Morgan Stanley has painted a positive outlook for Macau’s gaming sector in the year ahead, with companies predicted to elevate their non-gaming investments significantly.
It builds on a largely glowing outlook for the region in 2023, as it reported rapid growth and recovery close to pre-pandemic levels.
Analysts at the bank outlined: “If we assume VIP recovery in Dec was 30 per cent of 2019’s level (23 per cent in 3Q23), mass recovery should be ~20 per cent above 2019. We expect Macau gaming companies to follow the Macau government and increase wages by two to three per cent in 2024. We also think the opex portion of non-gaming investment, and potential competitions for gaming hosts/sales, could put upward pressure to opex.
“On capex, we think companies will accelerate their non-gaming spend in 2024. Sands has the scale to have 76 per cent of its committed investment in capex while other operators will need to spend more on opex, which could impact their margin.”
In 2023, the region reported gross gaming revenue of $22.7bn, a staggering annual increase of 334 per cent.
As a result of the recorded numbers, a stipulation has been triggered which will mean that the six major operators in the region will have to raise their spending on non-gaming investments by 20 per cent.
The numbers were bolstered by a bright end to the year, specifically when it comes to the overall uplift of tourism and global output for Macau.
Furthermore, the results are even more impressive given they come at a time when the wider Chinese gambling market has endured a slower period in the same year.
According to reports, the tourism boost of the gaming sector far eclipsed that of any other Chinese industry, as the local statistics bureau, DSEC, emphasised the country enjoyed a year of economic growth in the third quarter of 2023.
In a recent comment from Las Vegas Sands, the group’s Chair and CEO, Robert Goldstein, emphasised his optimism for market growth as the firm continues to expand across Asia.
“We are staunch believers in the growth of the Macao market near and long term,” Goldstein commented on LVS’ latest earnings call.
“LVS has invested $15bn in Macau, which is the most important land-based market in the world. A few reference points to consider, third quarter EBITDA represents strong growth compared to previous quarters, as I mentioned. Our retail business in Macau has far exceeded pre-COVID numbers.”
