All major casino operators in Macao reported signs of recovery in October as visitor turnout continued to improve beyond the Golden Week at the start of the month, but companies acknowledged that it may be some time before revenues return to pre-pandemic levels.
After a more than 90% year-over-year drop during the last six months, the decline in gaming revenue slowed to 72.5% year over year at 7.27 billion Macanese patacas in October, Macao's Gaming Inspection and Coordination Bureau reported, signaling the first hint of recovery in the market.
Casino operators said they experienced sustained higher visitor volumes in October following an underwhelming Golden Week holiday as visa services fully resumed from neighboring areas, sparking 229% revenue growth over September.
Tourist arrivals in September fell 83.8% year over year to 449,085 total visitors, based on data from the region's Statistics and Census Service. During the Oct. 1-Oct. 7 Golden Week holiday, total inbound arrivals dropped 86% to 156,300, of which 145,442 were from mainland China, according to preliminary data released by the Macao Government Tourism Office.
Despite the lifting of travel restrictions in China, the industry is set for a slow recovery, mainly due to the requirement for a negative COVID-19 test and the lengthy processing period for tourist visas. Visitors from countries other than China continue to be banned from Macao and those arriving from China must not have visited a foreign country within 14 days.
"We believe the gradual recovery is due to pent-up demand from patrons avoiding [Macao] during Golden Week," according to a research note by Jefferies. "However, the VIP business remains challenged due to liquidity pressures, and we therefore expect a slow and gradual recovery."
Major casino players in the region continued to reel under the crippling effects of COVID-19 in the third quarter but have pointed at a notable improvement in October, especially in the premium mass segment, loosely defined as wealthy middle-class individuals placing big bets.
Companies and analysts alike see the segment as crucial to driving a recovery with the gradual easing of visa backlogs. However, most expect the recovery to be a slow one.
MGM Resorts International's Macao-based unit MGM China Holdings Ltd. reported a 94% year-over-year fall in revenue to $46.9 million in the quarter ended Sept. 30 but said it has started making some profit since the Golden Week.
"We have days we make money. We have days we lose a little money. But on average, we're making money, not a lot, but we are making money, and I think it only grows from here," MGM Resorts President and CEO William Hornbuckle said on a Nov. 10 earnings call. "But I am hopeful by this time next year that Macao is back to whatever the new norm is."
Melco Resorts & Entertainment Ltd. Chairman and CEO Yau Lung Ho expects "demand recovery in Macao to be gradual." The company said on an earnings call that it returned to about 35% of volumes in the region in October with more "higher-end premium mass players coming back," mainly from non-Guangdong areas. Melco Resorts reported a near-85% decline in revenue to $212.9 million in the quarter ended Sept. 30.
Las Vegas Sands Corp.'s subsidiary Sands China Ltd. also experienced a resurgence in the premium mass segment and expects a recovery in the base mass market once tourist arrivals return to pre-pandemic levels, according to Las Vegas Sands CEO Sheldon Adelson.
Wynn Resorts Ltd. reported that its Wynn Macau Ltd. unit produced its first monthly positive EBITDA in October since the pandemic broke out as turnout continued to improve even after the holiday week. The company swung to EBITDA of $6 million in October from a $40 million loss in August.
"So we went from 10% of our normal visitor volumes up to almost 30%. And it wasn't just over Golden Week, it was actually throughout the month," said Wynn Resorts CEO Matthew Maddox on an earnings call. "And in fact, I looked at our visitor data from Nov. 2, 3 and 4 ... and we're seeing roughly 6,000 people a day come in the building. Pre-COVID, that number was 18,000."
As of Nov. 10, US$1 was equivalent to 7.99 Macanese patacas.
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.