Macau GGR Trending Higher to Start September, Big Decline Still in Offing

Posted on: September 7, 2020, 12:23h. 

Last updated on: September 7, 2020, 01:11h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Gross gaming revenue (GGR) in Macau is ticking higher this month, suggesting relaxed travel policies are starting to pay off. But another big year-over-year decline is still in the cards.

Macau Casinos September 2020
An aerial view of Macau casinos in 2018. There are signs of revenue improvement to start September. (Image: South China Morning Post)

Buoyed by mass market players and VIPs, GGR in the world’s largest casino center was probably around $63 million through the first seven days of this month, according to research firm Bernstein. On a month-to-date basis, average daily revenue is lower by 89 percent compared to September 2019.

While the ninth month of the year is still in its early innings, Bernstein is forecasting a revenue decline in the mid-80’s percent range. That sounds bad, and it is. But if that’s the result, it will be better than the 94.5 percent slide in August, which was the fifth straight month of drops of 90 percent or more. August was also the eleventh consecutive month in which Macau GGR retreated year-over-year.

In recent days, analysts are estimating that September won’t bring an epic rebound for concessionaires on the peninsula. But added incremental improvements this month could set the stage for a more material resurgence in the fourth quarter.

Looming Catalysts

Macau’s recovery efforts are being stymied by bureaucratic delays, which is something that can be worked through as 2020 draws to a close.

Last month, the city of Zhuhai in Guangdong resumed issuing individual visit scheme (IVS) visas, followed by the rest of the province on Aug. 26. Those are positive steps. But analysts widely said it will take some time for those moves to directly benefit concessionaires’ top and bottom lines. The hold-up revolves around processing times.

There’s evidence of the pent-up demand operators frequently discussed over the course of 2020. But Guangdong travelers are facing wait times of seven to 10 days to get their Macau visit permits approved. The province is the closest mainland region to the gaming hub and accounted for almost half the visits to the casino center last year.

Assuming there’s not another widespread outbreak of coronavirus cases, the rest of mainland China is slated to resume issuing IVS permits on Sept. 23. Allotting for cumbersome waiting periods, that move would start benefiting Macau operators in the fourth quarter.

What’s Next

Bernstein says concessionaires with a focus on the premium mass and VIP segments, which includes Melco Resorts & Entertainment and Wynn Resorts, should get some near-term tailwinds if traffic from those groups remains steady.

However, the research firm adds there’s limited visibility as to when travel between Hong Kong and Macau will reopen. Hong Kong’s COVID-19 case count is declining, which is positive because that special administrative region (SAR) accounts for 10 percent of annual visits to Macau, according to Bernstein.

The impact of IVS resumption will be soon be tested with the arrival of Golden Week on Oct. 1. Consensus wisdom among analysts is that the festival will go a long way toward determining how strong Macau’s fourth-quarter recovery will be.