Macau GGR Won’t Reclaim Pre-Pandemic Highs Until 2022, Say Analysts

Gross gaming revenue (GGR) in Macau showed signs of improvement in September, but JP Morgan says it will be 2022 before those figures return to pre-coronavirus highs.

That outlook deals a blow to the thesis that the world’s largest casino center could, with the help of pent-up demand and a COVID-19 vaccine, rebound in earnest in 2021. GGR numbers in the special administrative region (SAR) are in the midst of a six-month streak of year-over-year declines of at least 90 percent.

In late August, Guangdong province restarted issuing individual visit scheme (IVS) tourist visas, with the rest of mainland China following suit on Sept. 23, stoking hopes that pent-up demand would follow, bringing an influx of gamblers to Macau. However, lengthy approval times for those permits and Beijing clamping down on cross-border money transfer is hindering the casino hub’s rebound efforts.

We were overly hopeful on the prospect of pent-up demand, which we thought would outweigh the nuisances related to travel arrangement to Macau and stricter capital control,” said JP Morgan analysts.

Citing national security concerns, Chinese authorities are making it harder for VIP gamblers to move money into junket accounts, making Macau’s near-term recovery more dependent on mass market players that spend less.

VIP Woes

With higher-tier gamblers staying away for now, efforts to rejuvenate GGR are hamstrung, with recent data points confirming as much. Revenue for the recently concluded Golden Week festival slumped 76 percent year-over-year, dashing hopes that the holiday could set the stage for a fourth-quarter rebound in Macau.

Much of the problem revolves around Hong Kong. That SAR serves not only as a major travel artery for Macau, but a vital thoroughfare for capital moving off mainland China and on to the gaming enclave. Analysts say the bulk of cash being withdrawn from junket accounts is denominated in Hong Kong dollars.

That SAR accounts for about 15 percent of Macau GGR. Making matters worse is that Hong Kong still enforces a 14-day quarantine policy on travelers arriving from Macau, significantly diminishing the allure to leave that region to go to the casino center.

“We think Hong Kong’s importance lies in its position as an avenue for capital flow, where a sizable portion of liquidity goes through Hong Kong into Macau,” said JP Morgan.

What’s Next

Although Golden Week is over, Macau isn’t bereft of catalysts that could lead to near-term GGR improvements. Some analysts speculate Beijing will see the negative impact of the money transfer policy on the gaming center’s economic recovery and potentially take a softer stance.

Additionally, there’s hope that if former Vice President Joe Biden wins the White House, his administration’s presumably softer tone toward China will reduce geopolitical tensions between the world’s two largest economies, potentially hastening a Macau recovery.