An industry consultant has suggested to GGRAsia that the reasoning for keeping Macau’s casinos open amid the ongoing Covid-19 crisis is now “social” rather than commercial.
The local casino and general tourism sector has faced growing challenges in light of many layers of travel restrictions imposed by Macau and by governments outside, in order to combat the spread of the novel coronavirus and its associated Covid-19 infection.
Authorities in Macau’s neighbouring mainland province, Guangdong, implemented last week a 14-day quarantine requirement for people entering the province from Macau and Hong Kong.
Guangdong authorities said in a Thursday statement that the province would start requiring all travellers coming from outside mainland China to undergo a 14-day quarantine at designated facilities, and to take a test checking for Covid-19 infection. Such conditions apply to people from Guangdong that have visited Macau and wish to return home.
Earlier last week, the Macau authorities announced more stringent entry limits for visitors arriving from mainland China, Hong Kong and Taiwan. That included a 14-day quarantine requirement for people arriving from Hong Kong.
The latest round of travel restrictions has further depressed visitor arrivals to Macau. According the city’s Public Security Police, Macau received fewer than 250 visitors on Sunday. 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.
Casino industry consultant Ben Lee, managing partner of IGamiX Management and Consulting Ltd, and who is also a veteran of gaming operations in Australia and in Macau told GGRAsia: “With the mainlanders and Hong Kongers now effectively barred from entering Macau, the only rationale possible for keeping the casinos in Macau open right now is a social one which is to keep Macau residents employed.”
The city’s government has previously indicated its hope that the local casino sector could avoid worker lay-offs amid the coronavirus emergency.
There has been some commentary by observers of the Macau industry noting that the city’s government has considerable negotiating power in its relations with Macau’s six casino licensees, especially during the current crisis. There is likely to be a public retender for Macau gaming rights linked to the expiry in June 2022 of the existing permits.
The effects of the Covid-19 pandemic have led to market-wide temporary closures of casinos in key gaming jurisdictions in the Asia-Pacific region, including the Philippines, South Korea and Malaysia. Macau ordered the suspension of operations at all casino facilities for 15 days in February, but casinos have since been ordered to reopen.
Guangdong is one of the biggest feeder markets for Macau’s tourism industry: nearly one third of the 39.4 million visitor arrivals recorded by the city last year came from that Chinese province. Guangdong is also a major supplier of gamblers to Macau’s casinos, according to analysts covering the city’s gaming industry.
In a Friday memo brokerage JP Morgan Securities (Asia Pacific) Ltd had noted that the quarantine requirement imposed by Guangdong authorities was a negative for Macau’s casino industry. “For Macau, this is effectively the same as casino shutdown,” said analysts DS Kim, Derek Choi and Jeremy An.
They added: “Most, if not all, current visitors enter Macau via Guangdong (Gongbei border and Lotus Bridge), who were the source of GGR [gross gaming revenue] this month-to-date (down 75 percent to 80 percent year-on-year).”
In a Sunday memo, banking group Morgan Stanley said it was cutting further its estimates for Macau GGR.
“In our February industry report, we slashed our 2020 GGR estimates by 18 percentage points and earnings before interest, taxation, depreciation and amortisation by 32 percent. With Covid-19 spreading globally and travel restrictions tightening, we are cutting our estimates further,” stated analysts Praveen Choudhary, Gareth Leung and Thomas Allen.
“We cut our GGR estimates for the industry to -35 percent” for 2020, they added.
“In terms of quarterly impact, we expect GGR to decline by -60 percent year-on-year and -56 percent in the first quarter and second quarter [respectively], due to continued weakness in visitation amidst quarantine rules,” the Morgan Stanley team further observed, referring to the Macau market.
Morgan Stanley also expressed some concern about the fallout for the coronavirus crisis having some impact on Macau mass table games revenue into 2021.
Its analysts stated: “Prior to Covid-19, more than 20 people could be on one table betting for hours; now most casinos have imposed limits of three seats per table with no standing players. We think the habit of increasing social distance may continue for some time even after Covid-19 is contained.”
Macau’s casino regulator, the Gaming Inspection and Coordination Bureau, last month had introduced special conditions for the city’s operators including a limit on the number of gaming tables they were permitted to have in use and a restriction on the number of available seats at each table, as part of a number of measures to prevent the spread in Macau of the coronavirus responsible for the Covid-19 infection.
According to the guidelines, patrons are not be allowed to place bets while standing by a gaming table. The number of available seats at each gaming table has also been limited, and there should be an empty seat between each of the patrons. For instance, only three to four guests are permitted to sit at what would ordinarily be a seven-seat gaming table.
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"The resurgence of Covid cases in China is again delaying a market recovery [in Macau] and is a credit negative"
Vice president and senior credit officer at Moody’s Investors Service