The operating expenditure of Macau’s concessionaires is tipped to stabilize from the current quarter onwards, aided by increased hotel room supply as labor capacity returns to normal.
In a Tuesday note analyzing the current outlook of the Macau gaming industry, Credit Suisse analysts Kenneth Fong and Sardonna Fong said they “expect stabilizing opex trend from here as hotel capacity has largely reopened and as non-gaming events become recurring going forward.”
Concessionaires have for much of 2023 been operating with reduced hotel room supply due to labor shortages, with Sands China revealing that as much as 31% of its supply was offline on average during the March quarter. That figure has since been reduced to below 10%.
Melco Resorts, meanwhile, addressed the issue of opex during its recent earnings call for the June 2023 quarter, stating that it expected opex per day to normalize to between US$2.3 million and US$2.4 million per day in Q3, excluding concert-related costs.
The company has previously noted that between 20% and 25% of the cost savings it put in place during COVID-19 would become permanent savings.
“We are still comfortable with that guidance,” said Melco’s Executive Vice President and CFO, Geoffrey Davis, during last week’s earnings call. “That translates into approximately conservatively 200 basis points of margin improvement.”
On margins, Credit Suisse is predicting even greater upside potential in the coming months as the mass and premium mass segments continue to claim a greater share of the pie for concessionaires.
Taking Sands China as an example, the analysts point to ongoing recovery momentum through July and estimate that Sands’ traffic and revenue continue to improve month-on-month after the company achieved US$200 million of EBITDA in June.
“For July, we estimate that high-margin mass GGR was up 12% month-on-month to reach around MOP$13.7 billion (US$1.70 billion), while VIP was largely flat month-on-month due to a lower luck factor,” they wrote.
“As such, profitability improvement should be stronger than what headline GGR suggested.”
Macau’s DICJ last week reported industry GGR of MOP$16.66 billion (US$2.06 billion) in July, the highest monthly revenue since border restrictions were eased in January.
