Macau Business | May 2023
By José I. Duarte | Economist, Macau Business Senior Analyst
In the first quarter, Macau left an extended period of what one might call extraordinarily tight operational conditions. After such long suffering, everyone longs for some cheerfulness.
As movements have been thwarted for an extended period, any hint of freedom becomes exciting; any activity or step suggests great acceleration. As a new dawn shines upon us, some form of collective rejoicing comes easily and is expectable.
And yet, the most challenging part is starting now. Stopping, blocking, or locking are, in operational terms, easier to conceive and enforce. As it were, it’s all about statics, suspending the motion, and stopping the ball.
Keeping things together when they’re moving again, developing alternative solutions, and creating new paths, in a changed landscape are more challenging propositions. They require a sense of the dynamics of complex systems that are not so easier to grasp or emulate.
Sure, if the point was solely to remove barriers and let things get back to what they were before, one might be reasonably hopeful that recovery would happen relatively fast. Yet, there are few reasons to believe the circumstances can or will ever become as they were before. Some moderation may be appropriate here, as it will help make decisions more bound by facts than by hopes, no matter how generous they may be.
Figures from the current year (and its initial recovery) are still limited. But for some significant statistics, data for the first full quarter is available. Even if most are inevitably provisional, they already allow for some reflection based on observation, not just expectation. Remembering the inherent limitations of the exercise, what (slightly unorthodox) indicators can we look into that will provide some basis for further reflection? Here are some examples.
It is indeed good news that the cornucopia has been restarted. It is no trivial change that gambling revenues almost doubled compared with the same period last year. But, on a more temperate note, it must also acknowledge that it was still less than half its size in 2019. To double again what has already doubled is not just more of the same, even if the circumstances were similar – and it is doubtful they are. How far and how fast can we (if we can) get back to similar levels? The first figures of the year suggest some prudence.
If we take as a rough guide the average revenue per visitor, the 1st quarter is below the 2019 standard – but not extraordinarily so, which provides grounds for optimism. Still, that may indicate changing, less exuberant (and still evolving) gambling profiles. Even minor percentage deviations will compound into significant differences over time. And after such a long period of gambling opportunity scarcity, we may be getting an early kick of over-compensation. Prudence in reading these numbers is required.
Questions become more complicated when we consider revenue per table or slot machine. Even though the number of tables and slots declined significantly – by one-fifth and one-third since 2019, respectively—back-of-the-envelope calculations suggest the apparent income per table in this period is noticeably below the previous norm. As a result, adjustments in the number of assets deployed and the average income expectations will be needed.
Similar concerns affect the hotel sector. For all the positive figures concerning visitors and guests, the same kind of rough calculation suggests the occupation was well below the standards observed in previous times.
Recovery can and will continue without the heavyweights that almost put most of the economy at a standstill. But unless one expects to return to operational conditions like those prevailing before, which is a problematic assumption, the coming times will involve sorting out matters of operations’ scale, unlikely to be easy or painles
