Macau: VIP to recover faster from crisis

Analysts say Macau VIP sector could recover faster from The Coronavirus crisis.

Macau.- Brokerage firm Morgan Stanley has believes the VIP sector will recover faster than the mass market from the impact of the Covid-19 pandemic.

In a report, it said this was because VIP relies less on visitation and is less impacted by travel disruptions.

But the report, titled “Macau Gaming 2020 Edition – Still Plenty of Cash Flow Potential”, said VIP share of local gaming revenues will continue to decline.

The VIP sector has gone from representing 75 per cent of gaming revenues in 2011 to represent 39 per cent of revenue and 10 to 20 per cent of EBITDA.

“Also, the VIP business is under greater scrutiny, with a declining number of junkets, raids on pawnshops, and restrictions on the amount of money that can be transferred. It has declined from its peak in 2013, when VIP revenue for the industry was US$29bn (2019 at ~US$14bn only),” the brokerage added.

The analysts noted that visitor numbers dropped 56.9 per cent year-on-year to about 3 million in January and February, with hotel occupancy reaching as low as 15 per cent in the last month.

It also compared the current crisis to 2015/16 when both mass and VIP revenue declined meaningfully due to a large scale anti-corruption campaign headed by the Chinese government.

However, VIP growth is still closely linked to China’s property market conditions, plus interest rates and credit liquidity.

The mass market, on the other hand, is closely connected to RMB appreciation.