Macau casino operators likely to maintain lower operating costs

JP Morgan believes Macau casinos could maintain operating costs at 10 per cent below pre-Covid-19 levels.

Macau.- Analysts at JP Morgan Securities (Asia Pacific) have reported that Macau’s casino operators might be able to maintain their operating costs at 10 per cent below pre-pandemic levels. They believe operators learned to operate in a leaner way during the pandemic.

Analysts DS Kim and Mufan Shi noted that besides a shift towards mass play, which generates a higher EBITDA margin of 35-40 per cent compared to 7-10 per cent for VIP, the savings in operating expenses over the past three years should contribute to an increase in profitability as the industry recovers from the downturn.

They expressed confidence in an EBITDA recovery to approximately 100-110 per cent of the 2019 levels in 2024/2025, even without any profit contribution from VIP. This will also be aided by a projected 20 per cent increase in casino hotel rooms by 2024 compared to 2019. Galaxy Entertainment Group, Melco Resorts and Entertainment, and SJM Holdings are among the operators expected to see net increases in hotel rooms this year.

Galaxy Entertainment plans to gradually open Phase III of its Galaxy Macau resort, including a Raffles-branded hotel, in the second quarter of this year. JP Morgan Securities (Asia Pacific) has suggested that Galaxy Macau Phase III will expand the resort’s market share, especially in the premium mass segment. 

By 2026, Galaxy Entertainment’s room count is expected to reach 7,429, up 67.7 per cent from 2019. Analysts also suggested that Galaxy Entertainment could almost double its profits by 2027 to 2028.

Melco Entertainment is also launching the first stage of Phase II of its Studio City resort in the second quarter of this year. SJM Holdings is set to open more rooms at its Grand Lisboa Palace resort in the second quarter.

See also: Macau’s gambling market to grow at 5.7% CAGR until 2026 – report