VIP market slow to recover by Macau shows signs of improvement

The VIP segment of the gaming market will recover before 2023, according to a report from brokerage firm Sanford C. Bernstein.

GGR Asia reports the brokerage said VIP markets in 2021 could be negatively impacted by continued tighter capital controls and customer and agent concerns about dealing with junkets.

Macau’s VIP baccarat gross gaming revenue in the third quarter was US$293 million, making up nearly half of its entire quarter GGR.

That was a decline of 92.5 per cent in year-on-year terms, associated with disruption due to the coronavirus pandemic.

Mass-market baccarat generated a share of 38.4 per cent.

“Near term, we forecast GGR in 20202 to decline 78 per cent,” stated the brokerage.

“Five of the six operators have already achieved EBITDA break-event in October and November, and by the end of the year, we expect all six, including SJM, to do so,” added the institution, referring to earnings before interest, taxation, depreciation and amortisation.

“Longer term, we expect Macau GGR to grow at a two per cent compound annual growth rate, judged over the period 2019 to 2023, driven by six per cent in core gaming, while seeing a four per cent drop in VIP markets,” wrote analysts.

The institution observed: “Current investor sentiment on Macau is best described as uncertain, with long-term investors looking at the structural story beyond 2020 and shorter-term investors focused on the travel and near-term revenue recovery catalysts positioning for a momentum-driven stock price upswing.

While research indicates that not all tourists to Macau are gamblers, analysts covering Macau gaming stocks typically find a broad correlation between visitor volume and casino market performance.

As of mid-November, Macau’s average daily tourist visitor arrival tally via all forms of available transport surpassed 20,600, compared to a daily average of 19,000 in October.

That was according to Maria Helene Senna de Fernandes, director of macau Government Tourism Bureau, who mentioned the figure at a Wednesday meeting of the city’s Tourism Development Committee.

Sanford C. Bernstein echoed a theme in recent commentary by management from Macau operator Melco Resorts and Entertainment on the latter’s third-quarter earnings call, which had mentioned that visas for mainland China residents to come to Macau were being issued more quickly by some Chinese provinces than they were in Macau’s neighbouring province, Guangdong.

“Interestingly, in the early stage of recovery, non-Guangdong residents returned faster than Guangdong’s due to stringent visa restrictions in the latter,” analysts wrote.

Macau reports bumper visitor numbers in October 

Macau authorities have reported the city had seen more than 600,000 visitor arrivals for October.

GGR Asia reports the figures, from the Macau Government Tourism Office.

If they are confirmed, the number would mark at least a 34 per cent increase on September’s visitor arrival tally, which stood at about 450,000.

The city’s Statistics and Census Service is due to announce the official October tally in late November.

A total of 156,300 visitor arrivals were recorded for autumn Golden Week in early October, a major holiday period for residents of mainland China.

Tourism bureau boss Maria Helena de Senna Fernandes also said in her Friday remarks that she anticipated a “slight improvement” in the city’s visitor arrivals for the current month, as major events, including the Macau Grand Prix motor racing meeting and Macau Food Festival were due to take place.

The official said currently Macau was welcoming “20,000 to 24,000” visitors a day.

Ms Senna Fernandes also mentioned that officials from China’s Ministry of Culture and Tourism were in Macau, assessing local countermeasures on COVID-19 infection and observing the city’s tourism attractions.

The MGTO director said that she hoped the visit by the officials might be a contributing factor in the eventual resumption of package tours from the mainland to Macau, suspended since early this year, and thereby provide further support for the recovery of the city’s tourism trade.

In late October, the ministry said that businesses normally involved in, respectively, “inbound and outbound” package tours involving the mainland market: and bundled sale of “flights and hotels” were “not to resume” such trade for now, due to concerns that COVID-19 might make a comeback in China during cooler months.