Analysts Linda Huang and Chad Beynon wrote: “The China and Macau governments would like to transform Macau from a gaming to non-gaming destination,” referring to a public-policy wish to diversify Macau’s economy away from a dependence on high-stakes gambling tourism.

“We expect Macau’s gaming operators to transition to the Las Vegas Strip/Singapore model with a lower gaming revenue contribution at approximately 40 percent/68 percent, respectively”, versus Macau’s estimates of approximately 83 percent in 2023, they added.

The institution observed that “92 percent” of the six Macau operators’ pledged capital expenditure in aggregate as part of the conditions of each receiving a new 10-year gaming concession beginning on January 1, was on “non-gaming”.

The operators have agreed to commit 10 times as much to “exploring overseas customer markets and developing non-gaming projects”, i.e., MOP108.7 billion (US$13.5 billion), compared to gaming investment, where the aggregate will be MOP10.1 billion.

Macquarie stated it expected non-gaming investments “to diversify operators’ revenue sources and attract mass gaming patrons who look for a comprehensive experience”.

The comments were part of a 177-page report from the financial institution, which said it had triggered “initiation” of coverage for the six Macau names. Macquarie Capital Ltd had in recent years issued regular notes on the Macau gaming names.

The banking group expects Macau mass-market casino gross gaming revenue (GGR) to return to 2019 levels in the fourth quarter, “driven by the shift to mass”, relative to the market’s prior strength in VIP gambling.

Macau’s fourth-quarter 2019 mass-market GGR, including slot play, was just under MOP39.84 billion, show data from the city’s regulator, the Gaming Inspection and Coordination Bureau.

Aggregate revenue in the mass-market segment stood at MOP33.34 billion in the second quarter this year, accounting for a share of nearly 73.3 percent of Macau’s casino GGR in the period.

Macquarie stated: “We expect Macau’s mass GGR to return to 2019 levels in fourth-quarter 2023, helped by the removal of transport, hotel room supply, and labour supply bottlenecks.”

Inbound and outbound travel relating to Macau was only eased in January this year, after nearly three years of restrictions linked to the Covid-19 pandemic.

Macquarie further noted: “The increase in hotel room supply and the removal of transport bottlenecks should help to attract more tourists.”

The institution also estimated Macau operators’ total earnings before interest, taxation depreciation and amortisation (EBITDA) would return to pre-Covid levels “as early as” the third quarter this year.