VSO Analysis: Why Are Macau Casinos Still Struggling With Pandemic Recovery?

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Not meeting expectation

Commenting in August 2020, analysts from investment bank JP Morgan predicted that the Macau gambling market would begin its road to recovery from the COVID-19 pandemic in mid-August that year. They estimated that casinos would recuperate 2019 levels of gross gaming revenue (GGR) by Q3 2021, pointing to the easing of travel restrictions and an increase in high-end gambling business.

the lowest monthly GGR throughout the entire pandemic

Almost two years on from those statements and that recovery has undoubtedly failed to materialize. In fact, the market only seems to be deteriorating. Last month, Macau casinos generated just MOP$3.67bn ($459m), down 86% from March 2019 and the lowest monthly GGR throughout the entire pandemic period.

Meanwhile, Macau’s main opponent in the world of casino hubs is reaching new heights. For the month of February, Nevada recorded $1.1bn in gaming revenue, marking the 12th consecutive month that its casinos generated more than $1bn. At the same time, revenue from the Las Vegas Strip hit its third-highest level in history, up 10% over pre-pandemic levels in 2019.

The contrast in recovery is clear to see, and there are a number of reasons why Macau is losing the battle. With its casino firms now paying millions to extend their licenses, a question remains as to whether the region can overcome its adversities or if Macau has lost its shine for good.

Travel restrictions persist

While Las Vegas has essentially returned to pre-pandemic conditions, multiple strains of coronavirus continue to cause issues in the Asian gambling hub. Outbreaks across much of mainland China, including neighboring regions of Zhuhai and Shenzhen, have necessitated continued border controls.

visitors reached 655,505 for the last reported month

Macau visitor numbers are on the rise, but still well short of 2019. The number of visitors reached 655,505 for the last reported month in February. Almost all of these (93%) came from mainland China. In contrast, February 2019 saw 3.5 million visitors, of whom 2.6 million arrived from the mainland. The total included 86,179 Korean travelers, a market that has since dried up completely due to restrictions.

The Macau government has successfully managed to keep the pandemic at bay, with just 82 confirmed local cases since the crisis began. However, it has evidently come at the cost of the SAR’s casino giants, which recently saw their share prices drop 9.4% on average amid another COVID spike in China.

High roller business fading

Of course, the travel restrictions have taken an impact on Macau’s high roller business, which has typically accounted for the majority of its GGR in the past. This has been worsened by a clamping down of junket operators – the firms that bring in big spenders from mainland China to play in Macau’s VIP rooms.

In November last year, Chinese officials made history by arresting a high-profile industry figure for the first time. Alvin Chau Cheok-wa, arrested on suspicion of illegal cross-border gambling and money laundering, served as CEO of major junket operator Suncity Group. The firm did business with Macau’s largest casinos, helping them attract high rollers through the door in return for a fee.

The shockwaves of this arrest were undeniable. Macau’s Gaming Inspection and Co-ordination Bureau (DICJ) ordered operators to stop offering credit to players earlier this year, a vital way to attract VIPs. Since then, Macau junkets have stopped operations at Wynn Resorts and Melco Resorts and Entertainment casinos.

Much like travel restrictions, this issue has also sent Macau casino stock downwards. After the arrest of Chau for instance, Wynn Macau stock dropped 10%, while Sands China and Galaxy Entertainment Group shares fell by almost 8%.

The casino giant consensus

Despite these ongoing roadblocks to market recovery, the casino operators of Macau seem to have maintained their faith.

received extension applications from all six concessionaires

According to TDM Radio, all six of the SAR’s concessionaires must pay between MOP$50m ($6.2m) and MOP$80m ($9.9m) to extend their gaming licenses for a further six months this year. DICJ Director Adrian Ho confirmed on Thursday that the body has received extension applications from all six concessionaires.

Not only that, but some are doubling down on their investment in the Asian gambling hub. Las Vegas Sands, for instance, no longer has any US-based casinos after closing the sale of the Venetian, Palazzo, and the Venetian Expo Center in February. CEO Robert Goldstein affirmed that the operator is “focused on growth,” and sees Asia as “the backbone of the company.”

Evidently, for all its progress in recovery, Las Vegas is still losing operators to its Asian counterpart. Macau’s casino giants see a light at the end of the tunnel, even though the current situation seems worse than ever. For now, it’s just about remaining afloat in the turbulent waters and waiting for the golden age of Macau to return.

The post VSO Analysis: Why Are Macau Casinos Still Struggling With Pandemic Recovery? appeared first on VegasSlotsOnline News.



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