Fitch Ratings Issues Positive Long-Term Outlook for Macau, Predicts Gaming Growth in 2019

Posted on: November 29, 2018, 11:35h. 

Last updated on: November 29, 2018, 11:35h.

Devin O'Connor @CasinoorgDevinO Read More
Expertise: Asia Pacific Gaming, Commercial Gaming, Legislation, Politics.

Fitch Ratings is bullish on the Macau gaming industry long-term, and has a slightly different opinion than some other analysts on the year ahead for the Chinese enclave.

Fitch Ratings Macau casino revenue
Fitch Ratings anticipates Macau casinos further growing their gaming revenues in 2019. (Image: Macau News Agency)

In the credit rating agency’s report titled “Fitch Ratings 2019 Outlook: Global Gaming,” analysts reveal a “long-term positive outlook” on the enclave. They predict that gross gambling revenue (GGR) will climb in the mid-single-digit range in 2019.

Other analysts have voiced concerns that Macau would suffer an annual GGR decline in 2019. They cite a slowing Chinese economy and continued suppression of VIP junket groups as reasons total win might retract next year.

But Fitch believes GGR will increase for the third consecutive year in 2019. Through October, year-to-date casino win in Macau totals $31.16 billion, a 14.3 percent premium.

Deutsche Bank shares Fitch’s positive 2019 outlook for Macau. The financial institution cut its forecast in half this fall, but is still calling for four percent GGR growth.

Mass Market Growth

Chinese President Xi Jinping included junket groups in his 2014 anti-corruption campaign. Closer scrutiny of the companies that cater to mainland elite and loan them money to gamble with in the enclave led to roughly half of them closing.

With fewer high rollers arriving, Macau’s casino resorts began rethinking their marketing strategies. The solution was to develop more attractions that appeal to the middle-class traveler. It’s worked.

The Macau Statistics and Census Service reports that overall visitation is up more than eight percent this year. Fitch says in its 2019 outlook that the “growing middle class is underpenetrated,” and as casinos better capture the demographic, gaming will increase.

Visitation in the mass market sector is expected to further grow thanks to the October opening of the Hong Kong-Zhuhai-Macau bridge. The 34-mile expanse over the Peal River Delta slashes automobile travel time between the two hubs from four hours to just 40 minutes.

Macau’s Cotai Strip, the enclave’s main drag where the high rollers play, will become home to a new multibillion-dollar casino resort in 2019 with SJM Holdings’ Grand Lisboa Palace. The $4.6 billion property will feature a casino floor measuring nearly 300,000 square feet with 1,000 slot machines and some 700 table games. The hotel will offer 2,000 five-star guestrooms.

VIP Spillover

While Fitch Ratings is optimistic over Macau’s future, both near and long-term, the agency did note that weaker VIP numbers will effect not only the enclave, but other major casino markets.

Fitch says the VIP gambler is more impacted by an economic slowing than the mass market. And that will keep some Chinese high rollers away from Macau, Singapore, and Las Vegas.

Still, Fitch projects that the global gaming industry will grow in 2019, but the agency has concerns.

“Fitch is getting more cautious on the gaming sector as the US economy approaches the late part of the expansion cycle, China’s economy slows down, and Europe stiffens regulations,” the analysts concluded.