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Macau casino revenue fell in January, the first year on year decrease since July 2016. The 5% decline to US$3.1 billion doesn’t mean Macau has begun a replay of the 2014-2016 slump that cratered casino revenue by 36%. For 2019, expect a lower octane gaming market in line with the slower growing mainland Chinese economy in a Macau transforming into destination that can profit from more than just gambling.

Going down 5% “wasn’t THAT bad,” JPMorgan head of Asia gaming, lodging and leisure DS Kim writes in a research note. Kim adds that January marks a third consecutive month Macau gaming revenue has beaten expectations; the January consensus forecast was a drop of 9% consensus. Boutique investment bank Union Gaming managing director in Macau Grant Govertsen writes that because Chinese New Year starts on February 5 compared with February 16 in 2018, January suffered nearly all of this year’s pre-holiday slowdown, compared February taking the brunt last year. Credit Suisse research analyst Kenneth Fong cites other unique factors hitting revenue last month, including the full casino smoking ban that took effect January 1, tighter mainland China liquidity ahead of the holiday and VIP players taking a pause and junkets focusing on collections following two months of high house win rates.

Sanford Bernstein global gaming analyst Vitaly Umansky writes, “On a standalone basis, January [year on year] growth is not as meaningful as looking at January/February combined.” That’s due to the holiday period falling at different times in different years. Looking at both months captures the entire picture. Bernstein expects the two months will show a year on year decline in the low single digits. Other estimates range to a rise in the mid single digits.

Those figures are interesting but they miss the bigger picture. Macau visitation set a record for December and for the year as whole. Union Gaming’s Govertsen notes the December headline numbers are inflated by bridge tourists, mostly mainlanders intent on crossing the Hong Kong-Macau-Zhuhai Bridge and not necessarily spending meaningfully. But crowds on the streets of Macau and on casino floors, along with hotel occupancy rates up 3.9 percentages points to more than 91%, evidence a very real trend.

Overnight visitors constituted a majority of Macau’s visitors for a second straight year, reaching a record 18.5 million. That’s a million more than last year and 3.9 million more than in 2014, staying an average of 2.2 days, demanding millions more hotel room nights. All of the operators except SJM Holdings have each added thousands of hotel rooms since 2014 to capture this demand, and in some cases, stimulate it. Lawrence Ho-controlled Melco Resorts’ Morpheus, a US$1 billion boutique hotel opened in June, is a modern luxury icon, the world’s first free form high-rise exoskeleton, created by acclaimed architect Zaha Hadid, with exquisitely designed interiors that evoke yacht cabins and serious Chinese and Western fine dining.

Not every casino operator has a Morpheus – Melco’s second straight new building with holes in the middle – but they’re all (except SJM) getting millions of dollars in incremental revenue from those overnight guests. Steve Wynn’s genius was, in part, realizing that 70% of hotel room revenue goes to the bottom line, compared with about 20% from a gaming table. As more of the wave of outbound middle class tourists from mainland China wash into Macau, savvy casino operators will have more paying customers for those rooms plus dining in restaurants, shopping and other non-attractions. That won’t necessarily produce the gaudy headline casino revenue numbers VIP gaming can, but it’s a more profitable play.