There isn't a single empty seat on the casino floor of Macau's most recognisable landmark, the Grand Lisboa Hotel. Casino goers at the baccarat tables pay close attention to their chips, while bystanders wait for the appropriate opportunity to put their bets.
The five-day Labour Day holiday earlier this month was the finest season in three years for the gaming hub. After China officially dropped its harsh Covid-19 guidelines, which had nearly cut off Macau's inflow of tourists, about 500,000 visitors came to the city throughout the holiday, with many heading directly to the casinos.
“This is my first time coming to Macau since Covid-19 hit,” said Luo, a mainland Chinese tourist from Foshan in his late fifties. “I’ve watched a lot of tutorial videos on Douyin to get gambling tips and prepare myself during the past few months. Now it’s time to try them out.”
Macau's casino operators are doubling down on the mass market in order to capitalise on China's tourism surge following the reopening of its borders. So far, this play has richly rewarded them.
Last year, Las Vegas surpassed it as the world's largest gaming hub, but it is now on its way back. According to government figures, Macau's gross gaming revenue in the first four months of this year was US$6.2 billion, while the Las Vegas Strip Area made US$2.2 billion in revenue.
“The trajectory indicates that the mass market may get to the pre-pandemic level due to China’s tourism boom,” said Ben Lee, a gaming expert and managing partner at IGamiX Management and Consulting. “We will never go back to where we were in terms of gross gaming revenue at our peak.”
Market bulls like JPMorgan Securities are ecstatic about the tourism-fueled resurgence. During the Labour Day holiday, mass-market demand most likely returned to more than 90% of pre-Covid-19 levels, and it might stage a full-scale recovery by next year, with potential surprises in both the pace and magnitude, according to the brokerage.
This means that casino earnings, which have exceeded the market consensus in the first quarter, are expected to outperform this year. Sands China, for example, saw its net revenue increase by 132% year on year to US$1.28 billion in the first quarter, or around 55% of its pre-Covid-19 levels.
Investors, on the other hand, do not appear to have bought into this optimistic prognosis.
Some investors felt it was time to book profits after witnessing the stocks of the six casinos - Sands China, Galaxy Entertainment, MGM China, Melco International Development, Wynn Macau, and SJM Holdings - rise by as much as 240 percent from a low in October last year. A barometer measuring six equities traded in Hong Kong and the United States has fallen for four consecutive days since May 3, its worst performance in nearly two months, wiping out all gains recorded in 2023.
The substantial expenditure requirements tied to their renewal licences are currently one of the industry's largest overhangs.
The six casino operators have vowed to invest 118.8 billion patacas (US$14.8 billion) in Macau over the next decade, with more than 90% of the funds going into non-gaming ventures.
Galaxy, for example, announced plans to create Macau's first and only hi-tech themed amusement park, covering 61,000 square metres, in order to attract more families and leisure visitors to the city. Similarly, MGM stated that it is collaborating with a virtual-reality business to launch a show helmed by Zhang Yimou, one of the most popular film directors in mainland China.
Non-gaming amenities including retail, food, and entertainment draw new customers to the gaming hub. For example, a Hong Kong tourist who had come to Macau with her husband for Cantopop icon Leon Lai's concert at Melco's Studio City on May 1 claimed she opted to kill some time on the casino floor on the second day.
However, the investment requirements continue to be a hardship for the gaming business, which has yet to recoup from a three-year cumulative loss of US$1.6 billion. "We're burning so much money, and everyone in the industry needs to play by the rules," a senior casino management staff member who declined to be identified.
According to IGamiX's Lee, there are further hazards looming over the business. Tourist inflows to Macau are expected to decline when China adds more foreign flights later this year, while a workforce shortage and the city's infrastructure are likely to hamper the city's hopes to accommodate more tourists than before the pandemic.
“A lot of unknowns at this point,” Robert Goldstein, the chairman and CEO of Sands China and its parent, Las Vegas Sands Corp, said in a conference call with investors last month. “I don’t think we should pretend to know what the future looks like.”
But that is unimportant to travellers like Luo, who used to visit casinos every two to three months before Covid-19 and plans to resume the tradition if time permits.
“Even just playing on slot machines for HK$20 [US$2.5], I’m having fun.”
By fLEXI tEAM