The opening of Wynn Palace (above) in August and Parisian Macao in September have coincided with Macau’s return to gaming revenue growth and improved its tourist appeal. (Photo credit: Isaac Lawrence/AFP/Getty Images)

Gaming revenue in Macau rose 14.4% in November to 18.8 billion Macau patacas (MOP; US$2.35 billion). It’s the fourth straight month of accelerating year on year revenue growth, following 26 consecutive months of declines and the first double-digit growth in 31 months. “November was a great month, no two ways about it,” J.P. Morgan Securities (Asia Pacific) Regional Gaming and Lodging Analysts DS Kim and Sean Zhuang write, after their mid-November report declaring Macau’s is turnaround real and sustainable. Both keys to Macau’s recovery, VIP play and enhanced tourist appeal, were in full flower in November.

J.P. Morgan notes that November’s average daily revenue was a “quite impressive” MOP626 million, this traditionally soft month bettering the holiday month of May. Kim and Zhuang attribute the growth primarily to VIP revenue jumping by more than 15%, based on checks with junkets, more than three times better than the estimated 5% rise in October and a turnaround from the 7% decline in the third quarter. Fueling VIP growth, according to J.P. Morgan, favorable recent mainland China macroeconomic trends including a property price rally, rising coal, steel and producer price indexes, along with improved junket liquidity, new resort openings and improved player confidence amid a “less intense” anti-corruption campaign.

Wells Fargo Securities Senior Analyst Cameron McKnight remains “neutral” on Macau in view of long term economic and policy challenges: “In our view, recent stabilization and some market growth has been driven by Chinese monetary stimulus and re-inflation of the Chinese housing bubble, influences we think won’t drive prolonged, above-trend growth.”

In contrast, looking at likely double-digit mass market growth, “November GGR performance should go down as another signal to investors that the recovery in Macau gaming revenues is not a temporary event,” Buckingham Research Group Gaming and Lodging Analyst Christopher Jones writes. Going into this summer’s strong performance, there was no shortage of prognosticators predicting that Macau’s lift in performance was nothing more than a blip in VIP volume. And that excess room and gaming capacity would force operators to drive margins down with increasingly aggressive marketing campaigns. Thus far, there is little evidence to suggest that this has happened. With increasingly stronger GGR performance all but confirming that the market did desperately need incremental hotel capacity.”

Latest government hotel numbers for October bear that out. Sanford Bernstein Senior Analyst Vitaly Umansky notes that Macau’s hotel guests for October increased by 23% year/year to 1.08 million, 64% from mainland China, while the number of rooms increased to 35,600 with 6,700 added in the past 12 months most recently at Sheldon Adelson’s Parisian Macao and Steve Wynn’s Wynn Palace. That’s an addition of roughly 200,000 room nights for the month, and even if you put three guests in each room each night, that still leaves an incremental 400,000-plus added overnight guests in October. “On a year on year basis, we see solid occupancy rate growth in last October,” the report from Bernstein says, “and in the longer-term, we still believe growth in Macau will be driven by increase in supply of new product offerings and continued transportation infrastructure improvements.”

While some intra-month commentary attributed November strength to VIP we disagree that VIP is the primary driver of upside and believe it is largely being driven by mass,” Union Gaming Head of Asia Equity Research Grant Govertsen, the only investment bank analyst based in Macau says. “Our on-the-ground observations and conversations have consistently pointed to visibly growing mass market visitation, especially as it relates to non-premium mass. As we have pointed out previously, (most) mass casino floors and general tourism spots in Macau have felt busier over the last few months than at any point since summer/fall 2014. We would attribute some of this strength to the advertising blitz of Parisian, although we think this tells just part of the story. There seems to be a general and growing wave of casino visitation growth and spend per visitor growth that began in advance of this summers’ openings (and doesn’t show up in headline visitation numbers). While the greatest strength is seen in non-premium mass, we do hear of pockets of strength in both premium mass and VIP. Even though China’s anti-corruption drive is far from over, we believe that after three years we’re finally seeing the beginnings of a trend of customers who had stopped coming to Macau feeling more comfortable about their situations and returning to the market.”

For the year, Macau gaming revenue is down 4.3%. Even if December continues the streak of increasing monthly revenue growth, Macau will almost certainly post its third straight down year. But the uptrend is unmistakably, even if some still find it deniable.