Macau, Cambodia Affected Negatively by Loss of Chinese VIP Players

Macau and Cambodia are facing significant challenges in their casino and tourism sectors due to the decline of high-rolling players from mainland China. An S&P Global report highlights the adverse effects this trend is having on these two markets, which have traditionally depended heavily on Chinese visitors for their revenue.

The report notes that the anticipated “pent-up demand” for travel among Chinese citizens, which surged after pandemic restrictions were lifted in early 2023, appears to be fading. This shift suggests that a “two-speed recovery” is emerging across the gaming landscape in the Asia-Pacific region. As a result, both Macau and Cambodia’s gaming industries are unlikely to see their gross gaming revenue (GGR) return to pre-pandemic levels within the next 12 to 24 months. This is according to a report done by S&P analysts Shawn Park, Aras Poon, and Tristan Ong, which was cited by GGRAsia.

While Macau continues to attract a significant number of visitors, about 66 percent of its tourist volume in the first half of 2023 came from China, the region’s gaming market is struggling to compensate for the loss of its VIP clientele. In contrast, Cambodia saw only 30 percent of its visitors from China during the same period. Despite this, Macau’s mass gaming market is showing resilience, with GGR from mass-market players already reaching approximately 90 percent of the levels seen in 2019. However, the analysts stress that the VIP segment, primarily driven by junket operators, is not expected to recover fully.

Historically, VIP players have contributed a relatively small portion—about 10 to 15 percent—of earnings before interest, taxation, depreciation, and amortization (EBITDA) for Macau’s gaming companies. Nonetheless, the absence of high rollers poses a considerable threat to the overall recovery of the gaming sector.

Cambodia is experiencing a similar downturn. The report indicates that the number of high-rolling players in the country has dwindled significantly, primarily due to the withdrawal of Chinese junket operations. At NagaWorld, Cambodia’s leading casino resort located in the capital, Phnom Penh, VIP players used to account for 70 percent of the establishment’s GGR between 2017 and 2019. However, the S&P report forecasts that this contribution will drop to less than 10 percent annually moving forward.

NagaCorp Ltd., which operates NagaWorld, has recognized the need to shift its focus. During a media briefing following the company’s interim results in August, management outlined strategies to enhance the casino’s appeal to mass-market players. This shift is critical as the market adapts to a changing landscape characterized by fewer high rollers.

Looking at the broader Asia-Pacific region, S&P Global predicts that it will take Chinese tourists approximately 12 to 18 months to return to significant levels in various markets. Aside from Macau, other destinations have a long way to go in recovering visitor volumes. Many Chinese tourists are opting for shorter trips and are increasingly choosing to travel within China itself. This trend is driven by a combination of currency depreciation and government efforts to bolster domestic tourism in response to a sluggish economy.

The changing preferences of Chinese travelers are compounded by a decline in their willingness to spend. S&P analysts suggest that the urgency for travel has diminished, further complicating the recovery for casino and tourism operators.

Recent data from China’s National Immigration Administration shows a notable increase in travel activity, with the country’s border control agencies managing around 110 million inbound and outbound trips in July and August alone. This figure represents a 30 percent increase compared to the same period last year, averaging about 1.78 million trips per day. Despite this uptick, the recovery for Macau and Cambodia’s VIP segments remains uncertain.

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