yes, then the above shown graphs are drastically misrepresenting the “true” visitors figures to Macau.

Then once again, the hidden truth might be revealed in the following graph:

ChinavsRestQ2

 

Quarter to Previous Year Quarter comparison

Quarter to Previous Year Quarter comparison

China is on the rise with Hongkong visitors on a stark decline. Rest of world displays a three quarter continuous minor growth (in comparison to previous year same quarter), yet this can shift easily (as there had been two years of continuous decline beforehand). The implications of the above are exactly what needs to be discussed both in terms of where Macau would like to see itself as a gaming and tourism hub as well as the needs for the industry.

E.g. if non-Chinese speaking visitors are on a decline overall, why would there be the need to diversify one’s workforce to serve this small market share. Or the other way round, what is being done to prevent the decrease in visitors, i.e. how is Macau being made more attractive for non-mainland Chinese visitors?