Macau’s new smoking regulations could crimp VIP revenue, but overall the impact will be relatively limited, JP Morgan said in a note.
The firm said the proposals could lead to a 10 percent decrease in VIP and premium mass revenues and a 5 percent drop overall in 2019, the expected first full year of enforcement.
“Though somewhat expected, a new proposal is far more lenient than the previous version (submitted to the Legislative Assembly in June 2015), which urged a ‘complete blanket ban’ on smoking inside casinos (not even in smoking lounges),” the note said.
“Put differently, we believe the sector-wide impact to be about 5 percent of estimated 2019 GGR… or approximately 3 percent of EBITDA [earnings before interest, taxation, depreciation and amortisation]… It’s not nothing, but manageable.”
Casino operators will have until January 1st 2019 to upgrade their smoking lounges or set up new ones according to the new standards laid out by healthcare authorities.
The Health Bureau requires that smoking lounges in casinos generate a negative pressure of at least -5 pascal in order to prevent cross-contamination from room to room.