Competition among Macau operators is increasing, especially for customers in the premium-mass segment, but spending by the city’s six concessionaires has remained reasonable and costs were flat in the first quarter this year compared to prior reporting periods.
That is according to Praveen Choudhary (pictured), managing director at Morgan Stanley Asia Ltd. He made the comments during a presentation on the first day of the Global Gaming Expo (G2E) Asia 2024 casino industry conference and trade show in Macau on Tuesday.
“My view is that if you are going to spend a dollar and you’re going to get two out of it, it’s your business, and a competitive world, so the reinvestment cost is your decision,” stated Mr Choudhary.
He added: “Now the issue is that if all six operators try to do the same thing, then eventually the customers benefit, but the margin for the entire sector goes down, and you don’t want that to happen.”
There is an ongoing investor discussion regarding increasing player reinvestment rates in Macau, as operators vie for patrons in the premium-mass segment, which has led the recovery in the city’s gaming market.
In early May, Craig Billings, group chief executive of Wynn Resorts Ltd, the parent of Macau casino operator Wynn Macau Ltd, said the company reinvestment in terms of players “can move 50, [or] 75 basis points in any given quarter, depending upon what we are trying to achieve”.
According to Mr Choudhary, as long as a company market share and earnings before interest, taxation, depreciation and amortisation (EBITDA) goes up more than its revenue and costs, such spending is “absolutely justified”.
“You have to fight for your share. But is it smart for everybody else to copy that? Not really,” he observed.
According to the analyst, “it is tricky” to pinpoint the “right amount of reinvestment” because “everybody uses different calculations”.
But, he added, “anywhere between 15 percent to 20 percent” would be the right range, “with 20 percent being the maximum investment cost for premium mass players”.
“Between that range, it’s up to the companies to decide the kind of margin that they are comfortable with,” he stated.
Brokerage CLSA Ltd reduced its 2024 estimate for Macau-market casino operator EBITDA by 1.2 percent, to HKD68.63 billion (US$8.76 billion). That was due to the ongoing “competitive landscape” among the city’s six concessionaires, and was “1.8 percent… below consensus,” said the institution in an April memo.
