Inside Asian Gaming

IAG JAPAN MAY 2021 20 I n a recent research note titled “Welcome to 2022: Beyond reopening”, Morgan Stanley analysts Praveen Choudhary, Thomas Allen and Gareth Leung foretell a “new-look Macau” that will greet the post-COVID world. It will be, they state, a Macau far better prepared for the changing face of today’s Chinese consumer, with more hotel rooms available and of a higher quality than at any other time in the Special Administrative Region’s dynamic recent history. Most importantly though, the Morgan Stanley report outlines strong reasons for optimism, with gross gaming revenues tipped to improve from around 55% of 2019 levels in 2021 to around 97% by 2022. Combined with lower operating costs – one of the few positive impacts of the COVID-19 pandemic – next year shapes as one that will well and truly consign the challenges of the past 15 months to the annals of history. “Macau stocks are up 16% [year to date],” the analysts write, adding “investors are asking us ‘what is priced in’ and about the ‘shape of recovery’. We recommend to focus beyond these to 2022. “Macau will look and feel different in 2022, when compared to the pre-COVID world. Cotai hotel capacity will be up 13%, but fixed opex down 4% resulting in 15% higher EBITDA. High end premiummass services will greet visitors. Investors focused on the near-term catalysts should look beyond reopening.” So exactly what is driving such confidence in Macau’s recovery trajectory given that the combined losses of Macau’s six concessionaires totalled almost US$5.3 billion? Ultimately it comes down to supply and demand. COVER STORY