Rating agency Fitch has revised its forecast for the Macau gaming industry down from negative 4 per cent to negative 22 per cent. The decision was announced yesterday by the American-based rating agency and includes an estimation of a 40 per cent decline year-on-year in the period 1-24 March. The anti-corruption crackdown in Mainland China, tighter credit availability and smoking and visa restrictions are the main reasons cited to explain the negative revision for the industry. However, the allocation of gaming tables to the new casinos opening is also stressed as a cause for concern of the operators. ‘We believe there is some risk that the visa and smoking rules will become more restrictive and that new casino openings may not gain the full allocation of table games’, it is explained. ‘Our forecast incorporates more muted benefit from Galaxy’s and Melco’s projects coming online this year. Melco expressed concerns in their fourth-quarter call that table allocations may not be as generous as the company hoped.’ The report also opens the door for delays in the works of Galaxy Macau Phase II, which includes Broadway at Galaxy Macau, and of Studio City. ‘There is also potential for further opening delays as several concession holders expressed concerns about construction labour shortages. Galaxy Macau Phase II opens May 27 and Studio City is set to open mid-2015’. Nevertheless, Fitch still holds a positive view of the Macau gaming industry for the future, stressing the importance of the economic development of the Asia Pacific Region. ‘We estimate that GDP per table game is about US$2 billion across all APAC countries, or roughly US$300 million per table position assuming six positions per table. And continued GDP expansion in the region and improving transportation infrastructure should support the gaming supply over the next several years’, the report reads. Local competition grows stronger The Fitch report also mentions the possibility of some recovery for the VIP and premium mass segment. But on this, the competition from other locations is expected to grow stronger with benefits for the junket companies operating in these locations. According to the rating agency, VIP volume increased 74 per cent in the second half of 2014 at Echo’s and Crown’s properties in Australia. Echo also disclosed that its credit extensions increased 124 per cent at its Sydney property in the same quarter. In Cambodia, NagaWorld grew its VIP volume in the second half of 2014 by 47 per cent and the rating agency said that much of the growth came from China. The report also assumes that from this year on Macau will also feel the effect of the VIP-focused expansion at the Solaire, in the Philippines, as well as from City of Dreams Manila, a project developed by Melco Crown.
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