Inside Asian Gaming

inside asian gaming June 2014 20 following a 9.5% increase through the first quarter. However, with mass-market revenue growth remaining above 30%, he expects little impact on the market overall. In Mr Tulk’s analysis of GGR and EBITDA impact at various levels of VIP growth for the rest of the year, a situation of zero VIP revenue growth coupled with mass-market growth of 29.9% (down from 35.2% in the first quarter) will result in total GGR growth of 7.6% year on year for the remaining three quarters and up to 10.5% for 2014 overall. EBITDA, without any VIP growth for the final three quarters, would rise by 19.9%. Using those assumptions, a 5% contraction in VIP over the final three quarters would generate EBITDA growth of 18.4%. Analysts agree that VIP revenue will continue to slow from the 38.6% increase recorded during Macau’s record breaking February. “Xi Jinping’s anti-corruption crackdowns are seemingly lasting longer and are more pervasive than any previous anti-corruption crackdowns seen when previous leaders took the reins of power,” Union Gaming’s Mr Govertsen observes. “While there doesn’t seem to be any specific focus on Macau, I think that this could be serving to place a bit of a cap on VIP gaming going forward as junkets and wealthy customers alike are cognizant of what’s going on in China.” Mr Choudhary warns there are two less-discussed issues that could impact Macau’s revenue and earnings. One is the complete casino main floor smoking ban announced by Macau’s government on 15th May. Set to take effect on 6th October, the regulation calls for replacing the current mix of smoking and non-smoking areas with airport style smoking areas with no gaming tables or machines, while maintaining smoking in VIP areas. Casino operators themselves have suggested this approach as an improvement over the split-floor system currently in operation, which is criticized by gaming workers and continues to produce findings of poor indoor air quality. However, some small casinos have indicated that they may not have space for smoking areas. The smoking ban was among the top three concerns for US and Asian investors in Morgan Stanley surveys of each group conducted last month. Mr Choudhary suggests gaming revenue could drop 5-15% in the first year—based on the initial results of smoking bans in the US, UK and Australia—although it’s expected to recover. He also expects the near-term impact in Macau to be less severe than in other markets because of “strong demand and limited alternatives”. Finally, there’s the looming labor shortage, a far bigger and less tractable problem. Gaming executives cite labor retention and “There are no negative political factors from Beijing.” Kelvin Tan |executive vice president, Melco Crown Entertainment. One of the less-discussed issues that could impact Macau’s revenue is the complete casino main floor smoking ban set to take effect on 6th October, with smoking limited to dedicated airport style smoking areas with no gaming tables or machines. In Focus