Following Chinese New Year, Macau Casinos Remain Busy as Gaming Recovery Continues

February 8, 2023 Macau Casino & Hotel Earnings & Filings

The previous month saw the strongest January for Macau casinos in three years. February hasn’t been that bad thus far either.

The first Chinese New Year without entry restrictions into the gaming hub since the COVID-19 pandemic has fueled the strong travel demand that has continued throughout the first week of February. According to a report published today by JP Morgan Securities’ gaming analyst DS Kim, channel checks for the first five days of February showed that Macau’s casinos were humming thanks to a massive pent-up demand for travel.

Gamblers in Macau, the only region in China where casinos are legal, made $5.25 billion last year. The same six casino operators won $10.8 billion in 2021, but due to coronavirus epidemics and Chinese President Xi Jinping’s continuous dedication to “zero-COVID,” gaming was significantly hindered last year. As a result, the amount won was less than half of that amount.

Late in November, Xi made the controversial pandemic response program official by announcing its termination. Despite the other superpowers of the globe recovering to a state of normalcy, this policy kept China trapped in the pandemic. In Macau, this is fostering optimism.

Exceeding expectations
Kim noted on Monday that the enthusiasm from January had continued into February.

“The print was higher than expected,” Kim said, “even though the period (Feb. 1-5) did include a bit of a boost from the tail-end requests post Chinese New Year (which favors high-end/VIP demand more than mainstream demand).

Macau should begin to feel the effects of China’s decision to restart allowing group excursions from the mainland to Hong Kong and Macau, which became effective today. However, Kim stated that in order to “build confidence” in his predictions, he is anxious to continue to track Macau’s gross gaming revenue (GGR) trends for another week or two.

Analysis of the gambling sector in Macau is very different from past years. During the pandemic, China and the local government mostly pushed out VIP junket groups. It was a long-term objective for Xi, who claimed that concerns to national security were evident because to the significant financial outflow from the mainland via Macau.

After being found guilty of promoting unlawful cross-border gambling, Alvin Chau, one of the most well-known VIP junket kingpins, received an 18-year prison term last month. Most other junkets shut down because they were afraid of reprisals from the mainland after Chau’s arrest and imprisonment.

New Focus
Because of the largely disappearing junkets, Macau’s casinos have switched from a VIP focus to the general market. Over the next ten years, the industry titans in the gaming industry will also grow their nongaming services.

When casinos received new 10-year operating licenses in December, they were instructed to invest in nongaming initiatives. Throughout the terms of the concessions, the six owners of casino licenses are required to invest $13.5 billion into their resorts outside of their gaming floors.

According to the market share of each casino operator, the Macau government divided the total. For instance, Sands China, one of the more important businesses in Macau, is required to invest around $3.8 billion on non-gaming endeavors. SJM Resorts, on the other hand, is only liable for $1.5 billion.

The money, according to Macau, can be used by the casinos for a variety of purposes, such as conference space, entertainment, sporting events, arts and culture, theme parks, gastronomy, maritime tourism, and local community involvement.