Missing Chinese spenders deal Macau a losing hand
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, Aug 20 (Reuters Breakingviews) -China’s travellers are seeking inexpensive thrills. That spells bad news for Macau, where companies such as SJM Holdings 0880.HK and Las Vegas Sands LVS.N are betting heavily on middle-class holidaymakers’ appetite for gambling, shopping, wining and dining.
The gambling enclave has had a disappointing pandemic recovery. In the first half of 2024, the number of arrivals was almost on par with 2018. But visitors today are stingier: gaming revenue in the year to July came in at 132 billion patacas ($16.5 billion) in January to July, versus 176 billion patacas in the same period six years ago.
That's largely due to changing tastes. Far-flung destinations are out: in 2023, Chinese globetrotters tallied some 87 million trips overseas, around two-fifths below 2019 levels, per Reuters. When they do venture out, they are less inclined to splurge, too. On the other hand, domestic travel volumes could outstrip 2019 levels this year, according to the Economist Intelligence Unit.
The risk is that these habits could become entrenched as the world’s second-largest economy sputters. Even wealthier families are now opting to stay in China, according to a May survey by consultancy Oliver Wyman. Only 14% of high-income households that travelled internationally last year planned to go abroad this year. Respondents said they had plentiful local alternatives and wanted to avoid costly itineraries.
It’s tricky timing. President Xi Jinping's crackdown on corruption and excess in sectors including finance had almost wiped out high-rolling VIPs, who gambled vast sums on credit. The casino operators were largely unscathed, as middle-income punters became their main source of earnings. That makes the current slowdown particularly painful: annual EBITDA growth at the six companies is forecast to clock in at an average of less than 10% in 2025 and 2026, down from 17% in 2018, per Visible Alpha.
To satisfy the terms of their recent license agreements,they are also investing a combined $15 billion over the next ten years in new facilities and non-gambling activities such as concerts, art exhibitions and water parks. At the same time,resorts on the sprawling Cotai Strip, Macau's answer to Las Vegas, also offer free rooms, fancy meals and other goodies as they vie to entice gamblers.
That's weighing heavily on valuations. The casino operators are valued at roughly 9 times 2024 EBITDA on average per LSEG, lower than pre-COVID when the figure for the sector was around 13-14 times, per JPMorgan. Investors appear to see Macau as a Chinese territory with a losing hand.
Follow @KatrinaHamlin on X
CONTEXT NEWS
Macau’s gross gambling revenue for the first seven months of the year reached 132 billion pataca ($16.5 billion), according to official data. That compared with 176 billion patacas in the same period in 2018, the last year before protests in Hong Kong and a global pandemic disrupted travel to the region.
Visitor numbers in the first half of 2024 reached 16.8 million, compared with 16.7 million in 2018, according to Macau’s Statistics and Census service.
Graphic: Macau casinos revenue recovery drags on https://reut.rs/3Me9dm4
Editing by Robyn Mak and Aditya Srivastav
Aset Terkait
Berita Terbaru
Pengungkapan: Entitas XM Group menyediakan layanan khusus eksekusi dan akses ke Fasilitas Trading Online kami, yang memungkinkan Anda untuk melihat dan/atau menggunakan konten yang tersedia pada atau melalui situs, yang tidak untuk mengubah atau memperluas, serta tidak mengubah atau memperluas hal tersebut. Akses dan penggunaan ini selalu sesuai dengan: (i) Syarat dan Ketentuan; (ii) Peringatan Risiko; dan (iii) Pengungkapan Penuh. Oleh karena itu, konten disediakan hanya sebagai informasi umum. Anda juga harus ketahui bahwa konten Fasilitas Trading Online kami bukan sebagai ajakan atau tawaran untuk untuk melakukan transaksi apa pun di pasar finansial. Trading di pasar finansial mana pun melibatkan tingkat risiko yang signifikan pada modal Anda.
Semua materi yang diterbitkan di Fasilitas Trading Online kami hanya untuk tujuan edukasi/informasi dan tidak boleh mengandung nasihat dan rekomendasi finansial, pajak investasi atau trading, catatan harga trading kami, penawaran, permintaan, transaksi dalam instrumen finansial apa pun atau promo finansial untuk Anda yang tidak diminta.
Konten pihak ketiga apa pun, serta konten yang disiapkan oleh XM, seperti opini, berita, riset, analisis, harga, informasi lain atau link ke situs pihak ketiga yang tersedia "sebagaimana adanya", sebagai komentar pasar umum dan bukan menjadi nasihat investasi. Sejauh konten apa pun ditafsirkan sebagai penelitian investasi, Anda harus memperhatikan dan menerima bahwa konten tersebut tidak dimaksudkan dan belum disiapkan sesuai dengan persyaratan hukum yang dirancang untuk mempromosikan kemandirian riset investasi dan dengan demikian akan dianggap sebagai komunikasi pemasaran di bawah hukum dan peraturan yang relevan. Mohon dipastikan bahwa Anda telah membaca dan memahami Notifikasi pada Riset Investasi Non-Independen dan Peringatan Risiko kami mengenai informasi di atas, yang dapat diakses disini.
