Gaming | Rigorous HK-Macau travel bubble prompts JP Morgan to scale down GGR forecast

JP Morgan scaled down its gross gaming revenue (GGR) prognosis for the third and fourth quarters of this year to 43% and 58% of pre-pandemic levels, vis-à-vis the earlier prediction of 50% and 66% respectively. The reduction, the brokerage stated, is owing to the “stricter-than-expected” travel bubble measures announced by the two SARs on June 21.
In response to the proposed cross-city travel plan, the global investment banking firm said in a statement released yesterday that “we couldn’t help but be somewhat disappointed by the seemingly limited scale (at least initially) of the travel bubble plan, as well as the slower-than-expected timing of the launch.”
On Monday, Macau authorities announced at the Covid-19 media briefing that the Hong Kong-Macau border will be reinstated — provided that Hong Kong has not registered any locally transmitted cases for 28 consecutive days, or until July 5.
However, a set of preconditions apply in this quarantine-free regime, including that only fully vaccinated individuals will be granted entry to Macau, multiple Covid-19 tests will be required for travelers before and upon arrival, and limited quotas set for daily arrivals — which Hong Kong’s Chief Executive Carrie Lam Cheng Yuet Ngor said will only be a small number initially but will be progressively increased in phases.
From the brokerage’s point of view, a long list of prerequisites may curtail the prospect of a strong uptick in GGR in July and probably even August, “leading us to curb our enthusiasm for the summer holiday.”
JP Morgan also cut back its forecast for Macau’s GGR recovery pace for 2021 by around 5% to reach 42% of 2019’s levels, with the predicted recovery in mass and VIP segments standing at 51% and 26%, respectively.
Hong Kong is an “important” and “the second-largest feeder market” to Macau, the brokerage stressed. Hong Kong’s travelers take up around 15-20% of tourist arrivals and approximately 10% of GGR for Macau.
“Hong Kong’s importance lies in its position as a key channel for travelers and capital flows from the mainland,” JP Morgan added.
The brokerage estimates that Hong Kong, including Hong Kong holidaymakers and mainland travelers coming through Hong Kong, may contribute over 20% of Macau GGR for the mass segment in the pre-pandemic era.
Should there be an more large-scale reopening, the brokerage expects that this could give rise to a “step change in the demand run-rate.”
JP Morgan is anticipating a “likely poor June GGR,” owing to the resurgence of Covid-19 in Guangdong province.
Another brokerage, Sanford C. Bernstein, is forecasting the city’s GGR to dip 40% from May, and around 70% from the same period in 2019, according to a report by GGRAsia.
According to the latest official data compiled by the Gaming Inspection and Coordination Bureau (DICJ), Macau registered around MOP10.45 billion in GGR in May, up 24.3% from MOP8.40 billion in April. The uptick was mostly driven by the spike in demand during the May Golden Week.