Fitch affirms AA rating for Macau with further gaming recovery predicted
Fitch also gave Macau a “stable” outlook as the region’s economy continues to rebound from the pandemic. Extremely tight restrictions ground the gaming industry to a halt, but following the removal of travel restrictions in early 2023, the market has responded well.
Macau generated MOP19.3bn (£1.9bn/€2.2bn/$2.4bn) in January revenue. This was its second highest figure since reopening following the pandemic.
Fitch is expecting that recovery to continue, with gross gaming revenue (GGR) reaching around 79.5% of 2019 levels in 2024. This is after GGR was 62.6% of pre-pandemic levels in 2023, with Fitch predicting GGR to be 7.6% higher than assumed in the budget.
Fitch points to rising inbound tourism as a reason to be optimistic over the future of Macau’s gambling industry.
Macau: A strong start to 2024
Macau generated MOP18.5bn in February GGR. While this was down 4.1% on January’s figure, it was still 79.1% up on the same month last year.
The first two months of 2024 have combined for MOP37.8bn in GGR, up 72.7% on the same period of 2023. The start to 2024 is around 75% of the 2019 level, with Fitch attributing this success to an influx of mainland Chinese visitors for the New Year celebrations.
Fitch is expecting the mass-market segment to continue to power Macau’s gaming recovery, although it warned that the VIP segment will take a slower recovery path. As a result, the government’s gaming revenues will be restricted.
The VIP segment is being hampered by Macau’s more stringent regulatory framework for junket operators following a 2022 bill. Those changes have led to the mass market’s GGR share rising from 54% in 2019 to 75% in 2023.
Fitch’s warning
Despite its stable outlook for Macau, Fitch also highlighted areas that could potentially cause a problem for its gaming industry.
For instance, the Chinese government, which holds sovereignty over Macau, is looking to diversify its economy. It’s planning to increase the share of gross value added by non-gaming industries to approximately 60% by 2028, from under 50% in 2019.
The government is aiming to boost tourism and non-gaming offerings to produce more sustainable sources of growth, improving the developing non-gaming industries.
Also noted was the stumbling Chinese economy, which could lead to an “erosion” of Macau’s balance sheet and therefore limit future growth in the region.
Macau recovery set to continue
Macau’s response to the devastating Covid-19 lockdown has been impressive, with 2023’s cumulative gross income of MOP183.1bn a 333.8% year-on-year increase.
SJM Holdings, a key operator in Macau, had its outlook altered from “negative” to “stable” by Fitch in January, largely because of the continued growth in visitation and gaming revenue in Macau.
Macau’s success is also benefitting Las Vegas Sands, with its success in the region driving revenue up to $10.4bn for its 2023 financial year. Macau was a key part of that growth, with revenue in the region rocketing 303.1% to $6.6bn.
With Covid restrictions only largely cancelled in Macau in January 2023, Sands chief executive and chairman Rob Goldstein has big hopes for the region.
“There is an ongoing speculation of the future growth of Macau,” Goldstein said. “Can the Macau market grow to $30bn, $35bn, even $40bn and beyond? We believe that it will.”