Macau’s public gaming floors are officially smoke-free as of today under rules that appear to be much stricter than casino operators and analysts expected.
Following on four straight months of declining revenue growth marked by concerns about the resiliency of the territory’s vaunted mass market, operators were counting on a flexible ban that would allow them to sequester cash table games with the highest betting limits — their most profitable business, the “premium mass,” as it’s known — in enclosed smoking areas.
This is based on a provision in the rules that is supposed to permit smoking in areas “that are of limited access to specific games and gamblers”. But the government now appears to be adhering to a memo it issued on 30th September that treats the ban literally and restricts all smoking on main floors to detached airport-style smoking rooms.
Brokerage Union Gaming Research Macau calls it “an 11th hour change of plans”.
“Based on conversations we’ve had with industry sources this weekend we can confirm that the smoking ban was apparently expanded to include 100% of mass– market floors, including premium-mass areas,” analysts Grant Govertsen and Felicity Chiang wrote in a client note issued Sunday. “This also includes any enclosed premium-mass areas that had been constructed under the spirit of the new regulations that seemingly allowed for smoking within so-called private gaming areas. This suggests that the recent construction of enclosed private gaming areas—at least for now—was an effort in futility.
“At least for now” is the operative phrase.
“We understand from the operators that the government needs more time to approve the new floor plan and the classification of premium mass area,” analysts Kenneth Fong and Isis Wong of investment bank Credit Suisse said on Friday. “The regulator wants to make sure that after the change, casino smoking floor area is still kept below 50%. So there is still potential for further change in smoking space allocation.”
As of Monday, only 12 casinos and machine gaming venues had completed construction of smoking rooms, according to Health Bureau Director Lei Chin Ion, who said those rooms were still “undergoing administrative procedures”.
The bureau had stated that it was “foreseeable that not all” gaming venues would be able to finish construction of their lounges ahead of the ban, which has proved to be the case, which means that as the law is interpreted currently, those main floors without approved lounges have to be 100% smoke-free.
VIP rooms are exempt from the ban.
Union Gaming notes that “because operators were under the impression that smoking would be allowed in fully enclosed private gaming areas (to include premium mass), they did not build any smoking rooms within their premium-mass areas. Smoking rooms were only constructed on regular mass-market floors. As such, we would expect a new wave of construction to begin immediately to create smoking rooms within premium-mass areas.”
Given the apparent confusion, analysts aren’t certain how this will shake out in terms of gaming revenue. Most, though, are forecasting only a short-term impact until the rules are clarified, all smoking lounges are built and approved, and gamblers and operators have time to adjust.
As of last week, 28 properties had submitted requests with the bureau to establish a total of 62 smoking lounges.
The city has 35 casinos in all and five machine gaming parlors.
