Macau is suffering the aftermath of its worst Covid outbreak ever, with gaming revenue falling 50.7% in August as tourists continued to stay away on fear of getting trapped in snap lockdowns.
(Bloomberg) — Macau is suffering the aftermath of its worst Covid outbreak ever, with gaming revenue falling 50.7% in August as tourists continued to stay away on fear of getting trapped in snap lockdowns.
Gross gaming revenue dropped to 2.19 billion patacas ($272 million), according to data released by the Gaming Inspection and Coordination Bureau on Thursday. The results were worse than the median analyst estimate of a 47.5% year-on-year decline, prolonging a slump that started from March.
- Revenue surged over five times from the previous month, when Macau was in lockdown, but was still down 91% from pre-pandemic levels in 2019.
Key Insights
- Tourists have been slow to return even after China resumed quarantine-free travel with Macau in early August after six weeks of suspension amid the enclave’s worst outbreak. The Covid flareup in July caused visitation to plunge 99% to about 9,700 arrivals, or just 300 a day on average. The situation improved slightly late last month, with average daily visitation picking up to about 15,000 between August 20 and 27, but was still down 87% from the pre-pandemic levels in 2019.
- Recent outbreaks in top Chinese tourist destinations, including Hainan, Tibet and Xinjiang, will also hurt travel sentiment in the near term among Chinese consumers, said Sanford C. Bernstein analyst Vitaly Umansky in an August 22 note. Visitor arrivals to Macau in the third quarter may return to only 10% of the pre-pandemic levels, meaning recovery will remain weak through September, said Bloomberg Intelligence analyst Angela Hanlee in a note on August 30.
- A prolonged visitor drought has accelerated a liquidity crunch at Macau’s six casino operators, which are already bleeding millions of dollars every day. Most operators can only survive between 15 months to two years from the end of the second quarter in a worst-case scenario of zero revenue, according to estimates by JPMorgan Chase & Co. analyst DS Kim.
- The continued revenue slump comes as casinos submit bids to renew their operating licenses. It remains to be seen if Macau’s decline in fortunes and the stronger government control being implemented will affect their interest in new 10-year terms starting January.
- One of the new legal requirements introduces a minimum revenue threshold for operators for the first time, although the target for 2023 has been set at an easy-to-reach level. If companies can’t generate at least 7 million patacas per table and 300,000 patacas per slot machine, they will need to pay an extra sum to make up the difference.
Market Performance
- The Bloomberg Intelligence index of Macau’s six casino operators fell 5% in August, compared with a 1% fall in the benchmark Hang Seng Index.
Read More
- August 26: Macau Clears Doubt for Covid-Hit Casinos With Revenue Threshold
- August 26: Macau’s Second Quarter Real GDP by Expenditure; Details
- August 22: MGM China to Inject $594 Million Into Unit for Macau License
- August 4: SJM Shares Dive 12% on Rights Issue at Discount
- August 3: China Reopens Border With Macau After Six Weeks as Cases Ebb
- August 1: Macau to Reopen After Flareup With Gaming Revenue at New Low
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