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Chinese New Year Boosts Macau Gaming Revenue By 82.5% in January
By Jeff Osienya Feb 12, 2023 IndustryThe Lunar New Year catapulted Macau’s monthly GGR by over 80% year-over-year to mark a shining start for 2023. Join us as we dig deeper into the performance and what it means for the future of Macau’s economic lifeblood.In January, Macau casino operators reaped big amid the end of China’s Covid Zero policy and the week-long Lunar New Year break. These factors saw a surge in the number of visitors traveling to the former Portuguese colony, signaling that it’s on the road to recovery towards a thriving post-pandemic future.
In a report published by the Macau Gaming Inspection and Coordination Bureau (DICJ), the region’s gross gaming revenue (GGR) increased by 82.5% in January from last year to 11.6 billion patacas (~$1.4 billion). The stellar revenue figures have surpassed the median estimates of a 36.5% jump based on initial projections by Bloomberg analysts.
Thanks to the Lunar New Year showing, China’s Special Administrative Region (SAR) recorded the highest monthly revenue since January 2020 and the first increase since February last year. However, although the number of visitors was higher than that of the past three years, January’s GGR is still less than the revenue collected in 2019 during the same period.
Macau’s Gaming is Off to a Flying Start in 2023
On January 8th, China dropped the mandatory covid testing requirements for visitors from Taiwan, the mainland, and Hong Kong just in time for the Lunar Year celebrations. Based on provisional data from the Macau Tourism Data Plus, around 451,000 visitors, mostly from mainland China arrived in Macau for the festivities, representing a 300% year-over-year increase.
The increased gaming revenue figures come at a time when Macau experienced ten consecutive months of double-digit revenue decline due to Covid outbreaks. At the same time, Covid-19 response policies by President Xi Jinping kept casinos predominantly empty for the better part of 2022. As a result, the 2022 annual income generated by the SAR was at its lowest since 2004. This downturn is how the city that once boasted of being the world’s top gambling Mecca with its revenue toppled that of Las Vegas six times in 2019 lost its title.
In addition, China and the local government focused on chasing away junket groups during the Covid pandemic. Clamping down on the junket system has been the president’s long-term goal, as he believes the massive capital inflow from mainland China through Macau creates national security risks. For example, last month, Alvin Chau, a renowned VIP junket kingpin, was handed an 18-year jail term after he was found guilty of aiding illegal cross-border betting.
Thankfully, as of last week, China started allowing group tours from the mainland to Macau and Hong Kong. The move will for sure have a positive impact on Macau’s future GGR.
Analysts Project a Much Brighter Future for Macau’s Gaming
In late November last year, President Xi announced he would end the strict Zero Covid policy, fueling gaming sector recovery optimism in Macau. According to industry observers, the recovery will stretch at least throughout Q1.
For example, on January 30th, Sing Tao Daily, a Hong Kong newspaper, reported that hotel rates in February and March had increased to pre-covid levels. In addition, Bloomberg analysts have also reviewed their annual revenue estimates for the SAR’s gaming scene upward. They have issued a median forecast of a 222% jump in Macau’s yearly gaming revenue compared to the 195% increase they had predicted in January.
As we speak, data already indicates that the daily gambling revenue is back to about 60% of the pre-covid levels. However, despite the improving performance and the stellar Lunar New Year figures, it remains unclear if the upward trend will continue throughout the year. With that in mind, Kenneth Fong, a Credit Suisse analyst, has warned about the sustainability of the rebound pace by the sector. Additionally, in a note seen by Bloomberg, DS Kim, an analyst at JPMorgan Chase & Co., said:
Quote“All the operators that we’ve met were positively surprised by the level of demand during Lunar New Year. We feel good about the pace and magnitude of recovery here. While the period (Feb. 1-5) did include a bit of a boost from the tail-end demands post Chinese New Year (which helps high-end/VIP demand more than mass) … the print was better than expected.”
However, Kim noted that he would have to closely monitor Macau’s GGR for another week or so to confirm his predictions. Meanwhile, Rob Goldstein, the Chairman and Chief Executive of Las Vegas Sands and majority owner of Sands China, noted that the company is witnessing a strong rebound in the Macau market. This performance comeback is a direct result of the lifting of stricter Coronavirus testing requirements by mainland China. He said:
Quote“We’re just thrilled to be open and making money and seeing demand like we’re seeing.”
The gross revenue collected in January was the first for SJM Holdings, Wynn Macau, MGM China, Sands China, and Galaxy Entertainment under the new 10-year contract.
All Eyes On Macau’s Non-Gaming Ventures
In the next ten years, the six gaming license concessionaires are focused on pumping about $15 billion into the gaming mecca’s economy. About $13.5 billion, or 90% of this investment, will be channeled into creating non-gaming amenities such as health and wellness centers, convention spaces, and indoor waterparks. The total input for each license holder was calculated based on its market share in the region. So, for example, SJM resorts will part with $1.5 billion, whereas Sands China will invest $3.8 billion in non-gaming amenities.
A lot is riding on whether the casinos will successfully achieve the government’s mandate to increase their non-gaming revenue to above 30% of their total revenue collected. Compared to the pre-pandemic period, the said gaming license concessionaires only managed to have their non-gaming win reach 5% of their gaming proceeds. Meanwhile, Sin City, Macau’s closest competition, generates 50% of its revenue from non-gaming activities.
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