Fitch Ratings has expressed optimism regarding the outlook of Macau’s gaming industry for the year 2024, citing a projected improvement bolstered by a steady recovery in inbound tourism.
However, the rating agency highlights that the potential for upside in gaming operator ratings is limited due to the elevated leverage metrics of some operators since, despite improvements, debt reduction is expected to take time for these operators.
The ratings agency anticipates that the mass-market segment will play a significant role in contributing to this optimistic trajectory.
The upsurge in visitation and gaming revenue – as witnessed during the recent Chinese New Year holiday period – is expected to assist Fitch-rated casino operators in Macau in reducing their debt levels.
During the extended eight-day Chinese New Year holiday, there was a notable surge in tourists from mainland China to Macao.
This influx reinforces Fitch’s expectations of a continued recovery in Macao’s gaming sector throughout the year, despite economic challenges facing China.
The resilience of Macau’s gaming sector is attributed in part to a shift in Chinese consumer preferences toward service-oriented sectors such as domestic tourism and entertainment. Data from the Macao Government Tourism Office revealed a 2.6 percent increase in inbound visitor numbers during the first seven days of the holiday period compared to 2019.
The influx of tourists is anticipated to boost casinos’ gross gaming revenue (GGR), with the mass-market segment already showing positive signs. However, the VIP segment is on a slower path to recovery, likely due to regulatory tightening in China and broader economic challenges.
There is also a risk that the recovery in Macau’s gaming revenues could be hindered by potential policies aimed at tightening capital outflow from the Chinese mainland.
The gaming tourism recovery forms the basis of Fitch’s expectation of strong economic growth for Macau in 2024, with GDP projected to rise 15 percent.
In the end, the agency affirmed Macau’s rating at ‘AA’ with a Stable Outlook, highlighting robust public and external finances alongside continued economic and gaming recovery.
