A survey by financial services company Wells Fargo estimates that the average room rate in Macau will increase between 1.8 per cent and three per cent between July and August. The highest average room rate is attributed to casino-resort operator Galaxy Entertainment Group properties, with a July to August predicted month-on-month increase of 12.5 per cent. Melco Crown Entertainment Limited properties are estimated to have an average room rate increase of 8.4 per cent between July and August. The Wells Fargo survey however predicts a seven per cent decrease in the average room rate in September when compared to the period between July and August. It is also predicted that the month of September will see an average room rate decrease of eight per cent when compared to the average in the first half of 2016. Investor angst The financial services company also considers the non-disclosure by Wynn Macau of the concrete number of tables for the planned Wynn Palace project as a ‘source of angst among investors’. The analyst firm sees table allocations as ‘very important’ since the transition to a mass gaming market is ‘driving average table spend’ down. Last week the Secretary for Economy and Finance, Lionel Leong Vai Tac said that Wynn Macau had not yet submitted a definite number when applying for gaming tables and slot machines, while the Sands China Parisian project hadn’t revealed a definite number of gaming tables either. Wynn Palace, scheduled to open on August 22, has predicted it can accommodate a total of 500 gaming tables, but so far hasn’t specified the exact number it actually wants. Post Euro Cup pick up Wells Fargo analysts expect revenues in Macau to decrease between eight per cent and 10 per cent year-on-year, higher than the 5.8 per cent consensus. Average daily revenues registered in the first 10 days of July were as high as MOP535 million (US$67 million), with analysts expecting a five per cent ‘pick-up’ after the end of the Euro Cup with a gradual increase of average daily revenue of between MOP540 million and MOP550 million. The firm states that even though many investors see a stabilising of Macau revenues, it expects that ‘additional regulation’ and the new supply of rooms, with the Wynn Palace and The Parisian openings, could ‘weigh’ on the results for the second half of 2016. Cooler credit growth The analyst firm also chooses to ‘remain on the sidelines’ while watching the market adapt to the ‘new normal’: a weak Chinese economy and a flatter recovery than expected ‘contributing to more muted revenue growth for Macau.’ Credit growth is a leading market indicator for local VIP revenue growth. The firm notes that following a surge in early 2016, credit growth has ‘cooled’ and is now holding at around 10 to 11 per cent, and dollar credit growth has ‘ticked back down’. The group advises that the boom in revenues seen in 2010 and 2013 both saw a ‘significant and sustained increase and acceleration’ in year-on-year and dollar credit growth, which the current scenario doesn’t exhibit. ‘We don’t think the government is turning the stimulus tap on,’ opine the analysts.
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