Retail and hotel weakness to linger: Morgan Stanley

Macau’s 16Q1 industry EBITDA was down 7 percent year on year, driven by weak retail and hotel performance, bad debt and mix change, say Morgan Stanley analysts.

In a report released on Monday from the brokerage, industry EBITDA was down 3 percent quarter on quarter, lower than previous expectations (+1 percent).

According to its analysts, the key reasons for the margin decline was weaker retail performance, particularly from Galaxy, higher bad debt provisions, and mass revenue growth being weaker than VIP growth, increased staff costs due to a wage hike, new hires, as well as a decline in hotel occupancy.

The brokerage said retail and hotel weakness is likely to continue, and the slow ramp up of Galaxy Phase 2 and Studio City will also affect margins for the months ahead.

Daily GGR could stay below MOP600 million this year, except in May and October due to the long Chinese holidays, said the brokerage.