Macau’s mass market sector will reach just 30% of 2019 levels this year and only fully recover in 2024, according to Moody’s Investors Service.
In a Thursday note, Moody’s analysts noted that Macau’s mass segment – expected to comprise its core business in future given the demise of VIP – remains heavily reliant on tourist numbers which remain suppressed due to COVID-19 prevention measures.
As such, mass GGR will only reach 30% of 2019 levels this year, down on the 37% achieved in 2021 and “reflecting the very weak year-to-date performance and following the recent jump in COVID-19 cases and week-long closure of nonessential business venues including casinos.”
Mass GGR is tipped to increase to 70% of 2019 levels in 2023 before full recovery in 2024. In contrast, the VIP segment will recover to between 5% and 10% of 2019 levels even in 2023-24.
“China’s crackdown on corruption and illegal gambling activity since 2012 has structurally decimated the VIP segment and reduced its share of overall GGR in Macau,” the analysts said. “VIP contribution to overall GGR had already fallen to 33% in 2021 from 60% in 2014, and the ratio will decline further as China continues to restrict junket operations.”
However, “We expect tourist arrivals in Macau to gradually pick up over the next two years, assuming a further easing of travel restrictions in mainland China over the next few quarters, allowing some normalization in travel demand. The pent-up demand over the past two years will help to drive a significant recovery in mass GGR, once pandemic restrictions ease.”
On the credit ratings of Macau’s six concessionaires, Moody’s says that geographic diversification, cost structure and liquidity are key credit differentiating factors with MGM the “most insulated from continued weakness in the Macau gaming market” due to its strong US presence.
Conversely, SJM remains highly exposed “not only because of its exclusive footprint in Macau but also because high operating expenses are driving EBITDA negative, which can further increase debt and weaken both liquidity and capital structure.”
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