Citigroup optimistic about growth prospects for Macau’s casino industry in 2024

Citigroup is upbeat about the expansion prospects of the Macau casino industry in 2024, citing the outstanding achievements of the six casino operators in 2023. According to the banking institution, by the third quarter of 2023, the industry’s profits before interest, taxes, depreciation, and amortization (EBITDA) will have returned to about 80% of its pre-pandemic levels.

Macau casino equities have been volatile lately, despite the better performance, according to Citigroup analysts George Choi and Ryan Cheung. These difficulties include whispers of a pricing war for player incentives and worries about how China’s fragile economy may impact luxury purchasing. The current values of Macau’s casino operators, according to analysts, reflect a “over-pessimistic” assessment of the amount spent on operating expenses, especially player reinvestment.

Citigroup claims that worries about disproportionate payouts for player incentives in the Macau market are overblown. The experts come to the conclusion that casino operators shouldn’t be punished for raising their player incentive spending as long as it doesn’t negatively affect their EBITDA margins.

There has been some discussion among Macau’s casino operators regarding competitiveness concerning player reinvestment levels for premium-mass players, but Citigroup emphasizes that there is only a “weak correlation” between China’s GDP and Macau’s mass gross gaming revenue (GGR) growth potential. The experts assert that there is a stronger relationship between Macau’s total GGR and visitors, gaming expenditures, and time spent in casinos.

Macau’s overall gaming revenue is predicted by Citigroup to increase by 19% yearly by 2024, to MOP216 billion, or almost US$27.1 billion. According to the analysts, in order to meet this projection, visitor recovery must level off in the third quarter of 2023, player gaming spending must not increase from 2023 to 2024, and the number of hotel room nights available must slightly increase (totaling 3% of the increase in visitor time).

Citigroup believes there is upside risk to the Macau government’s projected 2024 casino GGR of MOP216.0 billion, given the government’s past practice of underestimating GGR in its fiscal budget.

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Original story by: GGRAsia