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Macau's Casinos Struggle to Reach Pre-COVID-19 Revenue

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As the dust settles on Macau's fiscal third-quarter financial reports from all six casino concessionaires, analysts are dissecting the numbers to gauge the region's gaming industry performance. The latest to file, SJM Holdings, reveals a mixed bag for the Chinese special administrative region (SAR). Deutsche Bank analysts note that while October's gross gaming revenue (GGR) exceeded pre-COVID-19 levels, the overall results present a challenging landscape.

Macau Continues to See Mixed Results

The EBITDA (earnings before interest, taxes, depreciation and amortization) margin for the third quarter was 29.3% – a slight uptick from the 29% in the third quarter of 2019. However, combined property EBITDA lost 20% in the same comparison, settling at $1.8 billion.

In the third quarter, mass GGR witnessed a 5% decline compared to the same period in 2019, indicating a slower-than-hoped recovery. However, VIP GGR paints a stark contrast, plummeting by 77%, underscoring the challenges faced by the high-roller segment. Interestingly, the VIP results show an 849% year-on-year increase, hinting at a recent surge in VIP activity.

October's total GGR reached $2.42 billion, marking a pre-pandemic high. Despite this positive uptick, the third-quarter net revenue experienced a 21% dip compared to Q3 2019. Non-gaming tax-related expenses were 9% lower in the same comparative period.

Among the casino giants, Sands China, Wynn Macau, MGM, Melco Resorts and Galaxy reported encouraging figures in mass market games. However, SJM Holdings reported a loss, emphasizing the diverse challenges faced by individual operators.

In the VIP gaming sector, Sands and Melco observed a loss in market share, while other industry players witnessed improvements. The dynamics within the VIP segment suggest a shifting landscape, with some operators capitalizing on the rebound more effectively than others.

Macau's journey to recovery remains intricate, navigating the delicate balance between mass market appeal and VIP engagement. The disparity in Q3 results highlights the nuanced challenges faced by casino concessionaires as they strive to regain pre-pandemic momentum. For the year, the total GGR is now $18.44 billion, a year-on-year increase of 315.6%.

Less Reliance on VIPs

There has been a concerted effort to rely less on VIP gaming in Macau that is going to carry over into the SAR's new status quo. The chief operating officer of Galaxy Entertainment, Kevin Kelley, confirmed this during a speech on Tuesday at the MGS Entertainment Show.

Kelley said that Macau's casinos are "never returning" to a primary focus on VIP gaming. Going forward, he envisions a strong reliance on electronic gaming, and said he was "confident" about the segment's possibilities in the city.

A catalyst for the change is Macau's move away from its focus on gambling, including a stronger interest in events, concerts and other forms of entertainment. With the development of alternative tourism options, the city is attracting new visitors. The change in focus means marketing to a new class of travelers who aren't as interested in table games.

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