Macau welcomed 2025 with an unwelcome update.
Indeed, the world’s foremost gambling hub reported a year-on-year decline in gross gaming revenue (GGR) for the first time in two years. December saw GGR drop 2% to MOP 18.2bn (US$2.2bn).
Share prices have reacted in kind: SJM Holdings is down 1.5% to HK$2.65 (US$0.34), Sands China has fallen 3.8% to HK$20.10, Wynn Macau is down 1.3% to HK$5.32 and Galaxy Entertainment Group has dropped 2.6% to HK$32.15. Although MGM China is up 1.4% to HK$10.08, Melco International Development has fallen 2.2% to HK$4.36.
And yet – as you will notice – these numbers are far from paralysing for Macau’s ‘big six’ concessionaires.
Despite its first revenue fall since December 2022, the simple fact remains that, for 2024 overall, Macau still saw a 24% annual GGR increase to MOP 226.8bn.
Why did revenue fall in December?
Naturally, this recent setback serves a blow to those constantly speculating about when Macau’s casinos will return to pre-Covid-19 pandemic GGR levels. Since 2020, those predictions – perhaps through no fault of those making them – have varied wildly.
Anyone who picked 2024 on their metaphorical bingo card now has the benefit of hindsight, while a drop in the last calendar month before 2025 also reduces promise for the upcoming year.
During December, China President Xi Jinping visited Macau, with analysts suggesting this held casino traffic back. The Chinese President once again urged Macau to continue its diversification efforts away from its traditionally heavy reliance on casinos.
China President Xi Jinping wants greater diversification away from Macau's casinos. Is this the best route for Macau's bottom line?
While the decline of junkets has naturally reduced GGR levels over time in Macau – and certainly its reliance on ‘VIP’ revenue, a recent Financial Times article also points to more topical factors.
In October, Sam Hou Fai was overwhelmingly voted in as Chief Executive of Macau; his past as a judge, one from mainland China at that, may suggest tighter restrictions.
In the same month, Macau also passed a bill that criminalised unlicensed money exchanges, historically used by local casinos and gamblers.
Not all doom and gloom
While the Financial Times’ conclusions have been backed up by Macau's 2% monthly GGR regression, its annual revenue performance is more indicative that there is no need to panic.
It is true we could yet see a shift over time if less liquidity is available to gamblers. For now, though, we must put Macau’s December figures into context. There has, generally, been discussion of late that the gambling industry as a whole may be seeing a recession.
Growth has been rapid in recent years and a temporary slowdown is something to be expected – just look at the many firms that have gone private in recent years, with capital markets not offering as much promise in the current climate.
In today’s digital society, meanwhile, a monthly fall for a purely land-based region like Macau was inevitable at some point. Las Vegas has seen similar declines of late – but is still posting over $1.2bn in monthly revenue.
The simple conclusion: people are still gambling in Macau en masse, just as they are in Las Vegas.
Macau in today’s climate
In 2013, Macau peaked with annual revenue of $45bn – yes that is in US dollars; a simply staggering amount.
Yet that was a different time. Yes, the Covid-19 pandemic has since disrupted Macau’s trajectory; but 12 years on, there are far greater entertainment options available to humans in general, not just gamblers. Touristically, there are more geographical options today, as well as new competing regions with genuinely appealing casino resorts.
Macau's skyline by night
Macau could well be demonstrating the natural cycle of a gambling market, with a settling down of long-term revenue accompanied by stricter regulation. It wouldn't be the first market to do so – and this certainly won’t thrill investors.
Once again, though, despite all of the above factors, Macau still reported a 24% annual rise in its 2024 GGR. That is not a figure to be disregarded when competing with last year’s astronomical rise.
It also proves, despite increased governmental efforts, that Macau will always attract gamblers. Diversification efforts are understandable but, when Macau is the biggest gambling hub in the world, it is a risk to diminish such a distinct advantage when the region has so little else to compete with as effectively on a global scale.
Why not, as industry activists have suggested in the past, look to open a legal, regulated online market in Macau instead?
That is perhaps another issue entirely, while those in favour of a reduced reliance on casinos will point precisely to December’s 2% decline as evidence of the need for greater diversification.
There is, however, no need to overreact. When putting these figures into perspective, Macau should not take its casinos for granted. They remain lucrative powerhouses – and we must not assume gamblers are giving up on the region just yet.
