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Macau Posts Worst Year Since 2004 With 51% Gaming Revenue Dip in 2022
By Jeff Osienya Jan 07, 2023 IndustryFollowing a tumultuous year primarily due to the resurgence of the Coronavirus, Macau’s gaming sector recorded the worst GGR performance in nearly two decades. Analysts, however, have painted a brighter picture for 2023 in their projections.2022 marked one of the worst years in Macau’s gaming revenue history, as the annual yield dropped by 51% compared to 2021. For the most part, the significant decline has been attributed to China’s Zero-Covid policy, worsened by a series of Coronavirus outbreaks over the course of the year. Following the back-to-back blows to China’s Special Administrative Region (SAR), last year marked its weakest fiscal year since 2004.
Last Sunday, Macau’s Gaming Inspection and Coordination Bureau reported that last month’s gaming revenue was a 56% drop compared to December 2021. Further, the total revenue collected in 2022 is $5.2 billion, a far cry from the $36.4 billion collected in 2019. Nevertheless, despite the negative report, gaming operators and analysts expect a robust post-pandemic recovery in 2023. After all, the SAR’s government has been lifting some of the restrictions imposed since the pandemic’s start.
Renewed Gambling Licences Came into Effect on Jan 1
After a whole year of negotiations on the renewal of casino licenses in the SAR, six gaming concessionaries finally got their licenses renewed.
Besides contributing to the region’s economy through gambling, the operators are also expected to pump revenue into the economy via non-gambling ventures. This was a condition laid out in the blueprint in an attempt to diversify Macau’s economy. Of course, setting up non-gambling investments will cost an arm and a leg especially given the current state of affairs in Macau’s revenue. But even then, there has been optimism on the matter as things are looking up toward the Lunar New Year, which starts at the end of January.
Speaking of which, adding non-gaming revenue to the picture is not a new concept for gaming-reliant economies. Such an arrangement exists in the Las Vegas investment model, which has worked for Sin City. Though, there has been a lot of doubt as to whether the story will be different for Macau operators, as the returns are much smaller for non-gambling ventures.
As soon as the license agreements were signed in December, the concessionaries released their non-gaming plans, with a majority gravitating towards the entertainment and hotel/dining sectors. From themed parks and exhibitions to nightclubs and cinemas to shopping centers and roller coasters, the operators have implied that they are ready to comply with the government’s conditions despite the risks involved.
On the flip side, IGamiX founder Ben Lee believes that the Macau gaming concessionaries may not deliver on the promise to focus some of their energy on non-gambling business initiatives. They have failed to do so in the past 20 years that they have had a presence in the SAR.
According to him, Galaxy, Sands, and Melco may fare better than their three rivals as they have more strategic management teams. Moreover, the trio (Galaxy, Sands, and Melco) have previously demonstrated an interest in diversifying their portfolios to include non-gaming initiatives. Further, Lee pointed out, adding that non-gaming in Asia is less profitable than in the case of Las Vegas due to punters’ spending habits.
Other requirements stipulated in the license agreement that lasts ten years include expanding to overseas markets.
New Hope for Macau’s Gaming Scene As Restrictions Loosen
The Macau gambling scene has been gloomy for the past three years, but 2023 may be the year the market hits full recovery. Most investors are looking forward to a better year with the resumption of overseas arrivals, which will open the market to a healthier performance.
On the other hand, the last 20-year license period has been quite lucrative for the six gaming operators as they have managed to amass billions in revenue over the years. This propelled the industry and set it above other gambling hubs, even overtaking Las Vegas to become the capital of gambling in the world. While various factors have brought about setbacks over the years, the pandemic is by far the worst, as its effects have been felt for almost half a decade.
March 2022 marked the beginning of Macau’s woes as a new wave of the virus raged through the region and mainland China, causing the government to impose strict preventive measures. Then, in July, there was yet another bout of infections, and casinos were worst hit as they were forced to shut down immediately, throwing the industry into uncertainty.
Despite a difficult 2022, there is finally some hope for the coming year as the government has already removed some of the limitations that hindered businesses from turning reasonable profits. The lifting of restrictions began in December, and according to Bloomberg, the results were almost immediate since there was a 35.5% month-on-month rise in revenue. It is estimated that casinos stand to bring in way more income, with analysts predicting an average growth of 195% by the end of 2023.
According to local media reports, Morgan Stanley predicts that in January alone, the total revenue will skyrocket to between $497 and $770 million. In addition, the Credit Suisse Group AG noted an 87% rise in revenue during Q4 2022, indicating that the decline may soon be over and that there are brighter days ahead. Based on the numbers, the bank has predicted a significant month-on-month revenue increment following an increase in tourists from mainland China.
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