VIP growth outside Macau threatening the city’s future

Macau’s gambling scene is being impacted by VIP growth in other regional areas, but there’s more to it than that. A number of factors have come together at once to create the “perfect storm” of reduced VIP revenue in the city and Grant Govertsen of Union Gaming believes that there is a “sustainable threat” to Macau’s economic future.

Govertsen points out that VIP growth has weakened not necessarily because it strengthened in other areas, but that the strength seen in those regions is because of the drop in Macau. That drop has been fueled by the ongoing US/China trade war, the new smoking ban in Macau, regional politics, a softer Chinese economy and junket maturity.

The analyst asserts, “The threat is real. Clearly, there is a growing realization that Macau VIP play (or, in some cases, liquidity) is bleeding to regional markets, with Cambodia and Vietnam being the primary beneficiaries. While history does, indeed, suggest that Macau VIP players will trial new regional properties and then ultimately come back to Macau, we think this time is different.”

For 2019, Union Gaming is not seeing good things for the VIP segment. Having previously forecast a recession of about 8%, it now expects the drop to reach as much as 15%. Mass-gaming, however, will be strong and the firm anticipates 10% growth, similar to what it had previously forecast. Overall, Macau’s gross gaming revenue (GGR) will be around -2% for the year.