Macau must respond to growing regional VIP play: Union Gaming

Regional markets will benefit from the bleeding of Macau VIP play, with Cambodia and Vietnam being the primary beneficiaries, say analysts from Union Gaming.

According to the analysts, there are three main reasons for the trend. First, regional properties are of significantly higher quality than ever before, access has been easier due to infrastructure improvements, and VIP junkets are now moving to an operator role – which helps them benefit from the move of Macau VIP into these regional markets.

To defend against this, Macau operators will need to focus on mass exposure and high-quality assets, says Union Gaming.

It is impossible to underestimate just how important the mass market story has become and that it has the most visibility and lowest volatility.”

“With respect to VIP, we do believe that certain operators will see a lot more of their players coming “home” to Macau than others given their high quality of assets and customer experience.”

The next step would be a change to the tax environment to Macau.

“From a tax rate perspective, Macau is simply not competitive. The next highest effective VIP tax rate relative to Macau is South Korea.

“Given that regional properties are significantly more attractive than ever before, and as access to these markets is improving by the day, Macau is likely to bleed VIP market share until such time as the government brings the VIP tax rate closer to parity with the regional peer group.”

“With the government targeting a no-extension policy for concessions post-2022, now is the time to open discussions on this topic,” added the brokerage.

For 2019, Union Gaming forecasts market-wide GGR to go to -2 percent, with mass at 10 percent growth and VIP at -15 percent.