4th quarter of 2016 was a mixed bag for the gambling industry
Things are going quite well for the gambling industry in Macau, with revenues rising marginally there in January – this is the sixth consecutive month of growth after a two year long stagnation. While the improvement is definitely a good thing overall, the fact that this recovery is going slowly does give reason to believe that there’s some uncertainty about the future.
A 3.1% rise in revenues in the world’s largest casino hub does indicate that things look positive overall after a crackdown on corruption and slow economic growth had taken their toll in recent years. January’s growth rate is still much below the 8% increase in December, and below the 8.5% gain that was predicted by Bloomberg analysts.
The overall rise can partially be explained by several new resorts opening in the last year, which brought in more casual gamblers and tourists – but it’s important to note that the newest resorts drawing in crowds are doing so at the expense of existing ones, which doesn’t paint such a rosy picture. Another indicator of an uncertain future is the fact that the relatively low January growth rate meant that the Chinese New Year holidays have not had the stimulating effect on the industry as had been hoped for.
Over 2015 and much of 2016, Macau’s fortunes had suffered in light of more restrictive conditions. A Chinese crackdown on corruption meant imposing restrictions in Macau to prevent billions of dollars in black money leaving mainland China to the gambling hub. The anti-corruption measures implemented by the Chinese government are still keeping away VIP gamblers, and it remains to be seen as to how long this will continue. While this itself lowered the number of visitors in casinos in Macau, a combination of an economic slowdown in China, political unrest, more stringent visa policies, and a smoking ban on casino floors all added to the decline.
What helped turn things around were efforts to attract tourists and recreational gamblers with family-friendly resorts and more non-gaming facilities – efforts that seem to have been successful at turning things around. This could also explain the slowed growth – while tourists and casual gamblers do come and spend their money in Macau, there are still relatively fewer big spenders coming in.
While Macau has been going through somewhat of a recovery, it would appear that things are not the same in Las Vegas. Casino revenues in the Strip account for over half of Nevada’s total gambling revenues, and the fact that they dropped 1.7% over December is not a good sign for the industry overall. Nevada gambling revenues dropped 2.7% overall in the same month, but this does not mean that things are bad everywhere in the state. In stark contrast to Las Vegas and the overall picture in Nevada, casino revenues in Reno saw a 14.1% rise at the same time.
Penn National Gaming saw their earnings rise by five cents in the fourth quarter of 2016, which is an improvement over the previous years loss of eleven cents in the same quarter. It’s also a very good thing when compared to the predicted loss of fourteen cents in the same period by Zacks Consensus, and significantly better than the management’s own predictions of a fifteen cent loss.
