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China – Macau’s mass market to dip to 30 per cent of 2019 revenue levels

By - 18 July 2022

With Macau’s casinos being forced to close for at least another five days to stop the spread of COVID, the SAR’s Secretary for Administration and Justice, André Cheong Weng Chon, has confirmed that a longer ‘consolidation period’ was set to be enforced.

Moody’s Investors Service has already moved to slash mass market revenue for the year, saying it will now reach just 30 per cent of 2019 revenue this year with a full recovery being delayed until 2024.

The analysts said this reflects the ‘very weak year-to-date performance and following the recent jump in COVID-19 cases and week-long closure of nonessential business venues including casinos.’

They explained: “China’s crackdown on corruption and illegal gambling activity since 2012 has structurally decimated the VIP segment and reduced its share of overall GGR in Macau. VIP contribution to overall GGR had already fallen to 33 per cent in 2021 from 60 per cent in 2014, and the ratio will decline further as China continues to restrict junket operations.”

“We expect tourist arrivals in Macau to gradually pick up over the next two years, assuming a further easing of travel restrictions in mainland China over the next few quarters, allowing some normalization in travel demand. The pent-up demand over the past two years will help to drive a significant recovery in mass GGR, once pandemic restrictions ease.”

They added that MGM was the ‘most insulated from continued weakness in the Macau gaming market’ due to its performance in the US whilst SJM is highly exposed ‘not only because of its exclusive footprint in Macau but also because high operating expenses are driving EBITDA negative, which can further increase debt and weaken both liquidity and capital structure.’

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