Instinet LLC, the research arm of Nomura, said on Monday that it expects a recovery in Macau casino gross gaming revenue (GGR) “to begin in June”. The brokerage said it believes that a post-Covid-19 recovery among the international casino markets it covers “would occur first in Macau”.
In its latest report on the Macau casino sector, Nomura said additional border restrictions between Macau and neighbouring Guangdong province imposed in late March had been a “setback” for casino GGR recovery, “which was gaining traction in March”.
The neighbouring mainland China province is normally a major feeder market for Macau tourism. It is currently one of a number of places in the region that has imposed travel restrictions to try to contain the spread of the Covid-19 disease.
Guangdong currently insists even its own residents must undergo a 14-day quarantine if they are coming back from Macau, and there is currently no clarity on when either that measure, or various other restrictions will end.
While Macau’s casino GGR in March saw an 80 percent contraction year-on-year according to official data, things might get even worse in April, according to investment analysts.
The April GGR estimates come against a background of sharply declining numbers of daily visitors judged year-on-year.
According to the city’s Public Security Police, Macau received an aggregate of less than 550 visitors over the weekend. In 2019 the statistical daily average was circa 108,000 tourist visitors per day, based on that year’s tally of 39.4 million arrivals as reported previously be the city’s Statistics and Census Service.
Macau’s Secretary for Economy and Finance, Lei Wai Nong, said earlier this month that the decline so far in GGR generated by the city’s casino industry amid the coronavirus pandemic was within the government’s expectation.
Mr Lei also said that once it was confirmed that the Covid-19 disease had been stopped, the government would work on attracting more tourists to the city. At that stage, the authorities in Macau would ask the central government to consider restarting the country’s individual visit scheme (IVS), in order to enable more mainland residents to visit the city, he added.
Gradual recovery
In Monday’s memo, the Nomura analysts said conversations they had with representatives of Macau casino operators suggested that “normal” operations “likely means a June reopen”.
“There will likely be a recovery in 2020, but slow,” wrote analysts Harry Curtis, Daniel Adam and Brian Dobson. They said normal traffic flow at Macau borders could resume in six to 12 months, but that the recent travelling restrictions implemented in mainland China indicated “Beijing is taking the risk of a second wave of infection seriously”.
“When the IVS system is restarted, it will be into a safe and controlled environment,” they added.
According to the Nomura team, if normal levels returned in June, second-quarter GGR could be down circa 80 percent in year-on-year terms. “VIP and premium mass are probably the first to recover since there are likely to be restrictions on visitation growth which will limit mass,” wrote the analysts.
The institution said it expected GGR to decline by 65 percent and 60 percent in the third and fourth quarters, respectively, from a year earlier.
The Macau market might eventually recover and reach US$22.6 billion in GGR in 2021, roughly 62 percent of the 2019 level, “if the reinfection rate [of Covid-19] is low”.
“To achieve this number, IVS needs to expand to larger, more distant provinces, mass and group visitors must have confidence in health screening protocols at the borders, and social distancing policies on casino floors should be relaxed, thus increasing the number of operational gaming positions during peak periods,” stated the Nomura team.
The brokerage expects the IVS system to gradually restart in May, firstly in mainland China provinces “where demand will not overwhelm immigration checkpoints”. It added: “Larger provinces, like Guangdong and Hubei, may get segmented into northern and southern sections with visas first issued in the closest virus-free areas.”
