A study from the University of Macau’s Center for Macau Studies and Economics Department suggests that the Covid-battered gaming hub will not recover this year. According to Asia Gaming Brief, the report indicates that the local economy could contract between 26.4 percent and 29.2 percent for the 2022 fiscal year.
“In the first half of 2022, the economic conditions for Macau were extremely challenging,” the report said. With “no clear prospects,” a genuine economic rebound “may be a long way off.”
The special administrative region (SAR) is the only place in China where gambling is legal, and for decades, the industry has played an outsized role in filling government coffers. Traditionally, Macau’s 40-plus casinos have provided about 80 percent of revenues and more than 55 percent of the city’s gross domestic product. More than 82,000 people worked in the industry in late 2020, accounting for more than 17 percent of the city’s working population.
With the onset of Covid-19, the Chinese government enforced travel restrictions and periodic lockdowns that sent gaming revenues off a cliff, and took the larger economy with it.
In the first quarter of fiscal year 2022, GDP fell by 8.9 percent year on year. And a major viral outbreak in June caused GDP to fall 39.3 percent in the second quarter.
“Under the multiple strict local control measures, many daily activities could not be carried out, and the economy continued to deteriorate,” the report stated.
But recently relaxed eVisas for individuals and tours brought more people from the Chinese Mainland to Macau for the Golden Week holiday, the first week of October. For the first three days of this month, visitation reached 91,509, up 1,595 percent from the year before, official data showed. Mainland visitors accounted for 89.7 percent of all arrivals.
Golden Week marks the founding of the People’s Republic of China.
According to Macau Business, despite ongoing challenges, Fitch Ratings analyst Colin Mansfield says that over time, the SAR should regain its position as the world’s most profitable gaming market, though the possibility of future outbreaks and corresponding restrictions remain a risk.
The city reported MOP31.9 billion (US$3.99 billion) in gaming revenue for the first nine months of 2022, a 53.1 percent decrease from the same period last year. Still, September was up by 35.3 percent from the previous month as pandemic restrictions were lifted.
Mansfield said predicting the Macau recovery is “the most challenging forecasting exercise” in the world. “You pick a year and you say, ‘They can’t keep the casinos closed for this long,’ they will reopen by this period. Then you assume there will be some linear recovery. But we learned that that’s actually not the case, the recovery in gaming demand is actually quite quick.”
However, he added, “Forecasting Macau is extremely challenging because we just don’t know when the demand will snap back, as it is mainly dependent on visitation… We’re modeling gross gaming revenue to be about 70 percent of 2019 levels by 2024 and 90 percent by 2025…. Nobody knows when that will happen.”
He concluded, “Macau is still the best game in town” for Chinese travelers who want to “go away for the weekend… The critical mass is also important… If a player feels unlucky in a certain casino, he can just get up and cross the street to another one.”
Meanwhile, “pandemic business planning, defense posturing, cash flow management is all happening as the operators have to think about the next round of concessions, which in itself is one of the most material economic decisions and exercises that these companies will probably have to go through.”
Macau’s Big 6 casino operators have all applied for new 10-year concessions to begin in January. One surprise entrant also put in a bid: GMM S.A., a subsidiary of Malaysian gaming operator Genting. The Macau government expects results of the public tender to be ready by year’s end.
The six bidders in addition to Genting are: Wynn Resorts (Macau) S.A., Venetian Macau S.A., Melco Resorts (Macau) S.A., MGM Grand Paradise S.A., Galaxy Casino S.A. and SJM Resorts S.A.
