Sands China’s impressive recovery trajectory through the first three months of 2023, which saw Adjusted Property EBITDA reach 46% of 2019 levels at US$398 million, came despite having 31% of its Macau hotel room inventory offline for the quarter, the company revealed.
The sheer volume of labor supply issues during 1Q23 were laid bare by Sands China COO and Executive Director Grant Chum on Thursday morning, revealing that an average of 3,800 of the company’s 12,392 hotel rooms were offline each day throughout the quarter.
“If you look at visitation overall, we’re seeing a much faster recovery from Guangdong than from non-Guangdong provinces, for obvious reasons – proximity and ease with which they can get to Macau,” Chum told analysts during the Q1 earnings call of parent company Las Vegas Sands.
“But from my point of view, the biggest impediment to a higher rate of recovery in non-Guangdong visitation is actually the amount of hotel inventory that was unavailable in the first quarter. We’re the biggest repository of hotel rooms [in Macau] and we were offline by [31%] and for the city as a whole the percentage of hotel rooms unavailable was also very significant.
“I think people have a high propensity to think about coming to Macau but the hotel inventory issue has been a big impediment, although that is obviously easing radically as we get into the second quarter.”
While Sands China anticipates hotel room supply returning to 89% during the June quarter, Chum noted that it was the premium gaming segments that drove Sands China’s strong results in Q1 given the lack of available rooms and slow recovery of transportation routes.
The company reported rolling win of US$155 million for the quarter, climbing to 23% of 1Q19 levels, while non-rolling win of US$911 million was back to 60% and slot win of US$118 million back to 77%.
Based on those numbers, “it looks like … we recovered at a similar rate in the base mass versus premium mass when compared to the first quarter of 2019 but overall in terms of volume and headcount it was definitely a premium mass-led recovery,” Chum explained.
“The quality of customer has been increasing and the spend per head. The win comparison to 2019 is more of hold-related issue in the premium mass segment for both 2019 and 2023 but overall premium mass gaming volume, gaming drop and head count recovery is faster than base mass. We’ve been outcompeting in the premium segments in both VIP and premium mass.
“Our non-rolling drop recovered to two-thirds of 1Q19 despite a much bigger dependence on base mass [in 1Q19], so as base mass – which has been lagging in recovery – starts to ramp up, as more hotel rooms come online through our portfolio and as transportation picks up and logistics improve, we should be the biggest beneficiary in base mass recovery.”
Sands China also pointed to an encouraging response from its efforts to increase marketing activities to foreign players.
As reported by IAG, the Macau government has flagged tax cuts for concessionaires of up to 5% on gross gaming revenues generated through international players, provided this GGR is specifically generated in designated foreigner-only gaming zones. In response, Macau’s concessionaires have already set up 12 exclusive foreigner gaming zones between them with a focus on international VIPs.
“The attraction of Macau to the foreign VIP gamer is immense,” said Chum.
“We obviously re-doubled our efforts post the concession tender in terms of bringing international visitation to Macau and VIP gaming was the natural place to start given that general commercial airlift was still a fraction of 2019, so direct VIP performance was very healthy during the quarter and kept growing.
“We don’t know where it grows to but there is no reason to believe it won’t continue to grow given the strong product appeal that we provide and the diversity and such a clustering effect of so many world class resorts. It’s an amazing clustering of world class premium gaming destinations here in one place and that should appeal to the Asian regional players over time.”
