December 30, 2022 Macau
A comeback in Macau’s gross gaming revenue (GGR) might begin practically as soon as the calendar switches to January 2023, after nearly three years of dashed expectations and disappointments.
Although there are still some coronavirus-related protocols for tourists entering the special administrative region (SAR), UBS analyst Angus Chan stated in a new note to clients that benefits should accrue to Macau concessionaires as a result of China’s withdrawal of its zero-COVID policies.
Chan said that although the requirement for a nucleic acid test is still in effect, travellers visiting the Asia-Pacific gaming hub would no longer be subject to a five-day quarantine in addition to a three-day home isolation requirement. On January 8, both mandates will be lifted.
Chan noted that the “effective elimination” of China’s quarantine regulations might increase Macau GGR as early as 2023. His predictions may come true due to the repeal of COVID-19 regulations and pent-up demand, but current conventional thinking maintained that gaming revenue on the peninsula wouldn’t significantly increase until 2024.
Macau’s Outlook is Brighter for 2023
Galaxy Entertainment, Melco Resorts & Entertainment (NASDAQ: MLCO), MGM China, Sands China, SJM Holdings, and Wynn Macau are the six Macau operators. All of the businesses just renewed their licenses for another ten years.
Another overhang from the Macau recovery thesis that has been eliminated is permit renewal, which suggests that it might become more potent in 2023, especially if conjecture about pent-up demand is right. How China responds to what will surely be a significant near-term increase in coronavirus cases will be the immediate problem.
Herd immunity is largely off the table because of the nation’s protracted, prohibitive shutdowns and zero-COVID policy. According to some predictions, China might see 5,000 new coronavirus infections each day and up to one million fatalities the following year.
One instance of how quickly the virus has spread after the zero-COVID precautions were abandoned is the fact that approximately half of the casino employees in Macau are COVID-19 positive.
Expectations for Macau in 2023
The base case for the SAR’s gambling industry in 2023 expects casinos there would be open for the majority of the year as operators work to improve non-gaming services and lower debt loads. However, China can change COVID-19 policy on a dime without having to deal with legislators.
These are important considerations since the group’s debt has increased since the onset of the coronavirus pandemic, and also because the concessionaires need to make such investments to satisfy local regulators. The casino firms’ ability to restore their balance sheets to their pre-COVID state will take a number of years, according to some analysts.
In terms of specific games, it is generally believed that concessionaires who have the most exposure to mass and premium mass players will be the earliest to recover, whilst operators who are more dependent on VIPs may experience some sluggishness as a result of the decline of the junket industry.