Macau’s VIP Segment to Drive Recovery for a While Longer

Macau is predicating its recovery on several factors, including the VIP segment, mass gaming vertical and family-friendly tourism moving forward.

Recovery in Macau Begins as VIP Players Return

Macau is looking for multiple ways to recover lost gambling revenue, the bulk of which was severed during the nadir of the novel coronavirus pandemic. Receipts at casinos fell, tourism came to a grinding halt as China and Macau rolled in border restrictions, and the city came to a halt, prompting a swift change in the outlook of authorities.

Macau, said chief executive Ho Iat Seng last week, would look to introduce alternative revenue streams lest the city remains susceptible to future repercussions in the gambling sector. The region is planning on hosting 12 sports events all throughout 2021 to boost tourism.

Yet, the special administrative region’s road to recovery in the short-term goes through a time-tested formula – that of the city’s casinos, with Bernstein Research expecting recovery to pivot around the premium gaming segment, at least for a while Macau’s gross domestic product (GDP) is only around 64% in Q3, 2020 of what it was a year ago.

Nevertheless, the city has been able to improve results from Q2, with mass gaming going up 77% and the VIP segment improving 51%. While the VIP segment is what would probably drive the recovery in the next few years, it’s the mass segment that will guarantee the region’s sustainability, as confirmed in a recent report by Bernstein.

Altering Casino Business Models in Macau

To spur recovery, Macau will have to learn new tricks. As an old dog, the city is an embarking on an ambitious experiment and one that can determine how soon recovery will begin. Properties such as Wynn Resorts and Melco Resorts and Entertainment, though, seem quite happy to be part of this recovery.

In fact, both Wynn and Melco, which are usually geared towards the VIP segment, argued that premium players are returning in droves from different destinations, responding to pent-up demand for high-stakes action. While Chinese nationals are the ones to power the Macau VIP segment, this time around, visitors have been much more varied, Bernstein noted.

VIP gambling is expected to continue to drive results as Macau prepares to bank on its non-gaming-related activities, with a special focus on Cotai and tourism in the area. Macau is firmly looking beyond the casino sector for its recovery, with a new, family-friendly approach to tourism instead.

All of this comes in a fraught context when gambling operators are in for reelection, as they seek an extension of their licenses which are expiring in 2022. Overseas investors have been skittish, fearing that Macau could make a volte-face from its status as the gambling capital of the world, and focus on other activities instead.

Tourism, however, remains low in Macau, with the numbers dropping 87.9% year-over-year so far, and the economy far from anywhere near pre-pandemic numbers. Yet, Macau is optimism for brighter tomorrow, mixing VIP and mass gaming, as well as a tailored approach to tourism.

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