Alidad Tash, Andy Choy and Vitaly Umansky take a deep dive into all things Macau – gaming and non-gaming. The analysts and gaming executive point out the unrivaled city’s current shortcomings: hotel rooms, labor, transportation, connectivity; and its opportunities: non-gaming, Hengqin and domestic market.
Here are summaries of some of the key segments:
00:52 – Macau GGR and EBITDA compared to 2019
For Macau, 2022 was the worst year on record. FY23 could reach 50 percent of GGR, EBITDA could reach 65 percent.
Depends on the visa policies, when all hotel rooms reopen. Ramp-up will take some time.
Revenue will not get back to previous levels because junkets are gone, EBITDA will get there faster.
04:37 – Can Macau ever return to its heyday since junkets are gone?
EBITDA will go back to good old days, GGR will eventually be filled with more mass, hotel rooms and infrastructure.
Medium to long term basis, there’s more hotel rooms, more inventory coming onto the market versus 2019.
06:30 – Will the capacity be enough to garner enough mass to replace the whales that have been lost?
Number of rooms in Macau for it to be a truly mass market business is too low – needs 50-60k minimum.
If speaking MICE-related – for which some of the infrastructure already exists, Macau needs 80k rooms.
08:00 – Labor is a major impactor on capacity, transport and connectivity are other issues.
Can confine a large number of people to a well-connected Cotai, but right now it’s not well connected.
Infrastructure is in place in certain areas – ferry terminal, HKZM bridge, light rail system.
12:18 – Prime examples of other jurisdictions were government acts as a better partner with industry (Las Vegas). Will the government start acting as a partner? Will get there, but how long will it take.
14:36 – Not so much about diversification, but about creating a broader tourism experience. Casinos allow you to build amenities that otherwise wouldn’t exist in a non-casino IR.
16:50 – One of the main issues for attracting foreigners is that business is too good coming out of China.
If the industry responds and meets the gov’t expectations, hopefully gov’t could then relax its mandates.
16:50 – Foreigner-only gaming zones built primarily for premium, flying in customers.
Incentive gov’t has provided to bring in foreign players, reduction in GGR tax, is not that material. Problem continues to be transport issue. Who flies into Macau? Budget airlines.
Every dealer has to be local, so they speak Chinese.
21:00 – Use current land in Cotai to build more hotel rooms.
22:47 – None of Galaxy Phase 4’s development is part of its new investment under the new gaming license.
26:20 – If labor policies aren’t improved, it will be impossible for operators to do what the government wants them to.
One problem is mandating that all dealers are locals, doesn’t allow for upward mobility.
30:00 – There are a lot of well-qualified locals that have been working in the industry for 20 years who have moved into more management roles. Foreign labor will still have to be brought in – lower end and some management, especially as you expand into non-gaming. Need expertise – language, industry skills, which locally doesn’t exist.
Maybe one-third of the upper management foreigners laid off during COVID could come back, if offered the right amount.
34:45 – Macau is unlikely to resume the extreme measures it took during COVID.
36:16 – Better for Macau to solve its own problems and adapt, partner better with the industry.
By eliminating junkets, creates a less volatile environment. You can make money in non-gaming but not going to happen overnight. Question is how to make a destination appealing to a broader range of customers.
39:22 – If non-gaming goals not being achieved, worst case scenario is if China decides to crack down on other ways money comes into Macau, forces it into cashless.
Best case scenario is leveraging Hengqin – lot of infrastructure, but most is residential and commercial – hasn’t been a plan.
Best thing is to allow free travel between Macau and Hengqin.
Zhuhai airport is a hidden gem.
Audience Questions
42:10
-Has there been a master plan for bringing in the foreigners?
Master plan is not looking towards the international visitors. Most of the infrastructure being put in place is to service the domestic Chinese market.
Beijing has the power to turn on or off the visitor tap. That tap has largely been on continuously, except COVID. There’s no looking back. Greater Bay Area initiative solves a lot of problems.
49:38
-Are the junkets really dead?
They’re not dead. Not all junkets are the same. Function of having a middle man to go and have local connections with players, facilitate their travel needs will be here to stay. With Suncity and Tak Chun, that’s unlikely to come back.
The model of a multi-national junket that brings in Macau and other jurisdictions, with ability to move money around them, have online gaming – that model is gone.
Closed off junket rooms with limited supervision is gone.
Junkets will amount for maybe 10 percent, tops.
Junkets made money in any number of ways that were not above the table. A lot of that has been dismantled. Smaller operators will still require third parties.
There will be more scrutiny in jurisdictions as we move forward, the tide will turn and things will have to be more transparent.
57:25 – Satellite casinos’ contribution has been continually dropping, some properties are viable. Many of the properties will close and reutilized in a different way – which also frees up tables.
Satellite casinos were not bringing up Macau as a destination.
