Macau received promising comments from a Morgan Stanley expert at G2E this week. [Image: Shutterstock.com]
Despite fleeting business during the peak period and post-epidemic recovery phases, Macau is in a position to remain a “highly profitable” market for operators.
It expects Macau’s revenue to exceed its total for 2019 and to fully recover by 2024
Praveen Chowdhury, director of Morgan Stanley Asia, said his company expects Macau’s revenue to exceed its 2019 total and fully recover by 2024. His remarks on Wednesday culminated in the presentation of the Morgan Stanley Financial Outlook of Asian Gaming Destinations at G2E Asia.
Macau has been faltering for two years, but optimism will go a long way to ensuring its business grows.
The struggle in Macau
G2E is an annual summit held to discuss the latest developments in the gaming and entertainment industry. This week’s meeting took place in Singapore, one of the world’s richest and most expensive countries.
During his presentation, Chowdhury cited the pandemic as an obvious cause of Macau’s recent economic downturn. He also pointed to several positive indicators about the reason for the recovery of the southern China region.
It could appear during the second half of 2023.”
“Huge revenue and EBITDA will be greater than in 2019 at least, and that is what we expect,” Chaudhry said. “We’re pegging that in 2024, but it could come during the second half of 2023.”
Macau has been particularly hard hit by the epidemic. Recently, in mid-July, all of the 40+ casinos were closed after another wave of the virus swept the city.
Travel restrictions imposed by the Chinese government have also limited the economic ceiling of the gambling destination. As a result, the business recovery has been much slower than in other entertainment-focused cities.
Despite the apocalyptic situation, the Macau market was described as “resilient” in front of a G2E audience.
That is why the market remains excited about Macau. The demand is still there, it’s just a matter of bringing in more [hotel] rooms, and of course the removal of travel restrictions,” Chaudhry said. “Sometime we need too [nearby] Hengqin Island to bring more rooms to drive [an] higher growth. That is why we believe that Macau has not yet reached its climax.”
In addition to declining gaming revenue, the resumption of VIP travel in Macau has been slow. However, Choudary does not consider this a problem.
“Having a business with higher slots and less business for VIPs could be a positive for Macau,” Chaudhry said.
As it stands, Macau has 35% of the VIP market in Asia, compared to the 72% it enjoyed in the pre-pandemic period. Singapore was the biggest beneficiary of the decline, moving to market dominance at 24% from just 9% in 2019.
The VIP market is still not what it was before the global shutdown – instead, the previously $20 billion industry is now worth just $4 billion. Choudhury expects more of that to return to Macau.
In an effort to catch up with the transcontinental competition, the Macau government created a ten-year plan for games in the city where the old concessions were to expire. Bidders have until September to apply for up to six licenses, but they must first submit plans for how they intend to acquire overseas customers.
Investors can expect a lower return in the future, although Choudary emphasized that it “will remain a very profitable business for the next 10 years when we are out of Covid.”
During seven months of 2022, Macau took 3.33 billion in revenue, down 53.6% year over year and making up just 15.3% of the pre-Covid benchmark.