As I sit in my home office penning this editorial, it is now more than three years since I last set foot in Macau, and for all I know it could be another three before I return, pending the status of China’s COVID-zero policy.
But the question I find myself asking with far greater regularity is what Macau I’ll find whenever I’m finally welcomed back.
One thing I know for sure is that many people I call friends will no longer be there when I arrive. Many have moved on, taking their expertise with them and leaving Macau with a dearth of genuine worldly experience I fear the city won’t know it misses until it’s too late.
Then again, perhaps Macau’s concessionaires – with their combined debt having ballooned from less than US$5 billion pre-COVID to almost US$25 billion according to Morgan Stanley calculations – can no longer afford to keep them anyway.
One figure few can agree on right now is what Macau’s gross gaming revenues will look like in five years’ time. At its peak back in 2013 the SAR was raking in around US$45 billion annually, and even with China’s anti-graft initiatives having tempered those heady days Macau still registered US$36.5 billion in GGR in 2019. How it would love to see those numbers again.
While industry optimists insist that, given time, GGR will fully recover on pent-up Chinese demand, there are some (my CEO included) who believe Macau will be lucky to reach US$15 billion in annual gaming revenues anytime soon.
I’m a little more bullish than that, having my longer-term line pegged at around US$25 billion a year, but keep in mind that COVID-zero isn’t the only headwind facing this once unstoppable industry. Mainland China’s crackdown on cross-border gambling and the related collapse of the junket industry as we knew it will all place further pressure on operators when they eventually welcome more customers back.
All of which brings us to the most important issue of profitability. On the one hand, the move away from a VIP-dominant market to a mass and premium mass one is positive for operators given the higher margins these sectors provide.
But two issues remain. One:
if operators are expected to move towards a mass market model, supply will become a major long-term issue given that Macau currently has only around 40,000 hotel rooms and little room for further expansion. (By comparison Las Vegas has over 150,000.)
And two: the government’s insistence that operators substantially increase their investment in non-gaming attractions will only place further pressure on profit margins moving forward. While the push to alter Macau’s standing as a purely gaming destination is admirable, placing this responsibility almost entirely on Macau’s concessionaires seems incredibly unfair. And it fails to provide any unified, strategic answer to the question of what will make non-gambling tourists visit Macau in future over regional competitors like Singapore, Thailand or Japan.
I do hope to see Macau flourish once more, but the more I see, the more I fear for the future.
Ben Blaschke
Managing Editor
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