Macau casinos to win $22.7 billion in 2023, sparking surge in non-gaming investment
Macau's gaming industry beat analysts' expectations for casino profits in December, capping a strong first year of COVID-19 recovery.
The Chinese enclave's gross gaming revenue (GGR) reached 18.57 billion patacas ($2.3 billion) by the end of 2023, beating analysts' consensus forecast of $2.1 billion.
2023 marks the beginning of the region’s pandemic recovery after Chinese President Xi Jinping ended the “zero COVID” response at the end of 2022. The end of the directive brings life back to normal in the world's second-most populous country in more than three years, with the coronavirus believed to have originated on the mainland.
Casinos posted full-year profits of 183 billion patacas ($22.7 billion) in December. Gaming revenue for the six commercial casino operators was up 334% year-over-year and 111% higher than in 2021.
Last year, however, Macau casinos won just 62.6% of the money wagered by the six operators before the pandemic hit in 2019, when total gaming revenue was $36.3 billion.
The market has changed dramatically since the outbreak. Former face of the agency industry, billionaire Chow Cheuk Wah, who runs Suncity Group, was successfully prosecuted for gambling offences, fraud and money laundering and sentenced to 18 years in prison. After Zhou's arrest in 2021, many of the VIP groups that brought mainland high-rollers to tax haven gambling meccas closed operations out of fear of being similarly targeted.
The Macau prosecution was conducted under direct orders from Beijing, which concluded that such VIP junket organizers essentially helped wealthy mainlanders launder money through the special administrative region's high-end casino resorts.
Good or Bad Results
In December 2022, Macau's six casino companies - Sands, Galaxy, MGM, Wynn, SJM and Melco - received new 10-year gaming licenses in exchange for a commitment to jointly contribute at least 118.8 billion patacas ( US$14.72 billion) investment. to their resort. More than 90%, or about $13.5 billion, must be allocated to non-gaming projects.
Under Beijing's guidance, Macau is trying to diversify its economy with new inducements to complement its casino market. The 2022 franchise agreement includes a provision that would increase non-gaming requirements by 20% if the six casino operators win at least 180 billion patacas ($22.3 billion) in a year to 2027.
With total GGR set to exceed $22.7 billion by 2023, casinos will now need to invest an additional $4.48 billion in non-gaming investments to bring total non-gaming investments to nearly $18 billion.
In November, Macau Chief Executive Ho Iat Seng bizarrely stated that casinos would not meet the non-gambling trigger threshold, despite being almost on track to do so.
I can tell you that this [$22.3 billion] number is impossible,” Ho explained.
Before the outbreak, Macau's casino profits totaled US$36.5 billion in 2019.
Casinos expected to increase
While that's certainly uncertain this year, Macau casinos may have been planning for growth outside of gaming, with a strong performance in December pushing gaming ahead of expectations in the final month of the year, driven by a strong Christmas holiday. If the $22.5 billion threshold is not reached this year, the industry must believe it will be exceeded in any year by 2027.
Segmentation of non-gaming spend targets based on 2022 market share. Before triggering the rate hike, Sands paid $3.46 billion, Galaxy paid $3.42 billion, Wynn paid $2.05 billion, MGM paid $1.87 billion, SJM paid $1.5 billion and Melco International paid $1.24 billion.
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Source: www.casino.org
