Macau gaming shielded in case of global recession: analysts

An eventual global recession would have “some impact” on the United States casino industry, but limited impact on Macau’s casino sector, suggests a Wednesday report from brokerage Sanford C. Bernstein Ltd.

The institution said it used its own “regression model” and factored in further post-Covid recovery, to measure the potential effect that a global recession could have on the gaming industry in the U.S. and in Macau.

“We would expect that the overall impact of the next recession could result in a U.S. national-wide gross gaming revenue [GGR] decline between 3 percent and 11 percent,” wrote analysts Vitaly Umansky, Louis Li, and Shirley Yang. They said the latter part of the range was indicative of a severe recession, “which at this stage looks less likely.”

“U.S.A gaming operators’ non-gaming revenue recovery from Covid could further support revenues in a recession that may occur in the next 12 months,” said the Sanford Bernstein team. “With cost restructuring that occurred during Covid, U.S. casinos are now much leaner with better cost structures than they were entering prior recessions.”

The brokerage said it believe that global gaming operators with Macau exposure “could be better positioned to hedge a recession risk,” despite the recent downward trend seen in Macau casino GGR.

“Macau revenue has been about as low as it can go as a result of travel restrictions stemming from Covid, and any impact on Macau from an economic slowdown in China would be minimal in light of the recovery to be driven by opening the borders,” suggested the report, referring to travel easing between Macau and the mainland, and between Macau and Hong Kong.

Source: https://www.ggrasia.com/macau-gaming-shielded-in-case-of-global-recession-brokerage/