(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
By Katrina Hamlin
HONG KONG, Dec 12 (Reuters Breakingviews) - Macau’s new leader could bring better luck for casino operators. Improving connections with mainland China is low-hanging fruit for incoming chief executive Sam Hou Fai, a former judge who hails from across the border in Zhongshan, Guangdong. Business at $22 billion Sands China , SJM and peers will benefit.
The gambling hub’s $26 billion gross gaming revenue in the first 11 months of the year is only around three quarters of 2018 volumes in that period, according to official data. Thanks to Beijing's corruption crackdown, VIP visitors are no longer driving growth; they now contribute about a quarter of the top line, compared to half five years ago. That has weighed on valuations: The six licensed operators’ enterprises trade on average around 9 times expected 2025 EBITDA, per Visible Alpha, versus mid-teens levels before Covid-19 struck.
Attracting more Chinese middle-class gamblers and tourists instead could drive a turnaround. Hoteliers are already aggressively courting this cohort with attractions including K-pop shows and NBA games. The problem is, Macau only has 45,000 hotel rooms, about a quarter of Las Vegas' tally. They’re jam-packed, averaging 85% occupancy in the third quarter of 2024, and 95% during a week-long holiday in October.
Sam officially takes the role of chief executive on the 25th anniversary of Macau's return to Chinese rule this month. He can look to neighboring Hengqin island, a special economic zone across the border in Guangdong province that's roughly three times Macau’s size. Casino operator Galaxy Entertainment
is among those who see potential for visitors to stay there in future, and was early to secure the right to develop a site over a decade ago. But progress has stalled on cross-border logistical and bureaucratic challenges.
This year, a new train line and a special multiple entry visa for tour groups started to ease movement between Hengqin and the former colony. If Sam successfully lobbies for a similar scheme for individuals, as well better critical infrastructure and transport on Hengqin itself, he could effectively put 10,000 hotel rooms less than an hour’s journey from the Cotai Strip, Macau’s main drag – and more if stakeholders like Galaxy, boasting $3.2 billion net cash as of June, invest too.
As Macau marks a quarter of a century of Chinese rule, its fortunes could turn.
Follow @KatrinaHamlin on X
CONTEXT NEWS
Former judge Sam Hou Fai will begin his five-year tenure as the chief executive of China's special administrative region Macau on Dec. 20, following his election in October. Sam was born in May 1962 in Zhongshan city in the southern Chinese province of Guangdong.
The date Dec. 20, 2024 will also mark the 25th anniversary of Macau’s return to Chinese rule, following more than 400 years as a Portuguese colony.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic: Macau has yet to regain pre-2020 lustre
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(Editing by Robyn Mak and Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))
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