Macau’s concessionaires have done a “good job” in repositioning former junket rooms into new premium mass gaming parlors, putting the SAR in a far better position moving forward, according to a new report by CBRE Institutional Research.
In a comprehensive analysis of the global gaming sector – with the investment banking firm this week launching global credit research on multiple related bonds and loans – CBRE analysts noted the successful transformation of Macau from a VIP-centric market to one now mostly reliant on the mass market, describing this as a “long-term positive” for the SAR.
“The mass market has essentially returned to 2019 levels and now accounts for ~90% of total gross gaming revenue,” said analysts Colin Mansfield and Connor Parks. “We see further upside in the segment since visitation still is ~10% below 2019 levels. The additional visitation should help operators optimize hotel yield and take advantage of newer supply directed at premium mass customers that has opened since the pandemic.”
Noting that premium mass gaming floors looked busy during a recent research trip, the analysts added that the VIP segment should remain a distant secondary contributor to gaming revenues going forward.
“Operators have done a good job of repositioning old junket rooms into gaming parlors and selectively growing direct VIP business,” they wrote.
“Overall, we view the submission of the VIP segment as a long-term positive. It was notoriously volatile and contributed to multiple instances of heightened regulatory scrutiny by the Chinese central government.
“Success of other non-junket markets like Singapore give us confidence that Macau is better positioned in the long run, even if it means a slower recovery from the pandemic than its neighboring jurisdictions (on a relative basis).”
CBRE also said the Macau government and casino operators are now firmly aligned on key issues such as integration into the Greater Bay Area and growing international tourism, which “bodes well for Macau’s long-term gaming prospects, in our opinion, as the gaming industry should be an indirect benefit from greater tourism-driven visitation to the region and more seamless cross-border travel.”
The investment bank is forecasting industry-wide gross gaming revenue of around US$28 billion in 2024, growing to US$29 billion in 2025, while for operators “credit fundamentals will remain sound and further strengthen with the market’s continued recovery in 2024.”
“This year, visitation and gaming revenue should grow by nearly 30% and level-off closer to China GDP-type growth thereafter,” Mansfield and Parks aid.
“The growth should be primarily driven by further improvements in mass market visitation, which can also support property-level margins. De-leveraging will be a by-product of EBITDA growth.”
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