Macau Operators Sport October Improvement, But Recovery Still Lethargic

Posted on: November 12, 2020, 11:01h. 

Last updated on: November 12, 2020, 11:45h.

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

After months of some of the worst gross gaming revenue (GGR) and visitation numbers on record, Macau gaming companies saw some green shoots in October. GGR declined less than expected and perked up on a month-over-month basis.

Macau
A student at the Macau Polytechnic Institute receiving instructions from her professor. The region’s gaming economy is perking up, but there’s still work to be done. (Image: Getty Images)

Although the Golden Week holiday in the early part of the month was disappointing, revenue and visitation trends over the course of October were broadly stout. That prompted some operators to say they broke even on the basis of earnings before interest, taxes, depreciation and amortization (EBITDA) on a fraction of the revenue generated a year earlier. MGM China and Wynn Macau are among the gaming firms recently highlighting positive trends in the world’s largest casino center.

We believe the gradual recovery is due to pent-up demand from patrons avoiding [Macau] during Golden Week,” said research firm Jefferies in a note. “However, the VIP business remains challenged due to liquidity pressures, and we therefore expect a slow and gradual recovery.”

There are six concessionaires in the Chinese territory, three of which are US-based companies — Las Vegas Sands, MGM, and Wynn.

Still Sluggish

While October was less bad for Macau operators, the recovery trajectory there remains slow. That crimps the hypothesis that the peninsula would shake off the effects of the coronavirus pandemic late this year, setting the stage for a material rebound in 2021.

Weighing on the rebound are a slew of travel-related issues. For example, it wasn’t until late August that Guangdong province, the mainland China region closest to the gaming hub, resumed issuing individual visit scheme (IVS) visas. The rest of the country joined about a month later, but the help to Macau has been incremental at best.

Would-be tourists have to apply for the visas in person, and approval times are spanning up to two weeks. Additionally, those hoping to travel to Macau must present nucleic acid tests proving they’re COVID-19 negative, and the results cannot be older than seven days, though there is talk that could be expanded to 14 days.

Further pinching the recovery effort is that Hong Kong and Macau haven’t yet established a travel bubble. Gamblers from the former are major drivers of the latter’s GGR and visitation numbers.

Premium Mass Power

With VIP players still skittish about returning to Macau, and mass market gamblers not known for high spending levels, operators in the special administrative region (SAR) need to get some help from the group in the middle, known as premium mass.

It appears that’s happening, as some companies are pointing to encouraging length of play and spending trends among gamblers in that segment.

“Major casino players in the region continued to reel under the crippling effects of COVID-19 in the third quarter, but have pointed at a notable improvement in October, especially in the premium mass segment, loosely defined as wealthy middle-class individuals placing big bets,” according to S&P Global Market Intelligence.