Macquerie expects the Chinese VIP sector to improve in Macau in Q3 2019, but show improvement in Australia by early 2020.
Macquarie Group predicts the Australian VIP gaming market to surge in 2020. The Australian investment bank and financial services company believes Chinese VIP revenues will continue to disappoint in 2019, but estimates a surge next year.
If correct, Macquarie’s analysis is good news for Australia’s ailing casino sector. Crown Resorts reported its VIP revenues are down 12% year-to-year in 2019.
Star Entertainment’s revenue reports are far bleaker. Star’s overall VIP revenues plunged 33% from 2018 to 2019, while Star Sydney’s VIP stats are down 49%.
Both companies report that Chinese high rollers still visit Aussie casinos in the same numbers. The big difference is how much they spend when playing in the local casinos.
Chinese High Rollers in Australia
Their reticence to bet as much as they once did is a sign of Chinese economic slowdown. Despite the slowdown, Macquarie believes Chinese high rollers shoudl spend more in the Q3 section of 2019.
Maquarie expects the boost to be felt first in Macau in Q3 and Q4, but spread to Australia in 2020.
VIP Casino Customers from 2012 to 2017
Not that long ago, Chinese high rollers flocked to Australia and spent boatloads of money. From 2012 to 2017, Chinese visits to Australian casinos doubled. That rate vastly increased in 2014, when an anti-corruption crackdown in Macau led high rollers to seek better games.
Many of those VIPs ended up in Australia, due to shorter flights and high levels of trust. Macau became iffy, due to high-handed policies and Beijing’s distrust of conspicuous consumption on the part of China’s financial elite.
Australia, on the other hand, had a stable gambling framework and a stable currency. Thus, Chinese high rollers like to gamble at Crown Melbourne, Crown Perth, and Star Sydney. High rollers could convert the Chinese yuan into Australian dollars while enjoying a trusted gaming setting.
2016 Crown Crackdown
Unfortunately, Crown Resorts advertisers went too far in Shanghai. Chinese gambling laws prohibit ads for foreign casinos, but do allow adverts for the cities in which the casinos exist. Three Crown executives and 15 Chinese nationals in the advert department flouted the laws in order to drive VIP visits to Melbourne and Perth.
Shanghai police arrested those 18 people and charged them with crimes. After an 8 to 9 month detention, Crown Resorts secured their freedom, but not before paying a $1.5 million fine. Also, Crown agreed to sell its shared of Melco, while staying out of the Chinese market.
Another part of that deal required Crown to stop advertising in China the way it had previously. That slowed Chinese VIPs visiting Crown casinos, which hurt revenues in 2017 and 2018. Even though the number of visits has stablized, Crown’s never quite recovered from the scandal.
Macquarie Predicts 2020 Casino Revenues
Macquarie predicts 2020 will be the year when a several trend turns around.. If so, it is great news for the Crown Sydney, which opens in 2021. To collect the Crown Sydney license, Crown Resorts promised New South Wales it would build a VIP-only casino resort.
If the Chinese high roller market declines in 2020 and 2021, it would particularly hurt Crown Sydney. If it’s boosted, then James Packer’s vision in 2013 would come to fruition in 2021 and beyond.
Why High Roller Gaming Is Volatile
High roller gaming is more volatile than mass market numbers. Casino companies are known to include whales’ numbers as a line item in quarterly reports. Saipan’s Imperial Pacific Casino had to write off $420+ million in losses last year due to 10 Chinese high rollers. The VIPs didn’t pay their gaming debts, so the casino reported losses for the year.
Even when high rollers pay their gaming debts, their numbers can be volatile. If a handful of high rollers win big in a given month, that month’s report looks bad for the casino. When the high roller incurs big losses, it boosts revenue reports.
Mass Market revenues are easier to predict, because it involves a higher volume of bets. The house edge does not assure winnings for a casino. But the more bets a casino takes, the more likely results will look like the house edge. In short, volatility is reduced when more bets take place.