Macau Casino Revenue Hits Highest Monthly Level Since January 2020 Amidst Increased Popularity
In May, the thriving casino sector of Macau, China, reached its highest monthly revenue since the start of the COVID-19 pandemic in January 2020. The Gaming Inspection and Coordination Bureau disclosed that the city's six gaming operators - Sands, Galaxy, Wynn, MGM, Melco and SJM - accumulated a staggering MOP20.188 billion (US$2.51 billion). This figure represents a nearly 9% increase from the previous month and an almost 30% rise compared to May 2023.
During the first five months of 2024, a total gross gaming revenue (GGR) of $11.19 billion has been recorded, showing a 48% improvement from the previous year. However, this is still 24% lower than the amount gathered during the same period in 2019, prior to the pandemic.
The gaming industry in Macau, its key economic component, continues to rebound despite lingering suppression when compared to 2019. This recovery has been driven by a remarkably different regulatory environment.
Embracing the Mass Market
Amid the pandemic, the Macau Special Administrative Region (SAR) government underwent significant changes in the way the six casino companies operate. At the behest of Beijing, authorities instructed VIP junket groups, crucial to attracting high rollers, that their activities would be subjected to increased scrutiny.
Control of these VIP junket groups was believed to help China's President Xi Jinping to reduce the flow of cash from mainland millionaires as a way to avoid paying tax responsibilities to the communist government. The clampdown eventually led to most junkets relocating to other countries with more favorable conditions for their operations, like the Philippines and Vietnam.
This mass migration of junkets led to a decline in the number of VIPs in Macau, prompting the six concessionaires to refocus their business strategies around the general public.
This shift towards the broader market is progressing rapidly, as evidenced by the increase in revenue from the mass market segment. In fact, JP Morgan analysts noted that May marked "a record-high mass GGR" for Macau's gaming licensees.
The $2.51 billion in revenue generated in May outperformed the $3.1 billion collected in January 2020, but still fell short of the $3.22 billion GGR experienced in May 2019 by 22%.
The six casinos continue their commitment to nongaming projects, a stipulation from their 2022 licensing agreement. The companies must spend approximately $18 billion on such projects before 2032.
Predicting the Future
While June is expected to see a downturn in gaming revenue, the month typically sees a drop due to both the conclusion of China's Labor Day Golden Week holiday and hot weather that averages almost 90 degrees Fahrenheit.
As a result, JP Morgan analysts forecast a GGR of approximately $2.2 billion. Nonetheless, despite economic worries in China, Macau's only casino market continues to generate impressive results. Industrial activity on the mainland declined faster than anticipated in May, potentially signaling a potential slowdown in China's economy.
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