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Macau Casino Industry to Continue Its Recovery in 2021, But It Might Take Years to Bounce Back

Article by : Helen Jan 21, 2021

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Now that the numbers are in for the last month of 2020, the bets are in on how swiftly the Macanese casino industry will recover – and what the industry players should expect in 2021.

2020 was “the worst year on record” for the Macanese casino industry. Still, it showed some signs of recovery in the last three months of the year – the monthly gross revenues rose from 2.2 billion patacas in September (roughly $275 million, which is 90% lower than in September 2019) to above 6.7 billion patacas per month (approximately $839 million). December turned out to be the second highest-grossing month of 2020, with its 7.8 billion patacas (roughly $976.7 million) in revenues.

The enclave’s casino industry finished the year with a total of 60.4 billion patacas (roughly $7.56 billion) in the yearly gross gaming revenues – this is a 70.9% drop compared to 2019.

What exactly 2021 holds in stock for the Macanese casino industry is as good as anyone’s guess. Analysts at Morgan Stanley, for instance, initially projected the enclave’s gross gaming revenue bouncing back to the level of 80% of the revenues in the pre-pandemic times in 2019.

But after the numbers for December 2020 financial results and the total performance indicators for 2020 came in, Morgan Stanley adjusted their projections and lowered their expectations to 65% of 2019’s gross gaming revenue.

Deutsche Bank is a bit more optimistic in its assessment of the economic situation: it projects a 248-percent year-on-year increase in gross gaming revenue compared to 2020 (210.4 billion patacas, or US$26.35 billion). This projection would be approximately 70% of the 2019 gross gaming revenues (which amounted to 293.3 billion patacas). Sanford C. Bernstein, on the other hand, estimates that the enclave will see its gaming revenues bounce back to 80% of 2019 levels.

Several factors can get in the way of the Macanese industry’s recovery. First, last year, China passed laws criminalizing organizing or facilitating overseas gambling activities for mainland China nationals. The law will enter into force on March 1, and it’ll be a severe blow to the industry, which relies heavily on VIP mainland Chinese for profit. (An estimated more than 90% of all tourists that come to Macau are from mainland China.)

This is why Morgan Stanley expects the VIP gambling revenues to be back to just 40% of the 2019 levels this year, which may get canceled out by a more swift recovery of the mass market sector to 80% of the 2019 levels.

Second, both Macau and mainland China are wary of tourist influxes that might break the more than six-month streak of zero coronavirus cases in the special administrative region. In 2020, mainland China quickly imposed travel restrictions for Macau trips. Still, even after they got relaxed in September, potential visitors need to go through a convoluted application process to get permission to come to Macau. That led to the number of tourists being below the expectations of the enclave’s authorities, as stated by Macau’s Secretary for Economy.

With the new, more contagious strain of the coronavirus on the rise worldwide and new infection cases reported both in mainland China and Hong Kong, we can’t rule out the travel restrictions getting tightened up once more at some point in 2021.

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