Analysts say Macau’s gross gaming revenue is expected to recover to 82% of 2019 levels
Analysts focusing on Macau expect a second year of recovery from the COVID-19 pandemic, after the gaming market surged 334% last year to reach about 63% of 2019 market levels.
Macau’s gross gaming revenue (GGR) reached US$22.7 billion last year. Market observers believe the mass market is back in full swing, but a decline in VIP gaming means Asia's casino destinations remain sluggish compared to 2019.
Macau is in the midst of a pandemic recovery and a transformation of the casino industry. The days of junkets bringing large numbers of VIP high-rollers to China's Special Administrative Region (SAR) are essentially over. The market shift comes after Beijing ordered law enforcement to monitor junket organizers more closely, leading to the indictment of Suncity Group billionaire Zhou Zhuohua, who is currently serving an 18-year sentence in a Chinese prison.
Macau's six casino operators are diversifying their resorts to attract a wider group of tourists, especially non-gambling guests. To secure new 10-year gaming licenses in December 2022, the six companies agreed to invest $13.5 billion in non-gaming projects. Spending commitments increased by $4.48 to nearly $18 billion after triggering a 20% premium on non-gaming commitments for 2023.
2024 Outlook
Analysts expect Macau’s epidemic recovery to further improve in the next 12 months. Macau's gross gaming revenue is expected to recover to 82% of 2019 levels this year, Hong Kong-based financial services firm CLSA said in a report this week.
Macau casinos made $36.3 million in profit in 2019, meaning CLSA analysts forecast total casino profits in 2024 of about $29.8 billion. That would be an increase of more than 30% compared to last year.
Mathematically speaking, Macau's total revenue in the first half of 2023 is still from a low base, as Macau needs time to resolve the labor shortage bottleneck and increase transportation capacity from mainland China," CLSA said in a statement.
Analysts at CLSA expect a "robust" 2024 holiday season in Macau. China's holiday calendar focuses on the Lunar New Year next month. The Spring Festival is from February 10th to 17th, which is also when most workers take a week off. Other important holidays include Labor Day, May 1-5, and National Day, October 1-7.
Visitor Required
For the gaming industry to continue growing, Macau needs to attract more new tourists and potentially convert some of them into mass-market gamblers. Nomura analysts are less confident that the region will return to 2019 tourist numbers this year.
Macau welcomed approximately 28.2 million tourists last year, nearly 400% more than the transit arrivals in 2022. This represents only 71.5% of the 39.4 million tourists Macau received in 2019.
Analysts at Nomura Securities said "significant headwinds remain" for Macau to return to 2019 tourist conditions.
The research report pointed out that the "stagnant" income of mainland residents is the main reason for the setback in tourism optimism this year. The yuan has also been criticized for its depreciation compared with other major world currencies.
The situation in Macau does not look as bad as in other countries in the Association of Southeast Asian Nations (ASEAN). Flights from China to Singapore, Malaysia, the Philippines, Thailand, Vietnam and Indonesia have recovered to less than 60% of 2019 levels, Nomura said.
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Source: www.casino.org
