Macau casino operators are preparing to release their second quarter earnings, but according to experts, these reports may not be relevant for understanding the current state of the world’s leading casino hub. JP Morgan Asia equity analyst DS Kim states that market share across operators is highly unpredictable and unimportant at this stage. Macau Gaming Fund II manager Matthew Ossolinski adds that for forward-looking investors, company earnings reports should be almost irrelevant.
Despite no locally transmitted cases of Covid-19 since March last year, the pandemic continues to have a significant impact on Macau. Borders remain closed to overseas travelers, including those from Hong Kong. While mainland Chinese visitors have been able to enter without quarantine since September, travel restrictions have been imposed due to virus outbreaks in Guangdong province, Macau’s largest feeder market. The recent relapse in June reversed revenue and visitor gains seen during the early May Labor Day Golden Week holiday. Casino revenue is still down 60% compared to pre-pandemic levels in May 2019.
Macau’s recovery from the pandemic has been slow compared to the US, where regional casinos and Las Vegas have experienced sharp rebounds. The decline in Macau’s casino revenue can also be attributed to President Xi Jinping’s anti-corruption campaign, which led to a significant drop in revenue from nearly US$44 billion in 2014 to less than US$29 billion in 2015. Beijing has also declared war on gambling, advocating for bans on online casinos targeting Chinese players in Cambodia. Furthermore, mainland citizens face restrictions on outbound money transfers, impacting VIP gamblers who rely on junket promoters for funds.
Macau’s days of explosive gaming expansion are over, according to economist Ricardo Sui, and the impending expiration of gaming concessions in 2022 has prompted casino operators to focus on non-gaming investments to boost their appeal. Despite the challenges, casino operators like Melco Resorts continue to invest in non-gaming facilities, such as the Water Park at Studio City and a joint venture for a theme park in Zhongshan, Guangdong province. These investments signal virtue and aim to attract a broader audience beyond traditional gamblers.
It is important to note that the ongoing developments in Macau’s casino industry and its response to various challenges are not reflected in earnings reports. Therefore, analyzing the larger trends and strategies adopted by casino operators is crucial for understanding the current landscape of the industry in Macau.
