Typhoon hits September revenues but October looks strong

Typhoon Usagi, which blew in to southern China last weekend and killed 33 people in Asia, damaged revenue at Macau's casinos and may lower overall monthly revenues by up to a few hundred basis points.  Usagi was responsible for the cancelation of over 250 flights into and out of Hong Kong, affecting many who were returning from long weekends spent away for the Mid-Autumn Festival.  

Despite this, growth prospects going forward look strong, with Fitch Ratings suggesting that China's policy of increasing domestic consumption is working, 

since “…Macau's economy and credit profile have remained firm despite its heavy reliance on the gaming sector and high exposure to China country risk."  Mass market revenue is growing relative to VIP revenue, with unofficial figures for August indicating that mass live dealer tables made up 36 percent of all gaming revenue for the month.  Fitch also sees a positive outlook for the mass market for the foreseeable future, with improved infrastructure and visitors from neighboring Hengqin Island being contributing factors.

David Bain, analyst at Sterne Agee, is predicting that October will be a bumper month, benefiting from the Golden Week holiday, an 8 percent increase in room capacity, the relaxation of certain visa policies, increased capacity at the Gongbei Border, and a stable economic backdrop in Mainland China.  Hotel rooms are said to be booked up for the Golden Week, giving analysts at Deutsche Bank confidence that growth will be around 17 percent for the month.

Meanwhile, Wells Fargo analysts are predicting that a knock-on effect of the high level of credit issued in China last April will contribute to a growth in VIP gaming in the fourth quarter, the delay reflecting the time it takes for the extra credit to flow through the economy to be spent on discretionary activities such as gaming and luxury purchases.

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