Macau casinos have seen gaming revenue surge in January amid China’s reopening and the week-long Lunar New Year. These factors sparked an influx of visitors to the gambling hub, fueling optimism that the city is finally leaving the worst days of the Covid pandemic behind.
On Wednesday, Macau’s Gaming Inspection and Coordination Bureau announced that gross gaming revenue climbed 82.5% last month from a year earlier to 11.6 billion patacas ($1.4 billion). The figures beat the median estimate of a 36.5% increase, according to analysts surveyed by Bloomberg.
Tens of thousands of tourists streamed daily into Macau’s casinos and picturesque cobbled streets over the Lunar New Year holiday from Jan. 21, points out Reuters, a stark contrast to the dearth of visitors to the former Portuguese colony since 2020.
January marks the first rise since February last year and the highest monthly revenue since January 2020. The recovery follows 10 consecutive months of double-digit declines as Covid Zero policies and a crackdown on cross-border gambling kept casinos mostly empty for much of 2022.
Proof of the heavy impact of the Covid pandemic on the hub was that last year’s annual takings were the lowest since 2004. The city — which in 2019 reported gaming revenue that was six times that of Las Vegas — lost its title of the world’s top gambling hub, as restrictions took a toll on its industry.
However, China’s Covid reopening on Jan. 8, just a few days ahead of Lunar New Year celebrations in the latter part of the month, has sparked a surge in travel, signaling full recovery could be underway. About 451,000 visitors arrived in Macau during the week-long holiday, an almost 300% increase from a year earlier. As expected, provisional data shows most arrivals came from mainland China.
“All the operators that we’ve met were positively surprised by the level of demand during Lunar New Year,” JPMorgan Chase & Co. analyst DS Kim wrote in a note Monday, retrieved by Bloomberg. “We feel (very) good about the pace and magnitude of recovery here”, Kim said.
Experts believe the rebound may stretch, at least, through the first quarter. Macau hotel room rates for February and March have already risen to pre-pandemic levels, Hong Kong newspaper Sing Tao Daily reported Jan. 30.
Analysts surveyed by Bloomberg have also ramped up their estimates for the sector. The median forecast is for 222% growth in gaming revenue this year, from 195% predicted a month ago.
While the Lunar New Year travel spike is welcomed news for the sector, it could prove to only be a short-term boon for Macau. It remains uncertain whether the sharp pace of gaming revenue growth will be sustained for the rest of the year, as casinos face increasing scrutiny from the government amid Beijing’s push for the city to shift away from its reliance on gambling; as well as a broader crackdown on the once-dominant VIP gambling sector.
While daily gaming revenue is back to around 60% of pre-Covid levels during the peak holiday season, Credit Suisse analysts including Kenneth Fong warned about the sustainability of the recovery’s pace. Macau is likely attracting more visitors due to its lack of Covid testing requirement versus Hong Kong and a dearth of international flight capacity in the mainland that is limiting travel options for now, while pent-up demand from Hong Kong residents may wane over time, points out Bloomberg.
January’s revenues were the first for Sands China, Wynn Macau, MGM China, Galaxy Entertainment, MGM China and SJM Holdings under new 10-year contracts. The new contracts, with more government oversight and control, were struck after COVID-19 restrictions decimated Macau’s gambling revenues and sent net debt soaring.
Casinos have now committed to investing a total of $15 billion in the coming decade, 90% of which must be spent on developing non-gaming plans that include an indoor waterpark, health and wellness centres, art exhibitions and a large garden attraction by Sands, similar to Singapore’s Gardens by the Bay.
Stakes are high as to whether they can successfully deliver on a government mandate to increase non-gaming revenues to more than 30% of the total versus an average of 5% pre-COVID. In Las Vegas, around 50% of revenues are non-gaming, notes Reuters.
