Macau Losing Ground to Rapid Vegas Recovery

It’s financial reporting season in the iGaming industry, and analysts’ eyes are firmly fixed on the world’s two largest casino markets. Early indications show Macao has lost significant market capitalization to its western rival, as Las Vegas enjoys a much faster recovery from the pandemic.

Las Vegas welcome sign.

Following the release of 2Q 2020 financial statements investors have seen Las Vegas is outperforming Macao, mainly due to the massive influx of gamblers since reopening. ©skeeze/Pixabay

The entire global casino industry has been hit hard by the COVID-19 pandemic, and it has been a catastrophic quarter by any measure. The biggest casinos in the world have interests in both Las Vegas and Macau, these include operators such as Las Vegas Sands, MGM Resorts, Wynn Resorts, and Melco Resorts. These publicly listed companies are laying bare the extent of the financial damage caused by travel restrictions and government-enforced shutdowns for most of this year.

Macao has been the biggest casino market for a considerable amount of time now, a gradual expansion over the previous decade has seen the industry undergo a major metamorphosis into the playground of the world’s wealthiest gamblers. The penchant for luxury and VIP treatment foreign high-rollers receive has been a major driving force in the Macao casino industry’s financial success – amassing huge cash reserves and consolidating influence through a series of strategic acquisitions across Europe and the United States.

With the release of the second quarter financial statements investors finally have a chance to see the value of their position, in the plain and unbiased black and white of the financial statements. Whilst many firms have been dipping into debt financing to stay afloat, reducing expenses has proved key to survival.

Las Vegas Faring Better

Despite its extended period of closure, the Las Vegas gambling sector has been performing slightly better than anticipated in the second quarter of 2020. The international casino conglomerate Las Vegas Sands which owns casinos across the world has reported the Las Vegas based operation performing the strongest. To bring things into perspective it is worth noting that the ultimate drop in revenue was 92%, a disaster by any measure, but much better than the 98% drop reported by Macau.

However, there is some promising signs buried in the financial statements. The table games win per unit per day, a metric reported for all games at every casino shows that table games are currently at $2,087 down from $4,621 -  a considerable reduction, but not as bad as expected given the massive reduction in footfall. The same metric for slot machines showed last quarter each machine made $327 per day compared with $349 the same quarter in the previous year.

In terms of headcount, it is not surprising that this was down to 40% in some casinos. Due to social-distancing considerations, many sections of the casino floor had to remain closed. Given the catastrophic economic fallout experienced across the world during this pandemic, these financial performance metrics are certainly not to bad all things considered.

Macau Performing Much Worse than Vegas

As we have already mentioned the 98% revenue drought has been devastating for the Macau casino industry. But taking a closer look at the table returns per day across the main casinos in the city highlights the extent of this drought and the major difference with Las Vegas. Table games win per unit per day was down to $95 from $13,556. Losses of $855 each table were reported by The Parisian Macao, down from a $14,000 win the previous year.

Slot machines were similarly affected, showing an enormous drop in daily takings. Translating the meaning of these numbers is difficult, but one thing is for certain, the reopening of the Macao casinos did very little to bring in additional revenue. In fact, the reopening may have lost the industry money as expenses increased whilst revenues stagnated. Unlike Vegas, the Macao casinos opening its doors to gamblers did very little to bring customers back to the casino floor.

It is surprising to many that a city like Las Vegas is leading the recovery across the global gaming sector, demonstrating how vulnerable Macao’s businesses are to consumer discretion. There isn’t a lot to be pleased within the latest financial reports, and it is clear that gamblers in Asia are much more hesitant to return to the casino as they are in the United States.

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