Macau: Smaller casino operators thrive as premium mass market grows

Macau's casino landscape is shifting as smaller operators MGM China and Wynn Macau benefit from a change in customer demographics. The recovery of the gambling hub is being driven by affluent premium mass customers, while larger competitors like Sands China and Galaxy Entertainment struggle to regain momentum due to their focus on the lower end of the mass market.

As visitors return to the world's largest gambling hub, the recovery trend favors affluent premium mass customers, who place high-limit baccarat bets ranging from hundreds to a few thousand dollars, Reuters reported.

The high-roller VIP segment, once the main revenue source for Macau, has declined due to stringent regulations. Meanwhile, the lowest spending mass segment, with minimum bets around $60, has not yet returned to 2019 levels.

Macau remains the only region in China where casino gambling is legal and is expected to see 14% GDP growth this year, contrasting with China's overall slowing economy and sluggish consumption.

"Macau is doing well but not all operators are enjoying that recovery," said DS Kim, an analyst at JPMorgan in Hong Kong.

Larger operators such as Sands China and Galaxy Entertainment, with significant exposure to the lower end of the mass market, have seen their shares fall 11.2% and 16.7% respectively since the start of the year. In contrast, shares of MGM China and Wynn Macau have risen 46% and 15.7% over the same period, the report said.

"For now, as traffic and gaming demand has not yet recovered to its 2019 levels, MGM China and Wynn Macau, given their relatively smaller size and premium mass-focused business, benefit from better operating efficiency including marketing and sales to premium clients," Jennifer Song, an analyst at Morningstar in Shenzhen, was quoted as saying in the report.

Government data shows that visitor numbers to Macau are at 75% of pre-pandemic levels from 2019, and gambling revenues are projected to reach 80% of pre-COVID figures this year.

MGM China has spearheaded Macau's recovery, witnessing a substantial rise in its gross gaming revenue share from 9.5% in 2019 to over 17% this year. The operator benefited from a government reallocation allowing increased gaming table numbers since January 2023. MGM is also augmenting its offerings with additional villas and suites.

Wynn Macau, amidst constructing a food hall, continues to maintain a strong performance, with CEO Craig Billings highlighting its consistent ability to generate significant market share on a revenue per hotel room basis.

Sands China and Galaxy, which have more tables, are confident in their ability to catch up, the report said. Galaxy's plans include opening its high-end Capella Hotel next year to attract more premium mass-segment customers. Meanwhile, Sands China, the largest player in Macau, remains focused on the mass market despite temporary closures for renovations.

Sands CEO Grant Chum said revenue per patron was higher than before COVID, and as the number of visitors returned to pre-pandemic levels, Sands China would be "best placed to capture that growth when it comes."