Macau’s gaming industry is experiencing notable shifts in market dynamics, with the focus on mass gaming tables gaining prominence. In 4Q23, mass tables accounted for a substantial 75.2% of total table revenue, showcasing a steady rise from previous quarters and a significant jump from 52.7% in 4Q19. This transformation is attributed to several factors, including regulatory changes, a crackdown on cross-border gambling by mainland China, and the upheaval of Macau’s traditional junket industry.
Mass Market Dominance:
The figures released by the Gaming Inspection and Coordination Bureau (DICJ) reveal that mass market baccarat revenue reached MOP$33.5 billion (US$4.15 billion) in 4Q23, constituting 61.8% of the total MOP$54.3 billion generated by Macau’s gaming operators in the quarter. This growth marks an increase from the 58.9% share in 3Q23 and signifies the ongoing trend of mass market dominance.
VIP Baccarat Decline:
Conversely, VIP baccarat revenues of MOP$12.7 billion (US$1.57 billion) accounted for only 23.4% of Macau’s Gross Gaming Revenue (GGR) in 4Q23, showcasing a decline from 24.0% in Q3 and a substantial drop from 44.7% in 4Q19. The downturn in VIP revenues is a clear indication of the industry’s shift away from traditional high-roller models.
Growth in Mass GGR and VIP Challenges:
According to Deutsche Bank analyst Carlo Santarelli, total mass GGR in 4Q23, inclusive of slots, experienced a 4% growth relative to 2019 and a significant 11.8% quarter-on-quarter increase. VIP GGR also saw a quarter-on-quarter increase of 7.9%, but it remained 60.7% lower than 4Q19. This disparity underscores the challenges faced by the VIP segment compared to the resilient growth in the mass market.
Market Dynamics and Recovery:
Santarelli observed that despite the challenges, Macau’s recovery is well underway. The number of tables operating in the market increased by 7.0% year-on-year, albeit still down 11.0% compared to 4Q19. Simultaneously, slot machines witnessed an 11.4% year-on-year increase but remained 29.4% lower than the pre-pandemic levels in 4Q19.
Regulatory Impact and Junket Industry Transformation:
The shifting dynamics are closely tied to mainland China’s crackdown on cross-border gambling and the collapse of Macau’s junket industry. The arrests of former Suncity Group CEO Alvin Chau and Tak Chun Group CEO Levo Chan in 2021 and 2022, respectively, played a pivotal role. The Macau government responded by updating its junket laws, restricting each junket to work with only one concessionaire. Junkets are now prohibited from operating VIP rooms within casinos and engaging in revenue share agreements with operators.
Premium Mass Segment Focus:
With the regulatory changes and the decline of the traditional junket model, concessionaires are increasingly shifting their focus to the lucrative premium mass segment. This strategic move offers higher profit margins compared to the outdated junket model, aligning with the evolving preferences of both operators and players.
VIP Operations Transition:
VIP operations are undergoing a fundamental shift towards a direct VIP model. The restructuring is a response to the challenges faced by the traditional VIP segment and the need for a more sustainable and transparent approach. As the industry adapts to these changes, the direct VIP model is expected to gain further traction.
Macau’s gaming industry is navigating a transformative period marked by a growing emphasis on mass market tables, regulatory adaptations, and the restructuring of traditional models. The resilience of the mass market, coupled with strategic shifts by concessionaires and VIP operators, reflects the industry’s adaptability in the face of challenges. As Macau continues its recovery journey, stakeholders are recalibrating their strategies to align with the evolving dynamics, ensuring a more sustainable and robust future for the world’s premier gaming destination.