Macau grapples with ‘what the future looks like’ even as China’s reopened border deals a winning hand to casinos
- Macau’s casino are doubling down on the mass market, which has rewarded them handsomely
- City will ‘never go back to where we had been during the peak’, gaming expert says
It is midnight in Macau, and there is not an empty seat on the casino floor of the Grand Lisboa Hotel, the city’s most iconic landmark. Casino goers at the baccarat tables stare at their chips with undivided attention, while onlookers anxiously wait for the right moment to place their bets.
“This is my first time coming to Macau since Covid-19 hit,” said Luo, a mainland Chinese tourist from Foshan in his late fifties. “I’ve watched a lot of tutorial videos on Douyin to get gambling tips and prepare myself during the past few months. Now it’s time to try them out.”
Macau’s casino operators are going all out to capture China’s tourism wave after the reopening of its borders, and are doubling down on the mass market. So far, this play has rewarded them handsomely.
08:31
What’s new in Macau: attractions that have opened in the city since the pandemic
The city lost its crown as the world’s largest gaming hub to Las Vegas last year, but is now on its way back. Macau’s gross gaming revenue in the first four months of this year amounted to US$6.2 billion, while the Las Vegas Strip Area generated US$2.2 billion in revenue during the first quarter of this year, government data shows.
“The trajectory indicates that the mass market may get to the pre-pandemic level due to China’s tourism boom,” said Ben Lee, a gaming expert and managing partner at IGamiX Management and Consulting. “We will never go back to where we were in terms of gross gaming revenue at our peak.”
Market bulls such as JPMorgan Securities are cheering on the tourism-aided recovery. Mass-market demand most likely recovered to more than 90 per cent of pre-Covid-19 levels during the Labour Day holiday, and it could stage a full-scale recovery by next year with potential surprises in both the pace and magnitude, the brokerage said.
That suggests casinos’ earnings, which have already beaten the market consensus in the first quarter, are likely to continue to impress this year. Sands China, for example, saw its net revenue rise by 132 per cent year on year to US$1.28 billion during the first quarter, about 55 per cent of its pre-Covid-19 levels.
Investors, however, appear to have not bought into this rosy outlook.
06:31
‘What else have we got?”: Macau questions role as casino hub after painful Covid downturn
After seeing the stocks of the six casinos – Sands China, Galaxy Entertainment, MGM China, Melco International Development, Wynn Macau and SJM Holdings – surge by as much as 240 per cent from a low in October last year, some investors decided it was time to book profits. A gauge tracking the six stocks trading in Hong Kong and the United States has dropped for four straight days since May 3, its worst performance in nearly two months that has also erased all the gains made in 2023.
Galaxy, for instance, said it would build Macau’s first and only hi-tech themed amusement park that will cover 61,000 square metres, to attract more families and leisure visitors to the city. Similarly, MGM said it is working with a virtual-reality company to launch a show directed by Zhang Yimou, one of mainland China’s most prominent film directors.
Non-gaming attractions such as retail, dining and entertainment offerings do bring new customers to the gaming hub. For instance, a tourist from Hong Kong who had come to Macau with her husband for Cantopop icon Leon Lai’s concert at Melco’s Studio City on May 1, said she decided to drop by the casino floor on the second day to kill some time.
But the investment requirements are still a burden for the gaming industry, which has yet to recover from a total loss of US$1.6 billion over the past three years. “We’re burning so much money and everyone in the industry needs to play by the rules,” a senior casino management staff member, who declined to be named, told the Post.
02:35
Mainland China to open all borders with Hong Kong and Macau, travel tours to resume
Moreover, there are other risks casting shadows on the industry, according to IGamiX’s Lee. The tourist inflows to Macau are likely to slow down when China adds more international flights later this year, while a labour shortage and the city’s infrastructure are likely to limit its ambitions to absorb more tourists than pre-pandemic levels.
“A lot of unknowns at this point,” Robert Goldstein, the chairman and CEO of Sands China and its parent, Las Vegas Sands Corp, said in a conference call with investors last month. “I don’t think we should pretend to know what the future looks like.”
But that is of little concern to tourists like Luo, who used to visit casinos every two to three months before Covid-19, and is now planning to revive the tradition, if time allows.
“Even just playing on slot machines for HK$20 [US$2.5], I’m having fun.”
