Not there yet

Since the beginning of the big contraction, at one moment or the other we heard someone foretelling the end of the crisis soon. Two years on such hope may, at last, get some support from the figures. There are signs that the revenue rout may be levelling out. It is too early to say that the crunch is over, but clearly the downward trend seems to have stopped. The homologous growth rate for the first quarter was negative, as has been the case since mid-2014. But it was, at around minus 13 per cent, noticeably lower than the rates seen in the previous twelve months, when rates were typically over 30 per cent. As a result, the sector’s total revenue appears to be entering a sort of steadier state, somewhere around MOP55 billion per quarter, give or take a couple of billion. Such relative stability notwithstanding, one cannot ignore the average monthly revenues in the last six months were a quarter below the corresponding figure recorded two years before. It is clear profits can still be made, even if the focus of the business becomes the so-called mass market. But margins there are likely to be smaller, and more sensitive to the composition of visitor flows and their spending profiles. Visitor trends are mixed. Figures have been relatively stable but if a trend exists it is a slow decrease in their numbers. That is not necessarily undesirable. Macau needs fewer low-spending single-day visitors and more travellers staying longer and, as a rule, showing higher and more diversified spending profiles. But attracting them may be only achievable at the cost of lower margins. On a more promising note, we can see that the average length of stay of visitors picked up a little in the last three quarters. And the number of visitors coming under the individual visa scheme seems to be stable. These features may hint at a slow change in the composition of visitor flows. However, unless a marked change in external conditions happens – and that seems unlikely at the moment – this is not yet the end of the tunnel. And if the current level of revenue, give or take a little, becomes the ‘new normal’ so many talk about some hard decisions lie ahead. Both the operators of casinos and other tourist-oriented facilities will have to further review and re-assess their investment plans and their growth assumptions.