Macau is likely to avoid any long-term effects from a potential global recession, said analysts at Bernstein Research, pointing to the fact that the U.S. gambling industry has shown no signs of any impact from the slowing economy.
While the impact of COVID-19 has been far greater than either China’s crackdown or the Global Financial Crisis of 2008, the analysts suggested Macau is far better placed for a strong recovery than previously due to its reduced reliance on the VIP gaming sector.
Macau revenue has been about as low as it can go as a result of travel restrictions stemming from COVID, and any impact on Macau from an economic slowdown in China would be minimal in light of the recovery to be driven by opening the borders, senior analyst Vitaly Umansky at Bernstein wrote on a note this Wednesday.
The brokerage argues that “with Junkets disappearing and GGR driven largely by Mass/Premium Mass, Macau’s gaming industry is better positioned for future economic cycles, and the global gaming operators with Macau exposure could be better positioned to hedge a recession risk – this assuming Macau reopens.”
In turn, Bernstein notes that the US casino gaming industry has shown no signs of any recession impact so far. Since early 2021, the US has largely come out of the COVID pandemic with almost all casinos having reopened. Nation-wide, land-based casinos have been largely running at above 2019 GGR.
Meanwhile, the online casino industry has maintained exceptional growth with monthly GGR now ~6x larger than end of 2019,.
Still, concerns for a recession impact on the gaming industry have arisen this year, along with soaring inflation and the Fed’s aggressive hikes in interest rates.
A recession, which now is largely baked into investors and economists expectations should have limited impact on US gaming, Bernstein notes.