Bernstein Research: Premium Mass Gamblers Could Be the Key to Macau’s Casino Industry Recovery

Article by : Helen Dec 10, 2020

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Macau, not unlike most other casino-reliant economies, is still struggling to bounce back from the COVID-19-induced rough patch. According to the Macau Statistics and Census Service data, the gross gaming revenue in the third quarter of 2020 amounted to just 5.1 billion Macanese patacas (around $639 million in US dollars). It is 92.8% less than in 3Q19 when the gross gaming revenue was 71 billion Macanese patacas (roughly $8.9 billion in US dollars).

The GDP figures aren’t looking that great for Macau’s economy either: the gross domestic product in 3Q20 is down by 63.8% compared to the same period of time last year. It is a small consolation that the year-on-year drop in the third quarter is a bit smaller than in the second one (-68.0%). There is a silver lining when it comes to the casino industry, however: 2020’s third quarter showed a significant improvement in gross gaming revenue compared to the quarter before that. The previous period variance was positive – 53.1% – which is a good sign the industry is slowly recovering. However, it is still a long way to go for the casino operators to return to the pre-coronavirus financial performance indicators.

Another silver lining is the skyrocketing surge in the number of tourists that visited Macau in the third quarter of 2020: we are talking about 1,409% more visitors than in 2Q20. The main reason behind such an uptick is mainland China’s decision to lift travel restrictions to Macau. One way to stimulate the recovery in the short run may be by focusing on the premium mass gamblers, according to Bernstein Research. Bernstein, a top-level firm specializing in sell-side research with the reputation for being number one in at least nine categories, explores the premium gambling segment in its newly released report “The rise of Chinese gaming: A brief history and glimpse into the future of Macau.”

In the report, Bernstein Research estimates that VIP and premium gamblers account for roughly 70% of Macau’s gross gambling revenues based on the 2018 calculations. Even though they aren’t a huge crowd – between 300 and 400 thousand gamblers in 2018, which was around just 1% of all visitors that year – they brought in 212 billion Macanese patacas (or roughly $26.3 billion in US dollars) out of the total of almost 304 billion Macanese patacas in 2018.

As for now, VIP baccarat’s quarter-on-quarter increase in revenues was not as overwhelming as those of the regular baccarat in 3Q20.

According to the Macau Statistics and Census Service data, the VIP segment showed a 55.8% increase in revenues compared to the devastating second quarter of 2020 – but the mass market revenues surged by 77.1%. However, VIP baccarat continued to bring more revenues in the third quarter of 2020 – 2.34 billion Macanese patacas, as opposed to the mass market baccarat with its 1.88 billion Macanese patacas in revenues. In its another report, “China Consumer: Where to Play, How to Win… Premium Is the New Mainstream”, Bernstein Research estimated China’s premium consumer class to reach 117 million people, twice as many as at the moment of the publication. According to the research firm, gambling venues and luxury hotels are best equipped to reap the benefits of this rapidly expanding consumer class.

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