Macau’s concessionaires are becoming increasingly hesitant to invest in infrastructure beyond what they have already committed under their current 10-year concessions due to growing pressure on returns, according to investment bank Jefferies.
In a note following a recent round of meetings with Macau operators, Jefferies analysts observed that while competition for market share remains intense, the city’s moderate growth outlook and increasingly tough GGR comps starting in May means that opportunities for ROI could further compress in the medium-to-long term.
On the issue of ROI, the analysts wrote, “GGR appears to be limited in the near to medium term, given the government estimate of +3.5% for 2026 that most operators appear to view as appropriately conservative but not far too low.
“We note that GGR comps become increasingly difficult in May versus year-to-date GGR growth of 13.8%. The implication is that underwriting new projects is pressured and therefore unlikely beyond the concession requirements.”
The Jefferies analysis echoes commentary from MGM Resorts President and CEO Bill Hornbuckle late last week, who revealed that the company has not yet decided how to best invest the remaining US$1.5 billion in non-gaming spend it has committed to outlay under its gaming concession.
Hornbuckle did, however, confirm that the premium mass market is still MGM’s focus in Macau with the company set to open 124 newly converted suites at MGM COTAI in April.
In its note, Jefferies agreed that the strategic battle for market share in Macau is very much centered around the premium mass segment.
“VIP is inherently limited by regulation, while grind mass has been impacted by macro trends in mainland China and limited room supply,” the analysts stated.
“Wynn and Galaxy Entertainment Group have historically demonstrated strength in the segment, while we believe [Sands China] is endeavoring to transition toward increasing its share where it hasn’t in the past.”
Notably, they observe that Sands “is focused on building its premium mass business and gaining share at the expense of margins” following recent company commentary around its promotional under-performance.
“Our take is that this competition could continue in the near term and that limited revenue growth coupled with tightening competition suggests EBITDA growth is also likely to be limited,” Jefferies said.
“In short, we believe the ROI opportunities appear limited in the near term.”
