Per the half-year survey from Macau’s Statistics and Census Service, the city was home to 46,863 hotel rooms at the end of June. That’s an increase of 9.1% keys from the first half of 2023 and marks a more than 21% increase from the same period in pre-pandemic 2019.

Rooms graded five-star accounted for 28K of the room allotment, or 60%. Most casino resort rooms on the Cotai Strip are classified as such. Five-star rooms were occupied at a rate of nearly 86% during the first six months, slightly higher than the 84% citywide occupancy rate for all rooms.

Room Expansion

Macau saw several new hotels come online over the past year. SJM Resorts opened the Palazzo Versace at its Grand Lisboa Palace on the Cotai Strip in April 2023. Melco Resorts opened the Epic Tower at Studio City that same month, and W Macau in September.

Galaxy Entertainment commenced operations last August at its all-suite Raffles inside Galaxy Macau, which is also on the Cotai Strip. Galaxy opened Andaz in September. More recently, The 13 reopened this month south of the Cotai Strip.

In January, the Macau government forecast that the Chinese Special Administrative Region (SAR) would welcome around 33 million visitors this year, or 84% of the city’s 2019 level. Between January and June, the city’s border agents counted 16.72 million visitors to the enclave, slightly above the government’s estimate.?

Visitors Spending Less

During the COVID-19 pandemic, China directed the Macau government to clamp down on junket groups, the VIP travel organizers that for years had kept the city’s high roller rooms busy.

China President Xi Jinping became frustrated with the large-scale outward flow of money through the tax haven that is Macau. Xi said such monetary movement threatened China’s national security.

Junkets swiftly departed after Suncity’s Alvin Chau was sentenced to 18 years in a Chinese prison after being convicted of running a criminal syndicate, laundering money, and organizing illicit gambling activities.

While visitor numbers continue to inch closer to 2019 conditions, the quality of the guests as it relates to spending willingness has diminished.

Through six months, casinos won about $14.1 billion off of gamblers, 42% higher than the same period last year.

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Macau’s Government Tourism Office (MGTO) monitors the flow of people in and out of the Chinese Special Administrative Region (SAR). MGTO Deputy Director Ricky Hoi provided an update on how the rescinding of free snacks and drinks from the casino floors has impacted traffic.

The number of tourists who visited Macau last weekend reached 110,000 and 120,000, ?respectively, and I believe that the main purpose of tourists coming to Macau is not for free snacks at the casinos,” Hoi said tongue in cheek.

“We don’t see any impact on the number of tourists for the time being. When compared with the past weekends, we didn’t notice any drop in terms of the number of tourists,” Hoi added.

Freebies Had Risen

Free drinks, inclusive of alcohol, are commonplace on most casino floors in the U.S., especially in major markets like Las Vegas and Atlantic City. But in China’s Macau, complimentary beverages hadn’t always been the norm.

Macau casinos had only recently increased free drinks to gamblers and began providing snacks as the resorts refocused their marketing efforts on the mass market.

The Macau SAR Government during the COVID-19 pandemic forced out most VIP junket operators at the direction of Beijing. That resulted in far fewer high rollers being in town, prompting the six casino operators to pivot to the general public to keep their slots spinning and table games active.

Instead of stopping in a store for a bottle of water and a bag of chips, a tourist could drop in a casino, bet $5 on a slot, grab a drink and snack for free, and possibly win a jackpot.

Along with small businesses tipping off the Macau SAR Government about the increase in handouts at the casinos, social media influencers were blamed for the removal of the freebies.

In recent months, numerous videos have been posted on WeChat, TikTok, and Wiebo showing people how to visit Macau on the cheap. The clips from the influencers demonstrated how one can spend a day in the Chinese casino hub and eat and drink for nearly free.

Visitor Traffic Rebounding

Macau welcomed about 28.2 million visitors last year, by far its most traffic since the COVID-19 pandemic hit. Last year’s visitor haul, however, remained only 72% of the more than 39.4 million people the enclave welcomed in pre-pandemic 2019.

For Macau to return to 2019 gaming numbers, the casinos need robust visitation and a strengthened Chinese economy, which continues to show signs of weakening amid a manufacturing slowdown.

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The 55th annual World Series of Poker (WSOP) is in full swing in Las Vegas at the Horseshoe on the Strip. The $10K Main Event gets cards in the air later this week.

Woods tweeted that many of his cohorts have told him they’ve become ill since arriving in Southern Nevada. That prompted the two-time Oscar nominee, whose credits include “Casino,” “The Onion Field,” and “Salvador,” to ask his millions of followers if they’re glad they took the COVID-19 vaccines.

Unwanted Guest at WSOP

A slew of WSOP players have reported feeling unwell in recent weeks. With the days of mandatory COVID-19 testing long in the past, it’s unknown whether the sicknesses are due to the coronavirus or something else like the common cold or flu. That didn’t stop Woods from speculating that COVID-19 is responsible.

Literally every vaccinated person I know contracted the disease. Their symptoms were those of a cold of varying degrees. Did anybody reap any benefit whatsoever from the COVID ‘vaccine?'” Woods asked.

“All my friends who took the never-ending series of ‘booster’ shots had worse and worse reactions with each one,” Woods continued. “The number of young, healthy people dropping dead around the world seems connected to the ‘vaccine’ being foisted on them, often as an employment requirement. In retrospect, the only people who benefited from this drug and this obviously engineered Wuhan virus were the pharmaceutical giants and Trump haters.”

Woods is no Trump hater, as he’s been a self-labeled “staunch supporter” of the former casino magnate for many years. Woods says his longtime talent agency, The Gersh Agency, dropped him as a client because of his support for Trump in July 2018.

“None of us regret not getting it,” said one Woods follower who seemingly agreed with the actor.

“There are so many injuries and deaths that resulted from those shots and nobody is willing to talk about,” added another. “Good for you, sir.”

It was a mass poisoning,” responded another.

“I had five jabs, got COVID this May on a flight. My throat felt like I swallowed broken glass for five days during which drinking water felt like acid,” claimed another.

Opposing Sentiments

Not everyone agreed with Woods.

The original vaccine worked against the early versions and protected against the Delta version which killed so many people in late 2020 and early 2021,” a person claiming to be a doctor countered. “The vaccine likely prevented millions of deaths. But after Omicron in November 2021, the vaccine was absolutely worthless.”

Another person tweeted that the vaccines were “never meant to prevent” people from getting COVID but “to greatly reduce the seriousness of the infection.”

While COVID-19 could be the culprit for some of the sickness that’s reportedly going around in Las Vegas, WSOP players have reported falling a bit under the weather before the coronavirus was a thing. In 2017, a Legionnaires outbreak infected many players at the WSOP host Rio All-Suite Hotel & Casino. The bacterial disease was found to have spread through the resort’s hot water heating system.

Woods’ Poker History?

Woods told CardsChat in 2017 that he took an interest in poker in 2002. He’s since been a regular at poker tournaments in Las Vegas and in Los Angeles, where he resides.

He’s played in almost 30 WSOP events in Las Vegas. In 2015, he finished seventh at the $3,000 No-Limit Hold’em Shootout to win $28,832.

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The median analyst estimate for June was 1.1% higher than what was realized. The enclave’s casinos were expected to see June GGR soften from May when the Golden Week holiday was held and millions of mainlanders ventured into the Chinese Special Administrative Region (SAR).

June has historically been a slow month for the casinos after the busy May Golden Week. However, the slowdown’s failure to meet analyst expectations could hint that China’s upper class, which kept Macau’s casinos bustling for decades, is reining in leisure spending in an uncertain economy.

A decline in spending by Chinese visitors, wary of splashing out on big-ticket items due to economic uncertainty, contributed to the slowdown,” Bloomberg reported.

Macau has been forced to rely more on the mass and premium-mass markets, the latter entailing visitors willing to spend thousands of dollars per trip, but not necessarily on the casino floor.

Lackluster Data Points

The $2.2 billion won by the Macau casinos remained almost 26% below the June 2019 revenue mark when the same operators won $2.96 billion. June marked the lowest monthly tally so far in 2024.

The casinos’ hand was forced by Beijing and China President Xi Jinping, who instructed the Macau government to crack down on junket groups amid the COVID-19 pandemic. Macau’s junket industry — the travel organizers that kept Macau’s high-roller rooms humming for many years — is essentially nonexistent today.

Macau casinos in recent months began dolling out an array of freebies to entice mass-market visitors. Such incentives include free snacks and drinks, something that was only afforded to high rollers before the pandemic.

The Macau SAR Government recently told the casinos to scale back the handouts. The government’s decision came as a result of nearby small businesses expressing frustration that their foot traffic had suffered as a result of the casino giveaways.

China’s Economy

China is the world’s largest manufacturing economy and exporter of goods, but the sector in June remained under contraction for a second consecutive month.

China’s Manufacturing Purchasing Managers Index remained below 50 points at 49.5. Index ratings below 50 points suggest contraction while an index above 50 suggests manufacturing growth.

One factor weighing on exports may be the marked turn in consumer sentiment and spending in the US, still China’s largest export market, in recent months. US consumer sentiment dipped to its lowest level since last November in May, according to a long-running survey from the University of Michigan,” The Wall Street Journal reported.

China’s real estate sector has also slowed, as has the service industry.

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Darrell Wayne Pilant took his life on June 14, 2024, while visiting Georgetown Lake in Montana. Pilant’s suicide comes a little more than four years after Caesars Entertainment allegedly forced him from his roles at Harrah’s Southern California after more than 22 years with the casino and hospitality firm.

Pilant’s obituary said he enjoyed cheering on his beloved Kansas City Chiefs and Kansas Jayhawks. He was also a “Parrot Head,” or a member of Jimmy Buffett’s fanbase.

Over the decades, Pilant climbed the corporate ladder with Caesars to eventually become vice president and assistant general manager at Harrah’s Kansas City. In September 2016, he was promoted to lead Harrah’s Southern California, one of the most profitable tribal casino destinations in the U.S.

Harrah’s Southern California is an hour’s drive northeast of San Diego.?

COVID Dispute?

Harrah’s Southern California is owned by the Rincon Band of Luiseno Indians. The integrated resort has over 1,000 hotel rooms and an 86,000-square-foot casino floor with 1,500 slot machines and 50 live dealer table games.

The resort amenities include an outdoor pool with a swim-up bar and lazy river, a full-service spa and fitness center, and 17 restaurants, bars, coffee shops, and grab-and-go options highlighted by Gordon Ramsay’s Hell’s Kitchen. Harrah’s Southern California also has a 23,000-square-foot events center with a capacity for 2,300 seated guests, as well as nearly 74,500 square feet of meeting and convention facilities.

Being tribally owned on the Rincon Tribe’s sovereign land, Harrah’s Southern California was not obliged to adhere to state COVID-19 orders. Pilant alleged in a wrongful termination lawsuit filed later in 2020 that he and Caesars Entertainment brass disagreed on when it was appropriate to reopen the resort following the height of the pandemic in the spring of 2020.

Pilant, among other things, alleges that Caesars constructively terminated his employment because he opposed and refused to carry out Caesars’ directive to reopen Harrah’s Southern California,” his complaint read.

After shuttering operations in mid-March 2020, Caesars and the tribe sought to reopen the facility in a limited capacity on May 22. The case, according to California’s U.S. Southern District docket, shows the lawsuit is still active.

Reopening Disagreement

On May 19, just three days before Harrah’s Southern California reopened, California had recorded its deadliest coronavirus day to date with 132 deaths. Gov. Gavin Newsom (D) subsequently wrote the Rincon Tribe and other tribal casinos prepping their reopening plans to reconsider.

Pilant refused to side with his employer and said his hand was forced to resign. In his obituary, his family, including his wife, Jenna, said he struggled to recover from the pandemic.

When 2020 came, it was a difficult time for everyone, but for Darrell, it was especially challenging,” his obituary read. “He lost his why and his long-time casino career due to COVID politics.”

“His wife Jenna and friends tried their best to help him during this time, but ultimately, his mental health took its toll not only on his career and marriage but his life,” the obituary concluded.

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Macau’s Gaming Inspection and Coordination Bureau reports that the city’s six gaming operators — Sands, Galaxy, Wynn, MGM, Melco, and SJM — combined to win MOP20.188 billion (US$2.51 billion) in May. The month marked a nearly 9% increase from April and was almost 30% higher than May 2023.

Through five months in 2024, total gross gaming revenue (GGR) stands at $11.19 billion, 48% better than in 2023, but 24% lower than what the six casino firms collected during the same period in pre-COVID 2019.

Despite the market remaining suppressed from 2019, Macau’s gaming industry, its most critical economic component, continues to rebound amid a significantly altered regulatory environment.

Mass Market Taking Hold

Throughout the pandemic, the Macau Special Administrative Region (SAR) Government radically overhauled governing conditions regarding how the six casino companies do business. At the direction of Beijing, Macau officials told VIP junket groups that had kept high-roller rooms bustling for years that their operations would be more closely supervised.

The exodus of junkets has resulted in fewer VIPs in Macau. That forced the six concessionaires to rethink their business strategies and focus more on the mass market.

The pivot to the general public continues to evolve, and analysts say investors should be pleased with how quickly the casino firms have been able to adjust. Analysts at JP Morgan said May represented “a record-high mass GGR” mark for Macau’s gaming licensees.

The month printed the best GGR in 50-plus months and a record-high mass GGR in the history of Macau — quite impressive, especially given mounting investor concerns on macro/consumption elsewhere in China,” wrote analysts DS Kim, Mufan Shi, and Selina Li.

The $2.51 billion won last month was the best month since January 2020 when the casinos took $3.1 billion off players. May 2024 was 22% below the $3.22 billion GGR experienced in May 2019.

The six casinos continue to invest in nongaming projects, a condition of their 2022 licensing agreement. The companies must spend $16.2 billion before 2032 on nongaming undertakings.

June Outlook

Analysts are forecasting a June pullback in terms of gaming revenue. June is typically a slower month following May’s Labor Day Golden Week holiday and also because of hot weather where daily temperatures average nearly 90 degrees Fahrenheit.

China’s lone casino market continues to make revenue gains despite economic concerns elsewhere. Factory activity on the mainland slowed more than expected in May, which could indicate a further slowing of the world’s second-largest economy.

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The commission voted unanimously in favor of granting Boyd a two-year extension on the temporary closure of the casino hotel located on Boulder Highway. That comes with the option for two six-month extensions. A previously established waiver on the venue’s licensing was set to expire before the end of this month.

Las Vegas-based Boyd runs 28 gaming venues across 10 states, including 11 in its home city.

Eastside Cannery Business Funneled to Sam’s Town

Boyd isn’t necessarily being pinched by Eastside Cannery’s now lengthy pandemic-induced closure because patrons of that venue are making their way to another Boyd property.

Our Eastside Cannery customers, gaming and non-gaming alike, have consolidated to Sam’s Town until demand requires additional capacity for both properties,” wrote the operator in a letter to the commission.

Boyd’s Chief Compliance Officer Michelle Rasmusson?noted in the letter that there’s ample excess capacity at Sam’s Town and current market conditions aren’t conducive to restarting operations at Eastside Cannery. She added that even if the demand was there to reopen the property, labor shortages would make it difficult to adequately staff the venue.

Eastside Cannery opened in 2008 with Boyd acquiring it through its 2016 $230 million purchase of Cannery Casinos, which also included the Cannery Casino Hotel in North Vegas.

It Might Behoove Boyd to Make a Move

Some casinos in the Las Vegas Valley that were shuttered due to the pandemic never returned. For example, in 2022, Boyd rival Red Rock Resorts announced permanent closures of Fiesta Henderson, Fiesta Rancho, and Texas Station. Those venues were ultimately demolished and Red Rock sold the real estate to nongaming entities.

“The company has suggested a plan. We value their judgment, not ours. The one thing I would say is the maintenance there has been impeccable,” Gibson noted prior to the commission’s ruling. “We appreciate very much the way the Boyd group has stepped up and taken care of its facility. We’re hopeful at some point in time that it will restore itself to commercial use and be a really important part of their organization.”

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The Chinese gaming enclave’s six casino operators — Sands, Galaxy, MGM, Wynn, SJM, and Melco — saw play improve from April 2023, but April nonetheless represented a 5% GGR drop from March when gaming win totaled $2.42 billion.

Gaming analysts expected the April downturn from March. The month was “in line with historical seasonality,” a note from brokerage Citigroup read.

The $2.3 billion won last month represents about 79% of the April 2019 GGR that the same six casino concessionaires generated.

Ongoing Rebound

Through four months of 2024, GGR in the world’s richest gaming market — a title Macau regained from Nevada after China President Xi Jinping ended his “zero-COVID” program in late 2022 — stands at approximately $9.41 billion. The January through April accumulation is 54% better than a year ago and accounts for 76% of the 2019 GGR won in the same four-month span.

Analysts focused on the Macau gaming industry say the first third of the year shows the market is stabilizing, an encouraging sign for the six casino giants. Though gaming revenue continues to inch closer to pre-pandemic conditions, the overhead for the gaming firms has skyrocketed due to their nongaming investment commitments they pledged to the Macau Special Administrative Region (SAR) Government in December 2022 in exchange for 10-year license extensions.

Seeking to diversify its economy away from gaming, Macau issued the six companies fresh tenders in late 2022. The casino operators agreed to collectively invest $13.5 billion in nongaming developments at their resorts during the 10-year extension.

The nongaming investment figure grew to nearly $18 billion after last year’s GGR triggered an increase that raised the amount by almost $4.5 billion.?

Market Outlook

May should see a month-over-month GGR rebound, as the month kicks off with the Chinese Labor Day break. The holiday period runs from today, May 1, through Sunday, May 5.

Capital markets advisory group CLSA recently upgraded its full-year 2024 outlook for Macau GGR by 3.5% to roughly $30.3 billion. Analysts cited better-than-expected visitation trends.

Chinese news agency Xinhua reported this week that the Hong Kong-Zhuhai-Macau Bridge served a record 3.26 million vehicles last year, or an average daily crossing of more than 8,900 vehicles.

If the CLSA number is realized, the Macau casino industry would return to 83% of the 2019 gaming win that totaled $36.5 billion.

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Harrah’s New Orleans struck a deal with state lawmakers in 2019 that extended the land-based casino’s gaming license through 2054. The agreement came with costly conditions for Caesars Entertainment, which operates the casino, including a minimum investment of $325 million in property upgrades.

Caesars said much of those funds would be used to build the casino’s first hotel. Since Harrah’s opened in 1999, the casino has partnered with nearby hotels to offer guests lodging.

New Orleans will host Super Bowl LIX on Feb. 9, 2025, at the Caesars Superdome. Harrah’s New Orleans will officially become Caesars New Orleans before the big game.?

Extension Likely

Caesars’ original agreement with Louisiana requires the casino to employ at least 2,400 people. Caesars’ 2019 licensing extension permitted the company to drop below the 2,400-worker threshold during construction. This week in Baton Rouge, the Senate Judiciary B Committee voted to extend the employment number exemption until 2025.

Mowad said “every square inch” of the casino is being renovated for the rebranding to Caesars New Orleans. He estimates that only about 60% of the casino space is currently operational, as big changes to the facility persist.

Once the restaurants and hotel open, we’ll get back to full employment,” Mowad said.

With the Senate Judiciary B Committee’s approval, the measure moves to the full Senate for consideration. The legislation is Senate Bull 277.

Caesars brass explained the delays in bringing the hotel to completion were due to the COVID-19 pandemic. Louisiana’s stay-at-home order in March 2020 didn’t consider construction to be “essential business” and, therefore, work on the hotel was temporarily suspended. Subsequent supply chain issues caused further delays.

Costly Guarantees

Harrah’s New Orleans has reported three consecutive years of annual gross gaming revenue (GGR) growth since emerging from the pandemic.

The casino won about $213.2 million from players during the 2021 fiscal year (July 1, 2020, through June 30, 2021). Casino win climbed to $228.3 million in fiscal year 2022 and to $260.2 million in FY23.

Though Harrah’s continues to trend positively, the casino’s GGR generated during the most recent fiscal year represents only 89% of the $291.5 million that it reported in 2019.

The City of New Orleans received a one-time $19.5 million payment from Harrah’s in 2019 when the state lengthened the gaming license through 2054. ?

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Hong Kong-based Melco owns and operates integrated resort casinos in China’s Macau, the Philippines, and Cyprus. The company last week confirmed it has once again awarded its founder Lawrence Ho with another healthy stock award, as the firm has done most Aprils in recent years.

The Melco board also approved issuing company President Evan Winkler nearly 150K restricted shares, Executive Director Clarence Chung Yuk Man 74,406 shares, and independent nonexecutive Director John Crawford 19,900 shares.

The share allotments cannot be cashed out until they vest in three equal batches. The first batch vests on April 3, 2025, and the remaining two batches vest on April 3, 2026, and April 3, 2027.

Not Performance Based

The bulk of Melco Resorts’ revenue comes by way of Macau and the company’s City of Dreams, Studio City, and Morpheus properties. Melco’s market share in Macau has declined post-COVID-19.

Ho conceded last month that the organization slashed its overhead costs “too deep” in the aftermath of the coronavirus and that led to customers and the city’s highly coveted VIPs taking their business elsewhere. The Melco securities filing regarding the stock awards said the allotments were not performance-based.

There are no performance targets nor claw back mechanism attached to the Restricted Shares granted,” the SEC filing read.

The Melco board said the restricted shares program not being based on performance is “market competitive” and recognizes “past contributions” to the company by the recipients. The statement added that the bonuses “incentivize” grantees to promote the success and enhance the value of Melco Resorts and helps “motivate, attract, and retain” their services.

Melco gave Ho a $5.1 million stock bonus in April 2018, $10 million in April 2021, and $15.2 million in April 2022.

Stock Slide

Some investors might not be overly thrilled to learn of Melco Resorts’ annual awards after what’s been a more than difficult year. With Melco losing market share in Macau and gaming revenue remaining suppressed in the Chinese enclave from pre-pandemic levels, many shareholders have divested their stake in the organization.

A year ago, Melco’s Nasdaq shares were trading at $12.85. On Monday, they opened trading at just $7 — 45% below April 2023.

Melco shares climbed to around $13 last summer during Macau’s initial gaming recovery but after the company lost VIP market share and struggled to compete for the premium mass segment, its quarterly filings sent investors running.

Melco’s pandemic downfall cost Ho many millions and momentarily cost him his billionaire status. He’s since regained that title, with Forbes currently estimating his net worth at around $1.2 billion.

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On March 29, a federal judge in Nevada’s District Court ordered that the lawsuit brought by Treasure Island, LLC, the parent operating company of the Strip casino resort, against Affiliated FM Insurance Company has merit to proceed. Attorneys for Treasure Island, which is owned by billionaire Phil Ruffin, filed the lawsuit in July 2020 against AFM after the insurer refused to pay out on property insurance claims.

Plaintiff has presented sufficient evidence from which a jury could find that it did in fact suffer physical loss and damage,” US District Judge James Mahan wrote.

AFM’s legal team had asked Mahan for a summary judgment and for the case to be dismissed. Mahan agreed that the insurance giant did not act in bad faith or violate the Nevada Unfair Claims Practices Act, as also alleged by Treasure Island, but said the casino’s claims that it suffered “physical loss or damage” is warranted for further consideration.

In Nevada, all brick-and-mortar casinos were closed on then-Gov. Steve Sisolak’s (D) orders from March 17, 2020, through June 4, 2020. ?

Rare Case Moving Forward

Numerous casinos, both commercial and tribal, sued their property insurers in the pandemic’s aftermath for not paying out on claims. Federal and state courts have almost unanimously sided with the insurance companies because the casino buildings didn’t suffer direct physical harm from the airborne virus.

Treasure Island sought coverage for the communicable disease component on March 19, 2020. The claim was denied.

AFM’s response says the claim was rejected because “coverage is not available absent physical loss or damage.” Treasure Island filed a lawsuit in July.

Mahan agreed with Treasure Island that the air inside the property is insured property and that the insured property caused physical harm to both employees and guests by infecting them with COVID-19. Mahan also wrote that viruses and disease-causing agents might not be excluded from the coverage terms.

“The policy provides an exclusion for ‘contamination, and any cost due to contamination, including the inability to use or occupy the property or any cost of making the property safe or suitable for use or occupancy,'” the judge explained. ?

Exclusions Dismissed

In his order, Mahan said AFM’s contamination and loss of use exclusions are ill-worded and unspecific in the agreement.

Although the policy mentions the word ‘virus’ in the contamination exclusion, that fact alone does not show that the contamination exclusion applies in this context. There is a ‘communicable disease’ provision in the policy that covers the physical removal of a disease. Plaintiff reasonably argues that ‘it would be meaningless (and impossible) to cover the physical removal of a disease but exclude the virus that causes it,'” Mahan continued.

Calling the terms “contradictory,” Mahan cited a 2011 case against Liberty Mutual that concluded that “vague or ambiguous insurance provisions” be “construed narrowly against the insurer.” ?

With Mahan’s order, Treasure Island’s case against AFM Global will head to a jury trial later this year, pending appeal by the insurance firm.

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March 2024 marked a more than 53% year-over-year boost and was 5.5% better than February when the city hosted many Chinese New Year travelers. March outpaced the consensus forecast among analysts focused on the region — the only place under China’s control where slot machines and table games are allowed — which predicted a 49% year-over-year improvement.

March was Macau’s second-richest monthly casino win since the city reopened its borders in January 2023.

Through three months of 2024, GGR in what was the world’s richest gaming market before the COVID-19 pandemic — a title since reclaimed by Nevada — has rebounded 65.5% from the same period in 2023. The region’s six casino licensees — Sands, Galaxy, MGM, Wynn, SJM, and Melco — won $7.11 billion in the first quarter.?

Market Instability

Macau has a vastly different operating climate for the six casino concession holders than it did pre-pandemic. China used the global health crisis to improve its national security, and a pillar of the undertaking was preventing large amounts of money stop fleeing the Communist Party’s control. ?

During the health crisis, Beijing instructed Macau to more closely scrutinize casino junket groups that for years had brought the mainland’s wealthiest VIP gamblers to the Special Administrative Region (SAR) to gamble in private high-roller rooms. China President Xi Jinping levied accusations that junkets facilitated the transfer of large amounts of cash through the tax haven. The Chinese leader says that poised national security risks.

That has forced the six casino companies, which have invested many billions of dollars each into their resorts around town, to switch their focus to the general and premium mass public.

Differing Outlooks

Some Macau analysts believe the casinos have already successfully pivoted to the general and coveted premium mass-public demographics.

March GGR was a significant improvement from March 2023, but the $2.42 billion represents 75% of the pre-pandemic March 2019 revenue. Since China and Macau began reopening their borders to international traffic by ending “zero-COVID” in late 2022, the best month related to 2019 was December 2023 when GGR returned to 81% of the pre-pandemic level.

Macau’s post-COVID recovery path is slowing as China’s economic growth loses momentum,” Shirley Zhao and Katia Dmitrieva, economics correspondents for Bloomberg, said Monday. “Slowing growth came despite rising numbers of tourists, suggesting per person spending weakened amid deteriorating consumer sentiment.”

Paired with the public possibly scaling back their spending are ongoing rising costs for the casinos. Along with inflation, the casinos continue to meet their nongaming investment obligations as dictated through their 2022 relicensing terms.

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Melco, one of the six licensed commercial casino operators in Macau, this week reported its full-year 2023 earnings.

Though the Hong Kong-based hospitality and gaming firm expanded operating revenues by 180% to $3.77 billion? as Macau reopened in late 2022, Melco still reported a net loss of $277.5 million for the year. Along with City of Dreams and Studio City in Macau, Melco owns and operates City of Dreams integrated resorts in the Philippines and Cyprus.

Ho told shareholders and analysts that Melco’s Macau properties carried trimmed workforces into the post-pandemic environment. The reduced resort services hampered the company’s product and prompted some visitors to take their business elsewhere. That included coveted VIPs and premium mass gamblers.

Clearly we lost share in 2023,” Ho said. “I guess we continued to cut too deep to the bone in terms of our operating expenditures and how we conducted our business.”

The misfortunes cost Melco Chief Operating Officer David Sisk his job. Ho said Sisk did “a great job” during COVID, but failed to properly reimplement staffing levels to pre-pandemic conditions. Sisk resigned last month ahead of the earnings release.

Premium Mass Focus

With junkets largely gone, Macau’s casinos are undergoing the biggest customer refocus of their operating histories. Fewer VIPs mean resorts must bring in considerably more guests to ramp back up their gaming and property-wide revenue.

“The goal for us is to really reclaim the crown in the premium mass sector. Frankly, post-COVID, we really did cut way too much of our offering. I think that’s why we lost some share,” Ho stated.

No one has lost more from Melco’s downfall than Ho himself. Melco shares on the Nasdaq are down nearly 49% over the past year from $13.87 to close at $7.12 on Friday.

Ho is Melco’s largest individual shareholder. Ho’s billionaire status is in question and he recently lost his spot on Forbes’ Hong Kong 50 Richest list.

2024 Outlook

Despite operating hiccups in 2023 and a stock plunge, Ho remains optimistic about his casino empire. Ho pointed to a strong Chinese New York last month in Macau and robust visitation to the region since “zero-COVID” was lifted.

Ho also said Melco benefits from being given the smallest nongaming investment requirement among the six casino operators made in 2022 in exchange for new 10-year licenses. Ho said the company already completed its required $1.24 billion investment in nongaming projects in Macau, and despite 2023 gaming win triggering a 20% increase, Ho said the firm is financially capable of following through on the additional $248 million.

I think its public knowledge that we had the lowest [nongaming] amount, and I’m pleased to say that we were the only one last year that fulfilled our full amount,” Ho said. “Going forward, even with the additional 20%, we’re comfortably below everybody else.”

The Macau government allocated the nongaming spending amounts based on each casino’s market share as of 2022.

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Macau’s strong start to the new year was the Chinese casino enclave’s second-best month post-COVID-19. Only one month last year — October — generated more gaming money for the six casino operators than did January.

Analysts are forecasting the recovery to continue in 2024. Researchers at Morgan Stanley think Macau casino revenue will return to about 80% of pre-COVID levels this year.

Macau is today a vastly different operating climate for the casinos. The days of junket groups regularly bringing in VIP gamblers from the mainland are gone. That’s after the Chinese government directed Macau to better scrutinize the travel organizers.

The prosecution of Alvin Chau, the former Suncity Group boss, resulted in an 18-year prison sentence for crimes of gambling offenses, fraud, and money laundering. That saw most junket groups fold shop.

Serious Crimes Decrease

Macau’s Judiciary Police this week released its 2023 report on enclave crime.

The filing showed that gaming-related criminal incidences climbed 182% last year to 2,717 cases. The spike was expected, as normal life in Macau and China remained on hold in 2022 because of zero-COVID.

With 2023 being the year China and its two Special Administrative Regions (SARs) reopened and Chinese people became free to move about the country, crime naturally returned. However, law enforcement in Macau says the number of offenses was significantly reduced compared with 2019.

The gaming industry in Macau is developing healthily in the right direction, and serious crimes such as illegal gambling and money laundering through gaming operations have basically disappeared,” said Judiciary Police Commissioner Sit Chong Meng.

Sit explained that gaming crimes were down 50% from 2019. Police also intercepted some 11K money exchanges between criminal associates. Law enforcement successfully prosecuted more than 2,000 gang members who are no longer allowed to enter the enclave’s casinos.

Stock Gains

January’s fruitful gaming revenue report provided shareholders with gains. Shares of Las Vegas Sands, MGM Resorts, Wynn Resorts, Melco Resorts, Galaxy Entertainment, and SJM Resorts were all up on Thursday.

The “Year of the Dragon,” the 2024 New Year holiday, is delivering strong bookings for casinos in Macau. Most luxury casino resorts on the Cotai Strip are fully booked or have only minimal availability during the holiday period. The average nightly rate for a five-star casino hotel room is nearly $400.

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The New Jersey Supreme Court this week ruled that three property insurers aren’t liable for paying Ocean Casino for operational losses it incurred during the coronavirus emergency. Ocean Casino is controlled by an entity called AC Ocean Walk, LLC. The LLC is fully owned by Luxor Capital Group and Ilitch Holdings.

The crux of the case was determining if Ocean Casino suffered “direct physical loss” or “direct physical damage” to its property from the virus infiltrating the Boardwalk property. In a unanimous ruling, the New Jersey Supreme Court ruled it did not.

No Physical Damage

New Jersey Supreme Court Justice Anne Patterson said Ocean Casino Resort attorneys failed to pinpoint how the presence of a virus led to physical damage.

“Ocean Walk was required to demonstrate that its property was destroyed or altered in a manner that rendered it unusable or uninhabitable,” Patterson wrote for a unanimous court.

Patterson explained that Ocean attorneys claimed the direct physical damage to the property was the “actual and/or threatened presence of coronavirus particles.” The judge said those claims “do not support a finding of a ‘direct physical loss.'”

It alleges that, in compliance with governmental directives, it was forced to close to the public in March 2020 and that it reopened in July 2020 with restricted or limited operations,” Patterson continued. “Here, absent the executive orders, Ocean Walk would have been able to use its property for casino and other entertainment functions with no suspension of its operations.”

AIG Specialty Insurance, American Guarantee & Liability Insurance, and Interstate Fire & Casualty sought to have the Ocean Casino property coverage lawsuit dismissed on claims the policies included contamination exclusions. A lower state court and Patterson agreed that the contamination exclusion didn’t apply because the condition primarily deals with radioactive contamination, not contamination from a “virus,” “pathogen,” or “pathogenic organism.”

Patterson said the contamination from a virus didn’t result in physical damage, and therefore, didn’t warrant property insurance coverage.

“The property insurance policies issued by defendants set forth identical base policy forms. Each policy provided that it insured ‘against direct physical loss of or damage caused by a Covered Cause of Loss to Covered Property, at an Insured Location.’ Each policy contained a ‘contamination exclusion’ providing in part that — ‘unless it results from direct physical loss or damage not excluded by this Policy’ — ‘Contamination, and any cost due to Contamination including the inability to use or occupy the property or any cost of making the property safe or suitable for use or occupancy’ is excluded,” Patterson concluded.

Insurers Not Responsible for COVID Losses

The New Jersey Supreme Court decision is the latest victory for insurers, which have largely won COVID-19 property damage cases.

AIG, American Guarantee, and Interstate Fire did pay Ocean $850K for claims on separate property coverages for “Interruption by Communicable Disease.”

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The Macau Government Tourism Office (MGTO) this week revealed its 2024 visitor expectations. The tourism agency said it believes roughly 33 million people will travel into the Chinese Special Administrative Region.

This month, the daily average of visitors entering Macau is around 70,000 to 80,000 people per day, reaching over 100,000 on weekends. This stable baseline has led the MGTO to expect to reach about 33 million visitors for the entire year by the end of 2024,” a government statement reported by the Macau Daily Times read.

If Macau realizes 33 million visitors this year, it would represent nearly 84% of the traffic the enclave experienced in pre-pandemic 2019. Macau welcomed 28.2 million visitors last year, nearly five times the number of tourists who traveled to the city in 2022 when China remained under COVID-19 restrictions.

Macau Comeback

Before the coronavirus, Macau was the richest casino market on planet Earth, and it wasn’t even close. Casinos in Nevada in 2019 won $12 billion. That same year, the six gaming operators in Macau won more than three times that amount.

Macau casinos that year recorded gross gaming revenue in excess of $36.5 billion. And that was a 3.4% decline from 2018.

President Xi Jinping’s directives essentially led to the prosecution of Alvin Chau, the billionaire face of Macau’s VIP junket industry who ran Suncity. Junkets quickly closed shop and fled to other gaming markets in Asia in fear of being similarly prosecuted for gambling crimes.

Chau maintained his innocence but was sentenced to 18 years in prison for fraud, illegal gambling, and criminal association. In the wake of junkets no longer escorting wealthy mainlanders to Macau’s private high roller rooms, the casinos are embarking on diversification. The pivot comes in partnership with the Macau government, which in late 2022 issued the six operators 10-year license extensions in exchange for $16.2 billion in pledged commitments to nongaming projects.

Casinos are focused on an array of new amenities to lure mainlanders, specifically families and business travelers in what’s seemingly a page out of the Las Vegas playbook. For those investments to provide a return, Macau needs to win over the mass public in mainland China as being an ideal place for leisure and business.

International Segment in Focus

Maria Helena de Senna Fernandes, the MGTO director, highlighted that international visitor traffic to Macau remains more suppressed from pre-pandemic levels than visitor arrivals from the Chinese mainland, Hong Kong, and Taiwan.

This year, the MGTO will focus on overseas markets, and in the first half of the year will organize roadshows in Southeast Asian countries such as Thailand and Malaysia,” Senna Fernandes explained. “We also plan to participate in travel shows in Europe.”

Macau casinos won $22.7 billion in 2023, a 334% year-over-year surge and a 111% increase on 2021.

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Gross gaming revenue (GGR) in Macau totaled $22.7 billion last year. Market observers believe the mass market fully returned, but declines in VIP play kept the Asian casino hub depressed compared with 2019.

Macau’s six casino operators are diversifying their resorts to attract a wider group of visitors, specifically nongamblers. In exchange for new 10-year gaming licenses in December 2022, the six companies agreed to invest $13.5 billion into nongaming projects. The spending pledge increased to $16.2 billion after 2023 triggered a 20% premium on the nongaming obligations.

2024 Outlook

Analysts believe the 12 months ahead will further improve Macau’s pandemic comeback. In a note issued this week, Hong Kong-based financial services firm CLSA Limited said it expects GGR in Macau to recover to 82% of 2019 levels this year.

In 2019, Macau casinos won $36.3 million, meaning CLSA analysts project 2024 casino win to total around $29.8 billion. That would represent a more than 30% year-over-year improvement.

Mathematically, the first half of 2023 was still a low base for Macau’s GGR, as it took time for Macau to solve the labor shortage bottleneck and for transportation capacity from mainland China to ramp,” the CLSA note explained.

The CLSA analysts say they expect 2024 holidays to be “robust” in Macau. The holiday calendar in China is highlighted by next month’s Chinese New Year. The Spring Festival runs from February 10 to February 17, and is a time when most workers are provided with the week off. Other major holidays include the May 1-5 Labor Day and October 1-7 National Day.

Visitors Needed

For gaming to continue its rebound, Macau must further attract new visitors, and presumably, convert some to become mass-market gamblers. Analysts at Nomura aren’t overly confident that the region will return to 2019 visitation levels this year.

Macau counted about 28.2 million visitors last year, nearly 400% more than the number of border crossings in 2022. That accounted for just 71.5% of the 39.4 million travelers that Macau welcomed in 2019.

Nomura analysts said “sizeable headwinds remain” for Macau to get back to 2019 visitation conditions.

Things aren’t as bad in Macau as they are in other Association of Southeast Asia Nations (ASEAN). Nomura said flights from China to Singapore, Malaysia, the Philippines, Thailand, Vietnam, and Indonesia have recovered to less than 60% of their 2019 levels.

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The Macau Government Tourism Office (MGTO) has launched a complimentary travel program between the two Chinese Special Administrative Regions (SARs) to spur additional visitation to the casino enclave. The MGTO says in a release that it has partnered with bus service operators to facilitate the travel across the 34-mile bridge-tunnel system, the longest sea crossing in the world.

The MGTO says people arriving in Hong Kong from Taiwan interested in the voucher program should visit the direct bus service counter at Hong Kong International Airport to obtain their complimentary passes. Tickets are available on a first-come, first-served basis, the MGTO detailed.

The Macau Government Tourism Office will launch the free ticket offer of the direct bus service from Hong Kong International Airport to Macau starting on Jan. 1, 2024, to encourage international and Taiwan region visitors in Hong Kong to extend their trip to Macau. The offer is set to spur twin-destination tourism to Hong Kong and Macao while tapping a more diverse range of international visitor markets,” an MGTO statement read.

The bridge, which opened in late 2018 after being built at a cost of nearly $19 billion, greatly expedites the vehicular travel time between the two SARs from about four hours to just 30 minutes. It also lessened demand for ferry shuttle service.

Visitors Return

2023 marked year one of Macau’s COVID-19 recovery.

The MGTO said on Monday that about 28.23 million visitors entered the region last year, a 395% year-over-year surge when 2022 remained under China President Xi Jinping’s “zero-COVID” program that kept normal life on hold. 2023’s visitor haul represented only about 70% of the visitors who ventured into Macau in 2019.

Macau is amid a diversification of its economy, which has heavily relied on its casinos. In exchange for granting the six gaming operators new 10-year concessions in late 2022, Macau mandated that they collectively invest $13.5 billion into their resorts through nongaming projects.

The 2022 licensing agreement came with a condition that the nongaming spend would increase by 20% if the casinos jointly won at least $22.3 billion in a given year through 2027. The government didn’t have to wait long for the potential $4.48 billion in additional nongaming investments to be activated, as the trigger was reached in 2023, the first year of the new 10-year licenses.

Junkets Down to 18

In 2013, during the junket industry’s heyday in Macau, there were 235 licensed touring groups. GGR that year hit a record $45 billion. That’s when Xi ordered law enforcement to begin more closely monitoring their operations, which he believed posed a national security threat because of the large amounts of money flowing from the mainland to the Macau tax haven.

The successful prosecution of Suncity Group founder Alvin Chau led to nearly all junkets closing shop and moving to more favorable markets like the Philippines and Vietnam.

In September, Macau’s Gaming Inspection and Coordination Bureau said it would limit the number of junkets to 50 this year. This week, the government agency said there are just 18 remaining VIP groups in operation.

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Gross gaming revenue (GGR) in the Chinese enclave totaled MOP18.57 billion (US$2.3 billion) to end 2023, surpassing the analyst consensus forecast of $2.1 billion.

2023 marked the start of the region’s pandemic recovery after China President Xi Jinping ended “zero-COVID” in late 2022. The directive’s ending allowed life to begin returning to normal in the world’s second-most populated country more than three years after the coronavirus is thought to have originated on the mainland.

However, Macau casinos last year won only 62.6% of the money that the same six operators fielded in pre-pandemic 2019, when GGR totaled $36.3 billion.

The market has changed considerably since the onset of the pandemic. Alvin Chau, the former face of the junket industry who became a billionaire running Suncity Group, was successfully prosecuted on gambling crimes, fraud, and money laundering, and sentenced to 18 years in prison. Following Chau’s 2021 arrest, many VIP groups that had brought mainland high rollers to the tax haven gambling mecca closed up shop on fears of being similarly targeted.

Macau’s prosecution came as a direct order from Beijing, which concluded that such VIP junket organizers were essentially helping wealthy mainlanders launder money through the Special Administration Region’s high-end casino resorts.

Good and Bad Outcome

In December 2022, Macau’s six casino firms — Sands, Galaxy, MGM, Wynn, SJM, and Melco — received new 10-year gaming licenses in exchange for a pledge that they would collectively invest at least MOP118.8 billion (US$14.72 billion) into their resorts. Over 90%, or about $13.5 billion, must be allocated to nongaming projects.

At the direction of Beijing, Macau is trying to diversify its economy with new lures to complement its casino market. The 2022 concession agreement included a provision that increases the nongaming requirement by 20% if the six casino operators win at least MOP180 billion (US$22.3) billion in a given year through 2027.

Since 2023 GGR totaled over $22.7 billion, the casinos now have an additional investment requirement of $4.48 billion and brings the total nongaming commitment to nearly $16.2 billion.

In November, Macau Chief Executive Ho Iat Seng bizarrely said the casinos wouldn’t meet the nongaming trigger threshold despite being nearly on track to do so.

I can tell you that this [$22.3 billion] figure is impossible,” Ho declared.

Before the pandemic, Macau casino win in 2019 totaled $36.5 billion.

Casinos Expected Increase

Though it certainly wasn’t a sure thing this year, as a robust December fueled by a strong Christmas holiday propelled gaming past expectations in the final month of the year, Macau casinos presumably budgeted for the nongaming increase. If the $22.5 billion threshold hadn’t been met this year, the industry must be confident that such a brink would be eclipsed in a given year by 2027.

The nongaming spending mandates were broken down based on 2022 market share. Before the triggered increase, Sands was on the hook for $3.46 billion, Galaxy for $3.42 billion, Wynn for $2.05 billion, MGM for $1.87 billion, SJM for $1.5 billion, and Melco for $1.24 billion.

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The Macau Government Tourism Office (MGTO), in an update released on Wednesday, said the enclave’s hotel rooms were occupied at a rate of nearly 91% between Dec. 23 and Dec. 26.

Macau is home to approximately 45,700 hotel rooms. The city’s casinos account for the vast majority of the rental lodging.

The 90.8% occupancy rate is a 2.7% uptick on the same three-night period in 2022. During the four days cited, the Macau Statistics and Census Service said the region counted “over 456,000” visitor arrivals, or about 114,000 a day.

Since Macau and Hong Kong operate under the “one country, two systems” policy arrangement that gives the SARs a bit of governance independence from Beijing, the regions are more popular Christmas destinations than many mainland cities.

Macau and Hong Kong both have stronger Christmas mood, which is appealing as a destination to mainland Chinese visitors,” analyst Hoffman Ma Ho Man explained.

Ma said Hong Kong is also a major feeder to Macau during the Christmas period.

Macau Rebound

2023 marked the start of Macau’s COVID-19 recovery, arriving more than three years after the coronavirus allegedly originated in China’s Wuhan.

China President Xi Jinping maintained his controversial “zero-COVID” response strategy that faced a flurry of criticism from foreign leaders. After widespread protests against the policy that mandated sporadic lockdowns upon detection of new case clusters, Xi finally lifted the directive in early December 2022.

Through 11 months of 2023, Macau’s six commercial casino operators have jointly won more than $20.4 billion from gamblers. While that’s a 325% year-over-year increase from the same period in 2022, the gaming win accounts for about 61% of the market’s 2019 GGR for January through November.

Market observers at JPMorgan focused on Macau’s gaming market are forecasting a December win of $2.11 billion. If that is realized, full-year 2023 GGR will come in around $22.51 billion — or about 62% of the 2019 win that totaled $36.3 billion.

Approximately 5.7 million visitors came through Macau’s border gates in 2022. Through November, 2023 visitation totaled nearly 25.3 million travelers.

Mass Play at Full Strength

The JPMorgan note on Macau’s December GGR forecast included the revelation that mass play has presumably returned to 2019 levels. The revenue shortcomings are largely due to VIP junket groups no longer bringing hordes of high rollers to town after Beijing ordered law enforcement to closely scrutinize the industry.

Mass GGR is running at around 100%,” the JPMorgan release detailed.

Macau is undergoing an effort to overhaul the destination with nongaming attractions. The six casino operators last year pledged to invest $13.5 billion in nongaming projects before 2033.

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Gross gaming revenue (GGR) from Games of Fortune, as the Macau government refers to its casino operations, totaled MOP16.04 billion (US$1.99 billion) in November 2023. Though that’s a 435% year-over-year improvement from November 2022, when China was still amid President Xi Jinping’s “zero-COVID” protocols, the monthly tally represents a nearly 18% decline from October, when the six casino operators won $2.42 billion.

October benefited from hosting eight days of the Golden Week holiday, a peak travel period for China’s 1.4 billion residents. Many workers are given a week of paid time off during the holiday period that celebrates the Oct. 1, 1949, establishment of the People’s Republic.

November, however, still marked Macau’s fourth-best gaming month in 2023. This year marked the start of the recovery of the world’s richest gaming market before the COVID-19 pandemic. Macau has since lost that distinction to Nevada. But its gaming rebound nonetheless continues.

Mass Rebound

November’s GGR numbers came as little surprise, as analysts predicted the month would be considerably lower than October. The analysts’ consensus for the November casino win was MOP16 billion, just shy of being on point with the revenue realized.

November maintained the industry’s rally. With its 435% year-over-year surge, November was 138% richer than in 2020 and 2021. But November’s haul remained 30% below pre-pandemic November 2019, when GGR totaled MOP22.87 billion.

Chau became a billionaire, founding and running his Suncity Group. The company began as a junket group facilitating first-class travel for mainland whales to Macau. Upon arrival, those guests were afforded gaming credit similar to their lavish tour cost — often in the six- and seven-figure U.S. dollar ranges. Those players gambled in private high-roller rooms, with the casinos providing Suncity a commission on the action.

Chinese prosecutors alleged Chau’s junket also ran illegal side games in the private rooms. That action allegedly swindled the Macau government out of more than $1 billion in tax revenue. Chau was arrested in late 2021 and in January 2023, was found guilty of fraud, illegal gambling, and criminal association.

Chau’s prosecution and prison sentence rocked the junket industry in Macau, with most operators closing up shop and skipping town for more welcoming markets like the Philippines, Vietnam, and Cambodia. It’s unclear how Macau’s gaming industry can return to 2019 gaming levels without junkets. The Macau government wants to diversify its economy away from gaming through new business capabilities and more family-friendly attractions.

Silver Lining

Through 11 months, Macau’s gaming win stands at MOP164.5 billion (US$20.4 billion). Compared with the same period in 2019, when the casinos won MOP269.6 billion (US$33.5 billion), the 2023 revenue represents a 61% return.

Historically, December has been a rather slow gaming month for Macau.

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A top government official said this week that with gaming surging this year, the six casino concession holders should contemplate elevating worker pay. Lei Wai Nong, the secretary of Macau’s Economy and Finance Office, says casino revenue likely warrants a 2% to 3% compensation increase for most staffers.

We cannot instruct the casino concessionaires to adjust the salaries of their employees, but we’ve been advising them to share the fruits of the economic recovery with their employees,” Lei told reporters.

Macau’s casino industry is controlled by the Chinese subsidiaries of Las Vegas Sands, Wynn Resorts, and MGM Resorts, along with Hong Kong-based gaming operators Galaxy Entertainment, SJM Resorts, and Melco Resorts.

Economy Comeback

Lei’s office oversees one of the world’s wealthiest economies. Despite measuring just 45 square miles and having a population of less than a million residents, Macau’s gross domestic product topped $55 billion in pre-pandemic 2019.

October marked Macau’s best gaming month since the onset of the pandemic, as gross gaming revenue totaled MOP19.5 billion (US$2.43 billion). Through 10 months, 2023 GGR totaled $18.4 billion.

This year’s gaming win is 316% higher than in 2022, 106% better than in 2021, and 224% better than what the six companies won during the same time period in 2020. The market, however, still has a ways to go to return to 2019 gaming levels, if such a return is even possible considering the market’s new conditions that feature far fewer VIP junket groups bringing high rollers to town.

GGR from January through October 2019 totaled more than $30 billion.

Government Comments Carry Weight

In Macau, when government officials speak from the private sector, those comments are weighed heavily. The six casinos go to great lengths to stay in the local government’s good graces, and never was that made more apparent than during the height of the COVID-19 pandemic.

Despite their resorts being nearly desolate of customer traffic, the six casinos retained most of their workforces throughout the nearly three-year-long health crisis. Though their gaming levels have only returned to about 60% of their 2019 business levels, and higher overhead costs because of inflation are cutting into the recovery, Lei’s comments will be expected to result in worker pay increases in 2024.

Macau casinos, however, typically provide their workers with lavish bonuses and annual compensation adjustments.

Last year, all six companies issued financial awards to their employees. Sands, Galaxy, Wynn, MGM, and Melco provided their workers with a bonus equivalent to one month’s salary. SJM provided its employees with 1.5 months of pay.

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In its third-quarter earnings report, Trip.com reported net revenue of approximately RMB13.7 billion ($1.9 billion), nearly double from the July through September period in 2022. The 2023 Q3 revenue also represents a 31% increase from 2019, as room rates and airfare prices have skyrocketed.

Throughout the third quarter, both domestic and international travel experienced a remarkable rebound, thanks to the robust summer travel demands. This shows just how eager travelers are to explore the world,” James Liang, Trip.com’s executive chairman, said on the earnings call.

Trip.com CEO Jane Sun added that the company continues to see outbound travel from China recover.

Normal life in China remained on hold until late last year, when China President Xi Jinping finally lifted his “zero-COVID” policy. The program had ordered lockdowns and travel restrictions across the world’s second-most populated country.

Macau Top Destination

Trip.com Group Limited was acquired in 2017 by Ctrip.com International. The reverse takeover resulted in Ctrip assuming the Trip.com identity. The corporation is headquartered in Shanghai.

Outbound tourism refers to mainland Chinese people crossing the People’s Republic’s borders into another country, or to one of China’s two Special Administrative Regions (SARs) in Hong Kong and Macau.

In the aftermath of the coronavirus, Trip.com officials say Macau has emerged as the most popular destination among Chinese travelers. Hong Kong previously held that distinction.

Outbound travel is rapidly recovering thanks to improvements in international airlift and travelers’ robust desire for international experience,” Liang detailed. “We anticipate continuously strong demand for outbound travel in the coming year and are committed to enhancing our partner offerings to meet this demand.”

One such Trip.com partnership is with the Macau government. In April, the Macau Government Tourism Office (MGTO) announced it was expanding its marketing agreement with Trip.com with additional incentives, such as discounted hotel rates.

Macau Overhaul

Macau is trying to appeal to a wider range of potential visitors by diversifying its leisure market away from casino gambling. When the Macau SAR Government issued its six casino operators new 10-year gaming licenses last December, the casinos agreed to invest a minimum of $13.5 billion in nongaming projects by 2033.

Sands China, the Asian subsidiary of Las Vegas Sands, must invest at least $3.46 billion in nongaming during its 10-year gaming license. Galaxy Entertainment’s nongaming allotment is $3.42 billion, while Wynn China must invest $2.05 billion, MGM China $1.87 billion, SJM Resorts $1.5 billion, and Melco Resorts $1.24 billion.

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Macau casinos continue to welcome back travelers and their coveted high rollers. Macau is one of two SARs in China, with Hong Kong being the other.

Sands, Galaxy, Wynn, MGM, SJM, and Melco are benefiting this year from China easing cross-border travel. October marked the enclave’s best gaming month since the outbreak of the coronavirus, as GGR totaled $2.42 billion.

Nongaming Spending Trigger

When Macau issued the six casino operators new 10-year gaming licenses late last year, the companies agreed to collectively invest about $13.5 billion into their resorts through nongaming projects. The Macau SAR Government is taking a page out of the Las Vegas playbook in seeking to become a diversified tourism market and not one that solely relies on gaming.

The $13.5 billion number can expand in the coming years if the gaming business reaches certain benchmarks. If the six concessions win MOP180 billion ($22.4 billion) in a given year through 2027, the nongaming spending requirement jumps 20%, or another $4.48 billion.

During a question and answer session with the media this week, Macau SAR Chief Executive Ho Iat Seng stated he doesn’t expect the casinos to reach the threshold this year.

We won’t know if it reaches MOP180 billion until next month, but I can tell you that this figure is impossible. It has not reached MOP180 billion,” the chief lawmaker said.

The chief executive’s comments are a bit puzzling, as through 10 months, Macau casinos have averaged about $1.84 billion a month in GGR. Even at that rate, the final two months would add about $3.68 billion in gaming revenue to take the full-year tally to around $22.15 billion, just shy of the $22.4 billion trigger.

But Macau’s recovery has escalated in recent months. The casinos won $2.14 billion in August and $1.86 billion in September, before October’s $2.42 billion haul.

Nongaming Breakdown

Macau broke down its nongaming investment requirements based on gaming market share at the end of 2022. With Sands China leading the market, the company was issued a $3.46 billion nongaming requirement.

Galaxy Entertainment is on the hook for $3.42 billion, Wynn China for $2.05 billion, MGM China for $1.87 billion, SJM Resorts for $1.5 billion, and Melco Resorts for $1.24 billion.

Ho told reporters he hasn’t formally approved any casino’s nongaming spending plans, though projects have been submitted to the government and are being reviewed.

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During his firm’s third-quarter earnings call this week, MGM Resorts International President and CEO Bill Hornbuckle said business is “booming” in Macau. MGM, through its subsidiary, MGM China Holdings, possesses one of the six commercial casino concessions in Macau, a Special Administrative Region (SAR) of the People’s Republic of China.

In the Macau market, it is clearly evident that business is booming,” Hornbuckle said on the earnings call with investors and analysts.

Hornbuckle revealed the third quarter delivered MGM China record earnings before interest, taxes, depreciation, and amortization (EBITDA). The July through September period topped the same quarter in pre-pandemic 2019.

MGM China reported adjusted EBITDA of HK$1.9 billion ($240 million) for the quarter. The unit said its casinos are outpacing the recovery of the rest of the market, as MGM China’s gross gaming revenue (GGR) returned to its 2019 levels, while the five other casino operators have only returned to about 84% of their pre-COVID gaming.

MGM China Upgrades

MGM China’s strong gaming performance in the third quarter grew the company’s market share in Macau from 14.8% to 15.5%. The company is winning over the mass and premium mass segment, which is now the dominant player demographic following the recent mass exodus of VIP junket groups.

“Results in Macau have been outstanding because of the ingenuity and execution of the MGM China team,” Hornbuckle said.

The MGM boss said the strong quarter has warranted renovations at both MGM Macau and MGM Cotai. Hornbuckle told analysts that “opportunistic changes” will be made to the casino floors to “maximize yield” and “take care of our mass and premium mass customers.”

MGM China operates more than 2,000 rooms across MGM Macau and MGM Cotai. Along with the room renovations, Hornbuckle says MGM China will build six new villas at MGM Macau.

Nongaming Spending

In exchange for the new 10-year gaming license MGM China was awarded last year, the company pledged to the Macau SAR Government to further invest MOP16.7 billion (US$2.1 billion) into its resorts. The bulk of the money, MOP15 billion (US$1.87 billion), must go to projects unrelated to casino operations.

MGM brass said they’re committed to diversifying Macau and growing general tourism to the enclave. Kenneth Feng, president and executive director of MGM China, said the company is focused on China’s upper middle class.

We are excited about the recovery in Macau, along with the diversification development of the city. We will continue investing in the gaming floors to enhance table yield. At the same time, we are committed to bringing in more unique integrated tourism experiences to attract international visitors.”

Pressed for comments on how macroeconomic pressures might impact Macau’s recovery, Hubert Wang, MGM China’s chief operating officer, said higher-income earners on the mainland, who represent the bulk of the demographic that frequents Macau, are doing just fine.

“China’s GDP growth is around 4% to 5%, but we cater to the upper middle class and the consumption in China between high-income groups and the base mass is very different,” Wang said. “You see continued growth in luxury goods in the high-income group, while the mass you have seen a decline. I think Macau is well-positioned to cater to the group with the high spending. This is what the concessionaires and the government are trying to do — to capture that group.”

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The October win is the best monthly haul since January 2020, when the six casino operators won $2.75 billion. With the coronavirus originating in China, the pandemic began impacting Macau’s gaming industry in February 2020.

Macau casinos won at least MOP10 billion just once from February 2020 through 2022. But after China President Xi Jinping ended his controversial “zero-COVID” policy late last year, Macau’s pandemic recovery was finally initiated.

Macau GGR through 10 months of 2023 stands at $18.4 billion, which is 316% higher than last year. The 2023 casino win is also 106% better than the same 10 months in 2021 and 224% better than 2020.

However, the $18.4 billion gaming win incurred from January through October 2023 remains 40% below what the six casinos collected during the 10 months in pre-pandemic 2019.

Rally Rolls On

Macau’s performance in October indicates that the industry is moving positively. October 2023 was a 400% year-over-year surge.

October 1 commemorates the establishment of the People’s Republic. The holiday is referred to as National Day in China. More than 932K people visited the Special Administrative Region (SAR) during the weeklong holiday.

Analysts at Citigroup and elsewhere projected October GGR to come in around MOP19 billion, meaning the market slightly beat expectations.

Market Changes

As of Aug. 30, 2023, China no longer has travel restrictions on its citizens or foreigners.

International travelers do have to complete a Customs Health Declaration form affirming they don’t believe they have COVID-19 or have been told they haven’t been in close proximity of anyone who does before entering. But testing requirements are no more.

Chau was found guilty of fraud, illegal gambling, and criminal association, and in January, was sentenced to 18 years in prison. Prosecutors successfully argued that Chau’s Suncity Group ran illegal marketing campaigns and side gambling operations that cost the local government $1 billion in lost tax revenue from 2013 to 2021.

The Macau SAR Government issued its full-year 2024 GGR forecast on Tuesday, with the expectation of MOP216 billion ($26.8 billion). The outlook adjusts to the changing market, as Macau casinos in 2013 won a record $45 billion. It was after that year that Xi instructed his government to begin cracking down on the money movement from the mainland to Macau via high roller junket groups.

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Typhoon Saola in late August reported sustained winds of more than 120 mph as the powerful and erratic tropical cyclone approached the Chinese mainland from the Philippine Sea. Macau’s local government ordered most nonessential businesses, including its many casino resorts, to close before the storm’s landfall on Friday, Sept. 1.

The Macau government allowed its casinos to reopen on Sept. 2 after the eye of the storm passed, and the typhoon weakened and dissipated by Sunday. However, the temporary closures, paired with the many changes to travel plans that the typhoon caused, resulted in financial damage to the casinos by way of lost revenue.

September Slide

Today, Macau’s Gaming Inspection and Coordination Bureau released September gaming revenue numbers for the six operators in town. September gross gaming revenue (GGR) totaled MOP14.93 billion (US$1.85 billion), a more than 13% decline from August when the casinos won $2.13 billion.

Along with amended travel plans for some would-be visitors, Typhoon Saola disrupted transportation and temporarily closed border entry points. Heavy rainfall in the week following the storm also kept bookings light.

Before the September numbers were released, gaming analysts at JPMorgan predicted that September would be a “month to forget” for the casinos because of the typhoon.

Though September represented a 404% year-over-year improvement, as China was still in President Xi Jinping’s “zero COVID” program with many pandemic-related travel restrictions in place during September 2022, last month ended a three-month GGR rally. September was also the first month since April when GGR was below MOP15 billion (US$1.86 billion).

Macau casinos have won almost $16 billion from players in nine months. That’s up 305% from 2022 but remains down 41% from 2019, when the six casino operators won $27.2 billion from January through September.

Golden Week Underway

Because of the weather’s impact on September’s numbers, gaming analysts say October will provide a more telling picture of the overall health of Macau’s gaming industry. Before COVID-19, Macau was the richest gaming market in the world, but Las Vegas and Nevada retook that claim last year.

China has designated Sept. 29 through Oct. 6 as the 2023 Golden Week. The week gives most workers a week of paid time off in honor of Oct. 1 being National Day commemorating the establishment of the People’s Republic on Oct. 1, 1949.

The Citigroup note projects October GGR to come in around MOP19 billion (US$2.35 billion).

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The bank expects the gaming companies operating in the special administrative region (SAR) to make a significant dent in outstanding obligations over the next three years, potentially getting debt figures back to pre-COVID-19 levels at some point in 2027.

The pace of deleverage could pick up from 2H23 as business volumes continue to ramp,” noted Morgan Stanley analysts in a recent report. “It could take the industry roughly three years to delever and get back to 2019 net debt levels, based on $6 billion annual FCF (free cash flow),” or around $9 billion in earnings before interest, taxes, depreciation and amortization (EBITDA).”

The six Macau operators are Galaxy Entertainment, Melco Resorts & Entertainment (NASDAQ: MLCO), MGM China, Sands China, SJM Holdings, and Wynn Macau.

Reasons for Optimism on Debt

Owing to a multiyear shutdown, China forbid a return to pre-pandemic travel levels, pinching Macau’s gaming industry in the process.

Entering this year, Macau operator debt approached $20 billion. But the gaming companies knocked $1.7 billion off that figure through the first half of 2023, indicating their pace of debt reduction this year could approach $3.4 billion, according to Morgan Stanley.

“Nongaming commitment is not free and is cash outflow,” added the bank. “We estimate the average yearly spend (over 10 years) to be 20% of [estimated] 2024 EBITDA.”

SJM, Melco Could Be Causes for Concern

Each company has different debt dynamics, with Morgan Stanley noting that Grand Lisboa Palace, owned by SJM Holdings, is the most levered at 9x. Melco and Wynn Macau are said to be around 5x to 6x. But as measured by debt as a percentage of market capitalization, Melco is the worst offender at 131%.

The bank notes that adding 200 table games across MGM Cotai and MGM Macau is paving the way for MGM China to reduce debt. MGM Resorts International (NYSE: MGM) owns 56% of that concessionaire.

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Macau’s Gaming Inspection and Coordination Bureau reports that gross gaming revenue (GGR) in August totaled MOP17.2 billion — or approximately US$2.13 billion. August was the casinos’ best revenue month since January 2020, when the coronavirus outbreak broke in China’s Wuhan.

After widespread protests and criticism from many foreign leaders, Xi ended zero-COVID in late 2022. It coincided with the Macau government issuing its six gaming operators — Sands, Galaxy, MGM, Wynn, SJM, and Melco — fresh 10-year licenses.

In exchange for the licenses, the six gaming giants pledged to collectively invest MOP118.8 billion (US$14.72 billion) into their resorts during the life of the concessions. The vast majority — US$13.5 billion — must go towards non-gaming projects.

Gaming Nearing Trigger

A far less reported condition of the new gaming permits Macau issued last year was that the casinos’ non-gaming commitment can increase substantially should their gaming revenues return to levels experienced before COVID-19. The concessions require that if the six operators win MOP180 billion or more in any year through 2027, the non-gaming spending requirement will jump 20%.

However, Macau casinos have experienced strong play in recent months as business continues to improve.

2023 Macau Casino Win (MOP)

• January — 11.58B
• February — 10.32B
• March — 12.73B
• April — 14.72B
• May — 15.56B
• June — 16.66B
• August — 17.21B

As the numbers show, Macau casinos are increasing their monthly gaming income and will likely be near the MOP180 billion threshold.

Financially Capable

Macau’s casinos are still reeling from the more than three-year pandemic in China. While their properties were nearly lifeless, the concessions largely adhered to calls from the Macau government to refrain from laying off workers.

But for the Macau casino giants, the pandemic came after more than a decade of prosperity, the market’s banner year coming in 2013 when the six casino operators won $45 billion. That left them considerable financial reserves to weather the pandemic.

Lawrence Ho, the founder, chair, and CEO of Melco Resorts, says his firm is “financially ready.”

If GGR goes over the 20% cap, we will be able to do it,” Ho said, as reported by GGRAsia, an online media outlet covering Asian gaming markets. “Everybody shares the same goal of trying to diversify the market and bring more international visitors. We’re supportive and we’ll continue to talk to the government to make sure that we’re all on the same page.”

Macau casino revenue has averaged about MOP16.5 billion over the past three months. At that rate, a full-year casino win would come in right at MOP180 billion and initiate the 20% non-gaming spending increase.

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As measured by $2.15 billion in GGR, August was the gaming enclave’s best month since prior to the global health crisis with monthly gaming revenue implying a daily run rate that’s 71% of pre-COVID 19 levels. That implies there’s still room for growth.

The print suggests mass GGR recovered to 93 percent to 94 percent of pre-Covid-19 levels versus high-80s [of percent] in the second quarter or low-90s [of percent] in July,” noted JPMorgan analysts in a recent note to clients.

The analysts observed that in August, the GGR rebound rate among bettors in the premium mass category wan 110% ahead of levels seen prior to the pandemic while mass market GGR 75% to 80% of highs notched in 2019. Gaming revenue attributable to VIPs was 28% to 29% of 2019 levels, according to the bank.

Macau on Right Track, Though September to Be Slow

In 2023, the Macau recovery has been sturdy enough that the special administrative region (SAR) reclaimed the throne as the world’s largest casino center by revenue, wresting that title from Las Vegas.

That’s a positive for Macau operators because it implies there’s ample room for upside when it comes to the VIP recovery. That could prove crucial as 2023 comes to an end because September GGR is likely to be slack owing to a brief closure of gaming venues at the hands of Typhoon Saola.

“September GGR isn’t going to wow anyone, not only due to seasonality (a shoulder season between summer holiday and October Golden?Week), but also due to super Typhoon Saola,” added the JPMorgan analysts.

Golden Week Outlook

The next significant catalyst for Macau GGR is likely to be the start of Golden Week on Oct. 1. That week-long holiday commences on China’s National Day, which is the country’s final public holiday of the year and one that typically drives an uptick in visits to Macau and Hong Kong.

In normal operating environments, Golden Week is usually a spark for Macau casinos, but forecasting the intensity of related upside is difficult to perform until the holiday arrives.

“Many investors ask, ‘Is there a way to gauge how good (or bad) the Golden?Week will be?’ ?Not really, because of a very short booking window of Chinese?travellers (only several days) and an even shorter window for Chinese?gamblers,” concluded the JPMorgan analysts.

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That could be a sign that China’s proliferating macroeconomic headwinds aren’t yet weighing on the special administrative region’s (SAR) gaming industry. While the bank forecasts the six concessionaires will reach 80% of pre-COVID EBITDA levels in the current quarter, it projects MGM China will be the stalwart, as that operator ascends to 120% of pre-pandemic EBITDA highs.

MGM China has more tables, redesigned casino floors, adding F&B (including bubble tea) on the floor, removing walkway at the casino floor, use of RFID chips, creative marketing programs, and personalized experiences rendered,” noted the Morgan Stanley analysts. “Peers are acknowledging the lead, and hoping to pick up a trick or two.”

MGM China operates two integrated resorts in Macau, and is 56% owned by MGM Resorts International (NYSE: MGM).

Premium Customers Supporting Macau Casinos

The six Macau concessionaires are Galaxy Entertainment, Melco Resorts & Entertainment (NASDAQ: MLCO), MGM China, Sands China, SJM Holdings, and Wynn Macau. In previous eras of vibrancy for the gaming enclave, VIPs drove gross gaming revenue (GGR).

“This is why the [Macau] recovery is premium-led (and grind mass has lagged),” added Morgan Stanley. “Younger patrons are visible on casino floors, as well as around the resorts. High-end customers are spending as much or even more than pre-COVID levels.”

That’s a plus for operators, such as Sands China, with significant retail space leased to luxury brands.

“They claim that similar to luxury sales in China, the top 1 percent of mainland Chinese are traveling and spending on entertainment,” the Morgan Stanley analysts observed.

China Economy Not Pinching VIPs

While the return of high rollers to Macau has been incremental, there are signs it’s gaining pace in recent weeks. The advantage for concessionaires is that while these bettors are smaller in number, their average bet is around $13K per hand, and they’re not as economically sensitive as their mass-market counterparts.

The VIP cohort’s resilience and increased visitation is likely one reason why Macau topped Las Vegas in GGR terms in the first half of this year, regaining its crown as the world’s top casino center.

Morgan Stanley added that house direct VIP service is “already above 2019 levels, and thus incremental VIP revenue should come from casual junkets.”

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Gross gaming revenue (GGR) in the Chinese Special Administrative Region totaled MOP22.126 billion (US$2.06 billion) in July 2023. The six commercial casino operators, — Sands, Galaxy, Wynn, Melco, MGM, and SJM — continued their post-pandemic rally, as June represented a nearly 10% improvement on June.

July topped the enclave’s previous best monthly GGR performance in the pandemic aftermath, which was $1.93 billion, set in May 2023. The $2.06 billion haul exceeded the median expectation among analysts issuing guidance on Macau.

Xi ended “zero-COVID” after nearly three years in November 2022. The policy had paralyzed the Chinese economy and wreaked havoc on Macau’s tourism and gaming industries, which generated more than 80 cents of every tax dollar the local government received before the pandemic.

Rebound Rolls On

Macau’s casinos continue to see their gaming rebound, though the local industry is considerably different than it was before COVID-19.

Amid the pandemic, local officials in Macau were tasked with reissuing fresh gaming licenses to the six firms. But upon pressure from Beijing to better scrutinize VIP play and the junket groups that had brought such mainland high rollers to the casino tax haven for more than a decade, Macau greatly overhauled its regulatory environment.

In seeking to diversify its regional economy through its most critical industry, the Macau government in November issued new 10-year gaming licenses to the six concessionaires, but with considerable nongaming requirements.

The six casino giants must collectively invest $13.5 billion in projects unrelated to their casino operations over the life of their licenses. The VIP pushout has also forced the casinos to place more emphasis on the mass market and so-called premium mass market, the latter referring to general public gamblers who might not be regulars, but who gamble more when they visit than the standard guest.

Gaming Remains Below 2019

Though 2023 has seen a meaningful recovery for Macau casino revenue, the market still has a way to go to return to pre-pandemic levels.

Through July 2023, Macau GGR totaled a little more than $12 billion. In 2019 January through July, casino revenue totaled more than $21.6 billion, meaning despite the 2023 rebound, gaming through seven months of the year remains 44% below 2019.

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Helped by strength in the mass-market segment, GGR in Macau was estimated at $1.03 billion through July 16, or an average of $64 million per day, according to JPMorgan. That’s slightly better than the second-quarter run rate of $62 million per day. In recent days, the July run rate slowed to $61 million because of typhoon warnings. But analysts still expect this month to be strong for the concessionaires.

We still see July printing the highest GGR since the pandemic, north of $1.99 billion,” wrote JPMorgan analysts DS Kim and Mufan Shi in a recent report. “This would imply mass GGR is comfortably running at 90%+ of pre-COVID levels, and we continue to expect a 100%+ recovery in mass by October.”

Macau casinos won $1.88 billion last month and $1.93 billion in May, with those two months representing the special administrative region’s (SAR) best GGR tallies since January 2020.

Good Timing for JPMorgan Call

The timing of JPMorgan’s July GGR forecast is pivotal, because Macau casino operators are about to start reporting second-quarter results. Those updates could include commentary on the current quarter.

Last week, Morgan Stanley analyst Stephen Grambling named Sands the firm’s top casino stock idea, calling it the best way to play the Macau recovery.

Should management teams sound optimistic about their outlooks for the back half of 2023, that could spark a rally in Macau equities. GGR is approaching two-thirds of 2019 levels, and some analysts believe that figure will be made whole by the end of this year.

Margins Matter for Macau GGR

Margins could set the tone for better run rates and higher GGR as 2023 progresses. On that note, JPMorgan is optimistic, with the analysts noting Macau margins could come in at record highs for the June quarter.

Vibrancy among mass and premium mass bettors is helping Galaxy Entertainment and Sands China, which were already entrenched in those segments, and those concessionaires that have been able to nimbly pivot away from dependence on high rollers.

However, data suggest the VIP segment is bouncing back, and could be a larger contributor to GGR in the back half of 2023.

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Macau, the only place in China where casino gambling is allowed, only recently began its COVID-19 comeback. The market’s six commercial gaming operators waited patiently for China President Xi Jinping to end his controversial “zero-COVID” scheme. That kept life on hold on the mainland long after much of the world returned to a sense of normalcy.

June’s revenue tally marked a 514% year-over-year surge over June 2022, when the enclave’s casinos won just $310 million. June 2023 marked Macau’s second-best revenue month since the coronavirus emerged after May 2023, when the six casino operators won $1.93 billion.

Slowdown Concerns

Macau, the world’s richest casino market before the pandemic, is trying to figure out its next chapter. Gone are the VIPs and high rollers brought to town by junket groups. That’s after Xi ordered mainland law enforcement to better scrutinize such operations.

The president says the touring operators — which facilitated luxury travel and first-class accommodations from the mainland to Macau for high rollers — present national security concerns because of the large flow of capital through the casino tax haven. Fearing prosecution after China arrested Alvin Chau, the former face of the junket industry, then sentencing him to 18 years in prison, junket groups closed up shop and moved to other markets in Asia.

May benefited from the Chinese Labor Day holiday, which saw more than 530K mainlanders visit Macau, one of two Special Administrative Regions in China, with Hong Kong as the other. But in June, that rush of casino visitation cooled despite other high-profile events, such as the Dragon Boat Festival.

That has some gaming analysts pondering whether Macau will experience the type of robust, long-running gaming rebound that other major gaming markets experienced post-COVID.

A recovery in Macau’s casino sector showed signs of waning in June, with gaming revenue missing estimates amid concerns the initial post-reopening Chinese tourist boom is fading,” wrote Shirely Zhao and Alice Huang in Bloomberg.

Dr. Wilfred Wong, president of Sands China, a subsidiary of Las Vegas Sands, said this week that the six gaming concessionaires won’t be able to overhaul their customer focus overnight. But they will achieve the goal of increasing foreign visitation in due time.

“We are now doing a lot of promotions overseas. We are expanding our overseas representative network; we are bringing in wholesalers and tour operators to come and experience Macau. This is a long-term [strategy],” Dr. Wong told Inside Asian Gaming.

Long Recovery Ahead

Macau casinos through the first half of 2023 have won MOP80.136 billion (US$9.93 billion). Although that’s a more than 200% surge on the same six months in 2022, the market has a ways to go to recover to its 2019 levels.

In 2019, January through June GGR totaled MOP149.503 billion — meaning casino income remains down over 46% from 2019.

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Macau’s COVID-19 recovery is coming about two years after Las Vegas casinos experienced unprecedented play. Gaming analysts and casino executives cite pent-up demand from the pandemic as a reason for the record revenues experienced in Nevada in 2021 and last year.

More than 7,000 miles away in Macau, the Chinse Special Administrative Region (SAR) is only now beginning its coronavirus rebound. May marked the city’s third consecutive month in posting its best GGR number since January 2020.

The $1.93 billion won off gamblers last month represented a 367% surge from May 2022, when the six casino operators in town collectively won just $413 million.

Macau is certainly on a comeback?as GGR continues to grow month to month. February was the lone exception through the first five months of 2023.

2023 Macau Monthly Gaming Income

• January — $1.43B
• February — $1.28B
• March — $1.58B
• April — $1.82B
• May — $1.93B

Trending Upwards

Through May 2023, GGR in Macau is up 173% compared with the same five-month period in 2022. Macau’s six casino licensees have won approximately $8 billion this year.

Though Macau is rebounding, the gaming industry has a ways to go to return to 2019 business levels. Through May 2019, the casinos won about $15.6 billion.

New Market

Casino executives in Macau are stressing that topline gaming revenue might not be quite as important as it once was to the operators’ bottom lines.

MGM Resorts CEO Bill Hornbuckle recently explained on the company’s earnings call that with fewer VIPs in town, after China forced out junket operators, gaming income should be expected to dwindle.

But that isn’t necessarily a bad thing, Hornbuckle said, as VIP revenue is a smaller-margin business than mass and premium mass-market play. VIPs are typically afforded much richer comps and incentives, and those costly promotions eat into the casinos’ bottom lines.

We’re leaning into mass,” Hornbuckle said last month on the company’s call. “I think the way to look at the totality of the business, obviously, the junket operatives were not cheap to do business. They took a lot of the margin out of the business. The fact that now we’re on our own, there’s a formula that suggests somewhere under 100% of former GGR levels, we could drive over 100% EBITDA,” Hornbuckle explained.

Las Vegas Sands CEO Rob Goldstein issued a similar sentiment.

“The junket segment … created very high numbers in terms of revenues, although less success in terms of the bottom line and EBITDA,” Goldstein commented to CNBC last week. “I don’t know if we’ll reach the same levels of topline gaming revenue. But I think we can exceed the EBITDA numbers of 2019.”

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In 2022, visitors to the special administrative region (SAR), the lone Chinese territory where gaming is permitted, spent $15.58 billion, according to the World Travel and Tourism Council (WTTC). That figure encompasses more than the closely watched gross gaming revenue (GGR) numbers, and likely would have been higher had Macau been more accessible last year.

The move is paying off, as analysts are forecasting some Macau casinos are positioned to generate revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) this year on par with or in excess of 2019 levels.

Casino Cities Not Prominent on WTTC List

Dubai, Doha, and London ranked ahead of Macau on the WTTC 2022 city tourist spending rankings. None of those metropolitan areas can be considered casino destinations.

Dubai’s long-running reputation as the Middle East’s prime tourist destination, and one where international visitors clearly spend freely, is one of the bullish catalysts underpinning the Wynn UAE project, which is scheduled to open in early 2027.

Doha is a 70-minute flight from Dubai, meaning residents and visitors to that city could get to Wynn Al Marjan Island in roughly three hours when the venue opens.

Other Gaming Implications from WTTC List

Istanbul, Barcelona, New York, Singapore, and Paris followed Macau, rounding out the top 10 on the 2022 WTTC list.

New York has long been one of the most visited cities in the US, and one where domestic and international tourists spend large amounts of money.

That proposition could be enhanced after the state awards three downstate gaming permits, which will allow for the development of Las Vegas-style casino hotels. The downside in terms of economic perks is that it will be several years before those venues open, meaning it will be some time before New York’s tourist spending numbers see a gaming-driven uptick.

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Also known as the “May Day” holiday, Labor Day is an annual event where employers thank their workers with three days of paid time off. Many workers tacked on the weekend before the May 1-3 holiday this year and made a vacation out of it.

The MGTO had hoped to lure an average of 70K daily visitors during the five-day holiday. Traffic easily outpaced that goal, with the median count for the period coming to about 98,400 daily entries.

Tourism Recovery

Visitation for the 2023 holiday was up more than 250% year over year. This week’s holiday still remained below 2019 when Labor Day brought approximately 531,500 visitors to the casino enclave. Last year’s Labor Day resulted in Macau counting only 136,700 visitors.

Macau is amid its economic recovery. The Chinese Special Administrative Region (SAR) relies mostly on tourism and gambling to fuel its local economy. Tourism accounts for over 80 cents of every tax dollar the Macau government receives yearly.

Gaming has rebounded along with visitation. Macau casinos won $1.82 billion in April, the industry’s best month since the onset of the pandemic.

Macau is free of all pandemic-related entry protocols for people arriving from mainland China, Taiwan, and Hong Kong. That’s a stark difference from last year when China and Macau continued to adhere to “zero-COVID” and responded to outbreaks with sporadic lockdowns.

Tours Boost Numbers?

Macau tourism officials said touring groups were largely responsible for the heightened visitation during Labor Day. Tang Ka Man of the Association of Macau Tourist Agents said there were approximately 300 groups that ventured to the casino region during the five-day period.

While Macau’s six casino operators, for many years, relied on VIP junkets to whisk high rollers into town, the region is undergoing an overhaul after such travel organizers were forced to do business elsewhere by the Chinese government in Beijing.

Though the general public gambles far less than a high roller, the mass market can return better margins for the casinos since those patrons are afforded far fewer incentives and comps.

Most mainlanders who venture to Macau do so today in part of a touring group, as traveling in clusters is considerably less expensive. Macau government officials hope to entice potential visitors with hotel incentives for tour participants, including a MOP500 (US$62) subsidy for a two-night stay.? ?

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Macau has traditionally been a popular destination for Labor Day frolickers. And following three years of scaled-down Labor Day celebrations, Macau is reporting a great return of visitation for this year’s holiday.

The holiday officially runs from Monday, May 1, through Wednesday, May 3, but many vacationers commenced the holiday break early to add on the weekend.

Macau officials said 109,196 entries were processed on Saturday. On Sunday, that number rose to 133,911, the region’s highest daily total since early 2020. On Monday, the official start of the holiday, Macau logged 110,823 visitor entries.

Visitors Return

Labor Day 2023 in China is much different than last year’s holiday when China was dealing with isolated COVID-19 outbreaks and still adhering to “zero COVID.” The policy commanded by China President Xi Jinping required provinces, cities, and SARs to lock down the immediate areas surrounding where coronavirus clusters were identified.

Macau was still open during the 2022 Labor Day for people from the mainland, Hong Kong, or Taiwan. But most of the public remained hesitant to travel because of ongoing COVID-19 testing and isolation requirements upon a positive test.

Macau welcomed around 92,400 visitors during the first three days of the Labor Day 2022 holiday, meaning attendance for this year’s celebration is up about 283%.

Travel analytical firm ForwardKeys reports that Macau is a top travel destination in all of Asia for the period ranging from April 17 to May 7. That’s proving accurate, as many Macau casinos are sold out this week, and the available rooms demand extravagant rates.

Macau tourism officials estimate about 90% of the region’s hotel rooms are occupied through Thursday.

Labor Shortage

While hundreds of thousands of mainlanders flock to Macau for some personal time, the region’s casinos continue to struggle to hire employees.

Macau’s gaming industry is changing from a high roller-first mentality to focusing on more of the general public. The switch comes after China forced out VIP junket groups in recent years and the Macau SAR government’s decision last year to require its six commercial gaming operators collectively invest $13.5 billion into non-gaming projects by 2033.

Before the pandemic, many Macau casino employees lived in neighboring mainland cities, specifically the Guangdong city of Zhuhai. But from early 2020 until late last year, those workers were subjected to a slew of testing and possible quarantines just to get to their workplace.

As a result, many of those former casino workers found new employment in new industries on the mainland.

“Many skilled employees left Macau and probably will not come back,” Ben Lee, the head of the Association of Industry and Commerce Federations of Macau, told Asia Gaming Brief this month.

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Macau’s Gaming Inspection and Coordination Bureau revealed Monday that the region’s six commercial casino operators won MOP14.72 billion (US$1.82 billion) in April 2023. That marks a 16% month-over-month improvement from March.

Macau’s economy has been on a pandemic rebound since China President Xi Jinping announced in late November he would be ditching his “zero-COVID” policy that had been scorned by many foreign leaders and international cooperatives such as the World Health Organization.

Macau Bounce Back

Macau’s gaming recovery comes about two years after other major casino markets, including Nevada and Las Vegas, experienced their own.

China’s efforts to eliminate COVID-19 by isolating infected persons and locking down cities among even small outbreaks proved unsustainable. Amid public unrest and widespread protests, Xi finally agreed to lift “zero-COVID.”

Health officials in December and early this year worried Xi’s lockdowns over the past three years suppressed herd immunity and could result in mass COVID-19 causalities with “zero-COVID” being ditched. After case counts soared in the immediate aftermath of “zero-COVID,” much of China and its two SARs finally returned to a sense of normal. Macau and Hong Kong are two of the Special Administrative Regions in China.

Business in Macau has been good since January, and April only further improved the gaming resurgence.

March 2023 marked Macau’s best gaming month since January 2020, and April was even better. Through the first four months of 2023, GGR totaled $6.12 billion, up 141% year over year.

US Tensions

Macau is open to the world, but US officials continue to caution citizens about venturing into the country and its casino enclave. US Department of State officials say China continues to enforce laws on foreigners that threaten travelers’ safety subjectively.

“Reconsider travel to the People’s Republic of China (PRC), including the Special Administrative Regions of Hong Kong and Macau, due to arbitrary enforcement of local laws,” a China Travel Advisory issued by the US State Department reads.

US citizens traveling or residing in the PRC, including the Hong Kong SAR and the Macau SAR, may be detained without access to US consular services or information about their alleged crime. US citizens in the PRC may be subjected to prolonged interrogations and extended detention without due process of law,” the notice added.

The US is a minor feeder market for Macau. In 2019, the US accounted for just 200K visitors of the record 39.4 million travelers to Macau that year.

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The Macau Government Tourism Office (MGTO) initiated its partnership with Trip.com in September 2020 in response to the COVID-19 pandemic. Trip.com is a privately held online travel booking agency, China’s equivalent of Expedia and Booking.com.

Ctrip.com International acquired Trip.com in October 2017. Ctrip International, which has since assumed the identity of Trip.com Group Limited, is headquartered in Shanghai.

The MGTO says certain hotels in Macau, including some casino resorts, now qualify for special promotions for international guests. Effective immediately and running through June, Trip.com users who make a reservation in Macau for at least two nights at select hotels can receive discounted rates. The savings can go up to SGD100 (US$75).

Government Incentives

The MGTO is funding the Trip.com promo. The government agency tasked with promoting Macau as a tourism destination has allocated MOP650 million (US$80.65 million) for the marketing scheme.

“We will continue to collaborate with our trusted partners on marketing campaigns with the aim of empowering visitors with the most up-to-date travel information and exciting deals,” said MGTO Director Maria Helena de Senna Fernandes.

Trip.com search results for international bookings display qualifying hotels in the incentive program with a “Macau Bonus” icon. The travel website is actively marketing the program in Singapore, South Korea, and Thailand, though the “Macau Bonus” scheme is available for all international travelers coming to Macau who use Trip.com.

Before the pandemic, Macau relied mostly on mainland China, Hong Kong, and Taiwan for its foreign visitation. Of the record 39 million people who traveled to Macau in 2019, nearly 29 million originated from mainland China and its claimed territories.

March Momentum

Macau has been on a roll in terms of gaming revenue and visitation since Chinese President Xi Jinping lifted his “zero-COVID” policy late last year. With Macau’s borders free of most pandemic-related entry rules and procedures, the MGTO says visitor counts were robust throughout the first quarter of 2023.

Macau’s casinos are more focused on patron quantity over quality these days, after Xi’s regime in Beijing forced VIP junket groups out in recent years. With far fewer high rollers in town, Macau’s six gaming operators cater more to the mass market and will undergo nongaming investments totaling at least $13.5 billion through 2033.

The nongaming spending pledge was in exchange for new 10-year gaming permits that the Macau government approved last year.

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