Deutsche Bank analysts have maintained a positive outlook for the Macau gaming market in 2025, despite lingering geopolitical tensions and competitive pressures.
In a recent report by Deutsche Bank analysts Carlo Santarelli and Steven Pizzella, the brokerage forecasts Macau’s GGR to grow by 5.3 percent in 2025, slightly below the consensus estimate of 7.4 percent.
Geopolitical concerns, including US-China relations in the new Trump administration, continue to loom over Macau’s casino sector, but Santarelli and Pizzella argue that these issues will have little direct impact on Macau’s fundamentals, despite heightened sensitivity to such factors affecting investor sentiment.
The report draws parallels to 2018, when US-China trade tariffs coincided with a challenging year for Macau stocks. However, the reduced importance of the VIP market today makes such correlations less relevant, note the analysts.
“One can surmise that the tariff implementations in 2018 had an impact on the VIP market in 2019, though, given the reduced importance of the VIP market today, and the confluence of other factors impacting the VIP market in 2019, we don’t believe this is a rational concern”, the analysts concluded.
Santarelli and Pizzella believe that Macau’s long-term fundamentals remain attractive, driven by a steady recovery in visitation and mass market expansion, citing expectations for continued growth in gross gaming revenue (GGR) and steady improvements in market fundamentals.
However, they acknowledge investor concerns over potential geopolitical disruptions and the intense competition that hindered profitability in 2024.
“While the fundamental impediments that drove negative revisions in 2024 are accounted for in our forecasts, questions remain about whether GGR will drive stock performance in 2025,” the report states.
Look back at 2024
For Deutsche Bank, Macau’s 2024 performance was a mix of recovery and underperformance, with GGR growing by 23.9 percent year-on-year, aligning with market expectations but falling 22.5 percent short of 2019 pre-pandemic levels.
The mass gaming segment saw significant growth, with GGR up approximately 25 percent year-on-year and 10 percent above 2019 levels. However, the VIP segment lagged, with GGR up 21 percent year-on-year but still down 60 percent from 2019.
Despite these gains, Macau casino stocks underperformed in 2024, with the Deutsche Bank analysts attributing this to eroded profit margins caused by heightened competition in the mass market and geopolitical uncertainties impacting sentiment toward US-listed operators in Macau.
“Mass competition intensified as the VIP segment contracted, and the flow-through on incremental mass GGR was weaker than expected,” the analysts noted.
Hotel room supply also remained a key restraint for Macau’s recovery, as renovation projects and a limited development pipeline kept room supply growth muted, with 2024 ending with fewer rooms year-on-year.
The average occupancy rate of Macau’s 44,000 hotel rooms in the first three quarters of 2024 exceeded 85 percent – an almost 5 percent increase compared to the same period in 2023.
“Year-end 2024 Macau market room supply will be lower Y/Y, with limited meaningful development on the horizon. As such, from a capacity perspective, with the exception of some rooms coming back online, some smaller scale new room openings, and the longer-term potential Galaxy Phase IV opening, the supply pipeline looks relatively healthy for harvesting existing, and presumably growing, demand”, the analysts added.
“This constraint, combined with recovering visitation levels, supports a favorable environment for operators seeking to maximize occupancy and revenue”.
Macau’s visitation grew 25 percent year-on-year in 2024 but remained 12 percent below 2019 levels. Reduced arrivals from mainland China—down 13 percent from 2019—were a major factor, though a marked improvement in the latter half of the year provides hope for sustained growth in 2025.
