Macau keeps casinos open for social impact – expert

by Noah Taylor Last Updated
Investors? optimism in Macau rebound might be overstated, analyst warns

An industry consultant has suggested to GGR Asia that the reasoning for keeping Macau’s casinos open amid the ongoing coronavirus pandemic is now “social” rather than commercial.

The local tourism and casino 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 infection.

Authorities in Macau’s neighbouring mainland province, Guangdong, implemented a 14-day quarantine treatment for people entering from Macau and Hong Kong.

Guangdong authorities said in a Thursday statement that the province would start requiring all travellers coming from outside China to undergo a 14-day quarantine at designated facilities, and to take a test checking for coronavirus infection.

Such conditions apply to people from Guangdong that have visited Macau and wish to return home.

Earlier this week, the Macau authorities announced more stringent entry limits for visitors arriving from mainland China, Hong Kong and Taiwan.

The latest round of travel restrictions has further depressed visitor arrivals to Macau.

According to the city’s Public Security Police, Macau received fewer than 250 visitors on Sunday.

In 2019, the statistical daily average was about 108,000 tourist visits per day, based on the year’s 39.4 million arrivals reported by the Statistics and Census Service.

Casino industry consultant Ben Lee, managing partner of IGamiX Management and Consulting said: “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 Macua’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 coronavirus pandemic have led to market-wide temporary closures of casinos in key gaming jurisdictions in the Asia-Pacific region.

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 with nearly one third of the 39.4 million visitor arrivals from the Chinese province.

In a Friday memo, brokerage JP Morgan Securities (Asia Pacific) 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,” they said.

Macau could face multi billion dollar deficit

Macau could face a deficit of $5.99 billion in 2020, according to the University of Macau Chair Professor in Accounting and Finance Jean Chen.

Calvin Ayre reports that her assessment matches one previously provided by Secretary for Economy and Finance Lei Wai Nong last week.

This, of course, is due to decreases in revenue at casino concessionaires, who have already seen sharp declines in gross gaming revenues.

To alleviate the economic impact of this downturn, it’s expected the government will have to step up and support struggling businesses.

In a statement provided by the economist, she explained:

“This kind of dramatic change due to unexpected emergency is not necessarily leading to a long-term drop in revenue.

“A temporary deficit is normal for any country suffering from some dramatic events.

“A careful cost benefit analysis is necessary rather than one single indicator.”

Secretary Lei has already been taking steps to try to assist the local economy.

In January, before the full impact of Covid-19 was felt, he ordered that the annual check be brought forward into April to help Macau recover from the impact of the outbreak.

Each permanent resident would receive a check in the amount of $1250, while non-permanent residents will receive $750.

This was expected to cost the government an estimated $887.5 million.

Resort-casinos have been facing putrid revenues through the first two months of this year.

In January, revenues saw a modest decline, but they bottomed out in February, as gaming revenue dropped by 87.8 per cent as compared to the same month in 2019.

Back to top