(Aug 7): Macau’s casinos are facing their sharpest setback since reopening from Covid, with steeper-than-expected revenue declines in June and July rattling investors and raising fears of a prolonged slowdown in the world’s biggest gambling hub.
The slump ends 16 straight months of growth and comes as Beijing steps up efforts to stem capital outflow — taxing offshore trusts, cracking down on cross-border brokerages, and restricting outbound investments including to Hong Kong and Macau by individual residents. Those moves have dampened sentiment among high-rollers, who are particularly sensitive to financial-market volatility.
At the same time, China’s capital markets — an important barometer for big-spending gamblers — have turned sour. The MSCI China Index is down about 8% this year, making it one of the worst performers globally. As liquidity dries up and portfolios shrink, the wealth effect that typically feeds through to Macau’s premium gaming segment has weakened noticeably, igniting fears of a longer downturn.
That’s a stark contrast to last year’s gaming boom, when the city’s six casino operators’ revenue and profits surged as Chinese and Hong Kong markets were flush with liquidity, thanks to equity gains and a spike in IPO activity.
Casinos saw double-digit declines in both the number of VIP and premium players, and their spending in June and July, according to Citigroup surveys. While the World Cup has been cited as a temporary drag on gaming budgets, this year’s revenue drop ranks among the worst historically for tournament periods.
“We predicted that June and July were going to be bad, but the actual numbers are even worse than our expectations, and that’s what the market is worried about,” said Morningstar Inc. analyst Jennifer Song. “The market’s biggest concern is if gaming revenue growth has slowed — then how are casinos able to maintain their margins while costs have increased?”
Profit margins have already been shrinking as casinos have been spending heavily on freebies, such as hotel rooms, dining and concert tickets, as well as stepping up commissions and rebates to draw big bettors. With mass-market demand softening and premium players pulling back, investors fear the slowdown could extend into the second half.
Analysts have cut their forecast for Macau’s gaming income growth this year to 3%, down from 7% at the beginning of this year, according to a Bloomberg monthly survey of brokerages. That would mark the slowest pace since the city reopened from Covid in 2023 and leave annual revenue still 13% below 2019’s level.
Casino operators’ combined profits are expected to fall 7% in the second quarter to the lowest since 2023. Both Las Vegas Sands Corp and MGM Resorts International reported significant margin drops for their Macau operations, while Wynn Resorts Ltd’s improved slightly.
The Bloomberg Intelligence index of Macau casino operators fell 2.4% on Friday morning in Hong Kong trading, the most in a month. The decline was led by MGM China Holdings Ltd shares falling 6.1% — its steepest drop in two months. The index has tumbled about 22% this year, compared with a 0.4% drop in Hong Kong’s benchmark Hang Seng Index.
“Underlying this are the lack of a wealth effect and cautious consumer sentiment in mainland China,” said Gary Ng, senior economist at Natixis. “And recent regulatory changes on taxes and cross-border capital flows can exert greater pressure.”
To be sure, Macau’s gaming activities have picked up in the second half of July, and Seaport Research Partners analyst Vitaly Umansky expects August — historically a strong month — to benefit from the pent-up demand following the conclusion of the World Cup. The gaming sector’s performance this month would be “crucially important” in getting more clarity on whether the current slowdown may last, he said.
In the longer term, Macau’s reliance on premium and VIP gamblers will continue to weigh on operators’ profitability, said Jeffrey Kiang, analyst at Citic CLSA.
“The major issue of Macau gaming is that the general consumer confidence in China remains depressed,” he said.
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