Macao’s travel restriction lift led to business rebound in January

Macao on Wednesday reported its highest monthly gaming revenue figures in three years, and an 82.5 percent increase over last year, according to the region’s Gaming Inspection and Coordination Bureau.

The bureau reported Macao’s 39 casinos won $1.43 billion (U.S.) in January, the highest amount since January 2020 when the COVID-19 pandemic soon led to the closure of the region’s casinos for 15 days.

In January 2020, the bureau reported revenue of $2.74 billion. Since then, the Chinese central government imposed lockdown restrictions and border closures that prevented tourists from visiting Macao and monthly revenue dipped to as low as $49 million in July.

Las Vegas-based gaming industry analyst John DeCree of CBRE Equity Research characterized last months’ turn of events as the luck of the Year of the Rabbit.

“January’s GGR (gross gaming revenue) marks a 52 percent recovery to January 2020 and a 46 percent recovery to January 2019, helped in part due to the timing of Chinese New Year which brought a meaningful recovery in volumes,” DeCree said in a report to investors.

“However, travel restrictions weren’t lifted until Jan. 8, suggesting the daily run rate is tracking even higher than implied by the total monthly results,” he said. “Given the absence of junkets and VIP play in the market, it is likely that the higher-margin mass market segment has recovered significantly beyond the total GGR recovery of 52 percent, perhaps in the 70 percent range.”

The elimination of junket and some VIP arrangements were among the new conditions imposed by the government in the renewal of licenses for six companies. Government leaders feared junket operations were connected to organized crime in Macao.

Importance to Las Vegas

A recovery in Macao is particularly important to three Las Vegas companies: Las Vegas Sands Corp., Wynn Resorts Ltd. and MGM Resorts International. The companies recently signed on to 10-year licensing extensions that requires them to invest billions of dollars in nongaming amenities there. Macao revenue represents up to around 60 percent of the total revenue collected by those companies.

“In addition to the initial recovery accelerating in Macao, both LVS (Sands) and Wynn benefit from continued recovery trends in other markets, namely Singapore for LVS and Las Vegas for Wynn,” DeCree said.

Ferry and bus services between Macao and Hong Kong resumed for the first time in almost three years last month and Lunar New Year visitor numbers hit 451,057 during the seven-day Golden Week holiday — the traditional kickoff to Lunar New Year celebrations — according to the Macao Government Tourism Office. That’s nearly a 300 percent increase over Lunar New Year 2022 although still only 37.5 percent of the 2.21 million visitors during Golden Week in 2019.

Analysts say the region appears to be experiencing the same pent-up demand that Las Vegas has experienced in its recovery.

Room rates rebound

For Lunar New Year, which started Jan. 22, the average daily hotel room rates increased 50 percent year-over-year to $195 a night, an 82 percent increase over 2019.

Occupancy averaged 85.7 percent for the week, up 22.4 percentage points from the same week last year, but below the 97.6 percent occupancy during 2019’s celebration.

Hotels reported average occupancy of 92.1 percent on the fourth day of the celebration, the highest daily average for the week this year.

“While it is too early to say if GGR could exceed 2019 levels any time soon given the significant contraction of the VIP business, the cadence of a mass market recovery is nonetheless encouraging and points to a sharper recovery in profitability than previously expected,” DeCree said.

In last week’s Sands earnings call, company executives said they were encouraged with what they were seeing in the Macao market.

MGM and Wynn have their fourth-quarter earnings call later this month.

The Review-Journal is owned by the Adelson family, including Dr. Miriam Adelson, majority shareholder of Las Vegas Sands Corp., and Las Vegas Sands President and COO Patrick Dumont.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.