Macau Gaming Revenue Plunges After Arrests of Junket Bosses

(Bloomberg) -- Macau's gaming revenue plunged 21% in January from a year earlier as casinos in the world's largest gambling hub suffered from the double-whammy of a Covid-induced tourist drought and China's crackdown on high rollers.

Gross gaming revenue was 6.3 billion patacas ($784.7 million), according to the Gaming Inspection and Coordination Bureau. The results were better than the median analyst estimate of a 31% year-on-year decline.

Revenue fell 20% from the previous month, and was down 75% from pre-pandemic levels in 2019.

Key Insights

Macau's $3.5 billion VIP sector has suffered a major blow from China's crackdown on junket operators, which extend credits to high-rolling gamblers. Beijing has been blaming these agents for helping transfer billions of dollars overseas, and is pushing Macau to diversify away from its reliance on gaming revenues.
Macau authorities on Sunday arrested Weng Lin Chan, boss of the city's second largest junket operator Tak Chun Group, two months after the police detained Alvin Chau, who headed Suncity Group, which ran the biggest junket business in the enclave. Analysts expect VIP revenue to fall 43% this year, while the overall gaming revenue is estimated to grow 59% year on year.
February may remain lackluster, based on weak advance hotel occupancy rates, as China tightens border restrictions to wall off Covid for the Beijing Winter Olympics, Bloomberg Intelligence analyst Angela Hanlee said in a note on Jan. 28. Casinos are likely to miss out the Lunar New Year holidays which have traditionally been peak travel season for Chinese tourists -- Macau's largest source of gaming revenue.
While visitation slowly picked up over the past few months, arrivals last year -- at 7.7 million -- were down 80% from pre-pandemic levels in 2019. Travel was further restrained in January after outbreaks in the neighboring city of Zhuhai.
The government this month released its final draft to amend the local gaming law, paving way for casinos to renew their licenses which are due to expire by June. Officials have proposed stricter oversight, including reviewing casino operations every three years, setting a minimum revenue requirement and banning junkets from sharing revenue with gaming operators or running VIP rooms in their casinos. The draft is now being scrutinized by the local legislature.

Market Performance

The Bloomberg Intelligence index of Macau's six casino operators rose 6.7% in January, compared with the benchmark Hang Seng Index, which climbed 1.7%.