MACAU BUSINESS
Casual players The robust start of the year does not surprise Kwok Chi Chung, president of the Macau Association of Gaming and Entertainment Promoters, owing to the lifting of the travel restrictions. “When the capacity of the transportation service has been back to the pre-COVID level, Macau will even attract more visitors to come back… to spike the gaming revenue,” the president of the junket trade body says. Albeit a shrinking volume compared with the “golden days”
of the industry, Mr. Kwok notes that the business of the local junkets has improved in light of the removal of travel restrictions. “The model of the Macau gaming industry now relies on the mass market, with junket operators playing a supporting role,” he says, stressing that local junkets still have room to survive in the local market. Addressing the role of junket operators in the future, Wynn’s Billings said: “I think it’s actually a little bit too early to call out what role the gaming promoters and the junkets will play in the market, but there certainly was some activity.” According to the estimates of various brokerage analysts, the
revenue of the mass market so far this year has already recovered to about 60-70 per cent of the pre-pandemic volume, a level enough for most local gaming operators to have positive free cash flow, while the recovery of the VIP market was much lower. Brokerage JP Morgan foresees the mass market reaching the pre-COVID level as soon as the end of this year but the recovery of the VIP segment will continue to hover around 15 per cent. “We expect the demand to continue ramping-up with casual
and less-hard-core players returning, to print sequential growth every quarter to hit 100 per cent mass recovery by the end of this year [versus the previous estimate of mid-2024], and (well) beyond pre-COVID levels into next year,” the investment bank said in a recent research note.
Higher margin “VIP recovery, which we estimate to be at around 15 per cent of pre-COVID levels, has also been tracking solidly for a segment that’s been considered ‘gone’ given the demise of junkets,” brokerage JP Morgan said in a recent research note, “but we highlight again that VIPs don’t really move the needle much for the profits [of the operators] given the very low margin of high-single-digit… vs 35 per cent to 40 per cent for mass.” Davis Fong Ka Chio, director of the Institute for the Study of
“The market roared back. Macau was a ranger on the mass side, on the direct VIP side, on the retail side, and on the occupancy side during Chinese New Year, and it
outperformed our expectations for the lull period shortly thereafter,”
said Wynn’s Craig Billings
Commercial Gaming of the University of Macau (UM), thinks the current mix-up of the gaming market is favourable for gaming operators. “Though the monthly gaming revenue now is lower than over MOP20 billion in the pre-pandemic period, the revenue is now supported by the mass and premium mass market that has a higher margin [than the VIP segment],” the scholar remarks. “After three years of the pandemic, as well as some major
changes in the [gaming] policies, both the government and industry players need to pay attention to observe whether there are any changes in the consumption behaviours and preferences of visitors,” he adds.
Non-gaming While the gaming industry has enjoyed a better-than-forecasted performance so far this year, Prof. Fong adds that it needs to wait and see for a few more months to gauge the momentum of the recovery, but he is optimistic that the gaming revenue could hit MOP130 billion in 2023 as expected by the authorities. Ultimately, the full recovery of Macau’s gaming revenue depends on whether and when the size of the mass market can offset the loss of the VIP segment. And there are signs some of the junket gamblers have shifted to the premium mass segment or the VIP segment directly run by gaming concessionaires, according to Mr. Billings of Wynn. “We certainly are seeing former junket customers migrate into both premium mass and into direct,” he said in the recent earnings call. “It’s way too early to be talking about percentages given the market really just fully reopened on January 8.” This year also marks a new beginning for the gaming
industry, as the six gaming operators’ new 10-year concessions officially begin, with a focus on developing non-gaming offerings and attracting international
visitors.As per the request of the government, the six concessionaires pledged to invest over MOP108.7 billion in the upcoming 10 years to achieve these two goals. This is one of the reasons that Prof. Zeng of the Macau
Polytechnic University believes it’s not reasonable to think Macau gaming revenue could reach the pre-pandemic level, at least in the foreseeable future. “We all know the current focus of the Macau government and concessionaires is not the gaming industry but the non-gaming offerings,” he adds.
18 APRIL 2023
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