Macau Casinos are Bleeding and Seeking Hopium as COVID-19 Takes Its Toll

Article by : Helen Jul 22, 2020

The Gambling Capital of the world, the Las Vegas of Asia, the Monte Carlo of the East…Macau is still enjoying its grandeur nicknames, but can no longer live up to the promising titles. The recovery in the gaming and gambling revenues in 2018 and 2019 had given casino owners hope to see the first peak in GGR since 2014, when, following a staggering 20% annual growth, it skyrocketed to 45 billion dollars, but only to deprive them of that optimism in 2020 by virtue of COVID-19.

Gambling in Macau has long been a cornerstone of its economy. In 2019, the revenue from gaming and gambling here exceeded 29 billion dollars, the lion’s share of the sum generated by games of fortune, roulette, poker, and baccarat. The six licensed casino operators in Macau – Melco Crown Entertainment, Galaxy Entertainment Group, Wynn Macau, SJM Holdings, MGM China Holdings, and Sands China, the richest one – have been developing gigantic casino & resort complexes over the last decade, providing their visitors with the ever-updating list of games and amenities.

Yet the current situation puts the necessity of scaling into question. The strengthening of the anti-corruption campaign by the Beijing government in 2013 – which was followed by two tough years for the region – might seem insignificant in the face of challenges brought by the pandemic. The combined losses of Macau’s casino operators have already exceeded one billion U.S. dollars and – undoubtedly – will continue to grow as COVID-19 takes its toll.

How Long Will it Take for the Industry to Recover?

The lockdown had lasted for only two weeks before all mask-donned croupiers and punters were admitted to local casinos. However, the traffic – the key success factors for any brick-and-mortar casino – is still subdued and will likely remain so until better times, which – as it generally believed – are expected to come in 2021.

Meanwhile, Macau is having by two times fewer visitors than the previous year, and its casinos are spending from 1.5 to 2.6 million dollars a day on upkeep. On average, only half the tables on casino floors are open due to the requirement to ensure the adequate distance between players, who are not allowed to gather in groups and even stand (for example, a typical baccarat table can only accept four people instead of seven).

The occupancy in hotels drops alike. Around 90 percent of the rooms are unoccupied, which is nine times more than the previous year.

What’s Next for Macau?

The good news is, though, that as China has loosened the border restriction between Macau and Guangdong Province (from July 15, punters coming back from Macau to Guangdong will no longer have to undergo two-week quarantine isolation), the Macau casino industry started to recover along with shares of Macau casinos, which soared by five to ten percent.

Macau hasn’t had new COVID cases for more than three months and has all the 45 patients released from hospitals, which is a very good sign for the local casino business.

Macau will have an edge over other gaming jurisdictions in drawing mainland Chinese gaming patrons.

Andrew Chung, Daiwa Capital Markets

If that holds true, the Las Vegas of Asia will tighten its stranglehold on the Asian gambling market and win over some new clientele even amidst the COVID-19-driven gambling recession.

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