Macau gaming operators have expressed a positive outlook on the sustainability of mass gaming revenue recovery this year, says UBS after a tour of Macau.
In its latest investment memo, UBS notes that the Macau gaming industry has observed several changes, such as a shift towards ‘higher spenders’ and a ‘younger crowd’. Coupled with non-gaming events that enhance Macau’s appeal, these factors are expected to drive further recovery in Macau’s mass market.
JP Morgan estimates that Macau mass gross gaming revenue (GGR) in March stood at 110 percent of 2019 levels, and this compares with a 104 percent recovery in 4Q23, suggesting mass gaming demand can grow by 3-4 percent quarter-over-quarter in 1Q24 to again outperform the historical seasonality of 2 percent quarter-over-quarter.
Stable opex
Commenting on the operators’ opex (operational expenditure) concern, UBS notes that operators expect a ‘stable trend’ for 2024 versus 4Q23 run rate, with salaries increasing at inflationary rates and quarter-to-quarter swings driven by the timing of non-gaming events.
All six gaming operators have announced pay raise schemes earlier this year, and the average salary increase stood at 2-3 percent. At that time, Goldman Sachs commented on Galaxy’s expenditure, noting that a 2 to 3 percent pay raise is ‘less drastic’ than what the market feared, as casino salaries have seen hikes of 5-8 percent in the prior upcycle.
In the same investment memo, UBS also commented on the current competitive environment, noting that the industry appears rational and continues to focus on driving property enhancements, service standards, and the efficiency of the marketing budget, as opposed to raising the budget.
‘Competition for premium mass customers is set to increase, as operators add sales and marketing staff focusing on the segment, but not necessarily to lead to higher reinvestment rates at this stage.’
Non-gaming events
Non-gaming events have already gained importance for driving the gaming operators’ performance. UBS observes that ‘the industry has been on a learning curve since the reopening in 2023 and is in a better position now to make these events more effective from a gaming perspective in 2024.’
Just to recall, all six gaming operators have investment commitments for the next 10 years under their new gaming concessions. And 2023 gross gaming revenue (GGR) has exceeded MOP180 billion ($22.4 billion), meaning that casino firms have to increase their collective MOP108.7 billion ($13.5 billion) non-gaming and overseas marketing spending pledges by up to 20 percent.
