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For Macau casinos analysts, this is what capitulation looks like.

As revenue declined month after month this year, they have steadily cut their estimates for how the year will turn out. In January, they forecast a slight increase in overall casino revenue after the 2.6 percent decline in 2014, the first drop in the city’s history. That estimate kept sliding throughout the year until the median estimate from 12 analysts surveyed by Bloomberg is now for a 32 percent slump.

They have given up on the idea of a second-half recovery, now assuming a $14 billion revenue decline in one year. 

China’s relentless crackdown on graft and the slowing economy have forced high rollers to lay low. Looser travel restrictions on Chinese nationals and a possible easing of a proposed smoking ban might have boosted optimism. That didn’t last long. A yuan devaluation, stock rout, government clampdown on money flows and the latest scandal of alleged fraud committed by a junket operator employee added concerns to the hard-luck industry.

The scandal “gives an additional reason to dislike the overall Macau gaming space because of the potential overhang,” said Richard Huang, an analyst at Nomura Holdings Inc. “I’m not optimistic about the future of the VIP business.” Huang forecast a 31 percent decline this year and a 5 percent growth in 2016.

Gross gaming revenue could fall to about $30 billion this year, $14 billion shy of the $44 billion posted in 2014.

Casino shares fell, with Galaxy Entertainment Group Ltd. dropping 3.9 percent and Sands China Ltd. down 2.5 percent by the close of trading in Hong Kong. The Bloomberg Intelligence Macau Gaming Index has fallen 40 percent year to date, against the Hang Seng Index’s 8 percent decline.

Madonna Concerts

Amid a weak market, revenue per available room in some of the hotels has dropped in the second quarter according to Bloomberg Intelligence data, and hotels are offering steep discounts to draw more customers. Sands China, which has the most rooms in Macau among six operators, took out advertisements in Hong Kong newspapers offering rooms costing as low as HK$788 ($102) until February next year. Galaxy Hotel has discounts as low as 30 percent.

Casino bosses are betting new resorts will help turn around the industry by luring more customers with their family-friendly attractions, such as Melco Crown Entertainment Ltd.’s Batman ride, Asia’s tallest Ferris wheel and Madonna concerts among other non-gaming features at its resort due to open in October.

The market may grow 5 percent next year, followed by another 10 percent gain in 2017, according to the Bloomberg survey. While VIP revenue continues to slump, the mass-gambling market has shown signs of growth, partly helped by the resort expansion of Galaxy, said Nomura’s Huang.

One major test for the former Portuguese colony would be visitation during the weeklong China National Day holiday which lasts from Oct. 1-7 this year. Major hotels including those at Galaxy hotels, Melco Crown, Wynn Macau Ltd. and MGM China Holdings Ltd. are fully booked, according to calls to the properties.

Still, gambling houses need the big spenders for now to generate revenue. Though Macau government wants to draw more tourists, those patrons who make lower bets won’t immediately provide significant growth, said Huang of Nomura.

“The mass segment by default takes time to build because you rely on word of mouth to spread reputation and create desirability to come to Macau,”
he said.