“High-end gamblers come more often” to Macau than previously, and “gamble more”, says a note from Morgan Stanley Asia Ltd, summarising a trip its analyst team made this month to the casino hub.
The brokerage anticipated Macau’s six operators would see increased capital costs and operational costs next year, mainly due to higher salary payouts and investment spending pledged to the Macau government.
Morgan Stanley added it did not expect any “meaningful… recovery” in outlook for dividend payments by operators “before 2025”, as Macau gaming companies were likely to “prioritise” efforts to “deleverage”.
“Operators saw spend per head for premium mass gamblers remain above the 2019 level,” wrote analysts Praveen Choudhary and Gareth Leung, referring to a player category betting in high denominations with cash chips rather than the non-rolling chips that had traditionally been used by the junket-based VIP segment.
“Some [operators] even noticed high-end customers visit Macau more often despite a sequential decline in China consumption/overall macros,” added, the analysts. They were referring latterly to macroeconomic indicators on the Chinese mainland, the main source market for Macau players.
“Some operators saw some new younger gamblers (in their 30s) spend similar to the older core gamblers – in their 40s to 50s,” added the Morgan Stanley team.
In terms of the cost of doing business, the institution said it expected Macau’s concessionaires “to follow the Macau government and increase wages by 2 to 3 percent in 2024”.
That was a reference to November comments by the city’s Secretary for Economy and Finance urging the operators to give casino staff a pay rise in 2024. His remarks came soon after the Macau government announced it would increase civil-servant pay by 3.3 percent. Subsequent remarks by local labour representatives called for a similar course of action in the casino sector.
Morgan Stanley additionally observed: “We… think the operating expenditure portion of non-gaming investment, and potential competition” on casino sales, “could put upward pressure” on overall casino operating costs.
The brokerage said that with regard to capital expenditure, “companies will accelerate their non-gaming spend in 2024”.
Macau’s Chief Executive, Ho Iat Seng, said on Wednesday that the government expected the city’s 2023 casino gross gaming revenue (GGR) to exceed MOP180 billion (US$22.39 billion).
Under the new concession contracts with the city’s six operators, that came into force in January 2023, if Macau’s annual GGR reaches or exceeds MOP180 billion, the casino firms are required to increase their collective MOP108.7 billion non-gaming and overseas-marketing spending pledges made to the local government by up to 20 percent.
