The largest casino market in the world has been laid low during its busiest season of the year. The lethal coronavirus continued its rapid spread last week, from central China across East and Southeast Asia and beyond.
Macau’s six casino concessions, which recorded a combined US$36.52 billion in gaming win in 2019 in a comparatively slow year, were operating last week in what Reuters described as a “near ghost town.” The Lunar New Year holiday normally would see the casinos so packed with gamblers from China, it would be almost impossible to get near a baccarat table.
Instead, the floors were largely deserted, restaurants shuttered, and shows and events canceled. Visitation from Mainland China to Macau, the only place in the country where gambling is legal, plummeted by almost 90 percent from last year’s holiday.
Overall visitation to the city was down last week by almost 70 percent.
“In a nutshell, the impact is far worse than what we expected, especially for the gaming industry, especially in Macau,” said Michael Zhu, senior vice president for Asia-Pacific planning, operations and analysis for The Innovation Group, a U.S.-based industry consultancy.
“But it’s going to affect every region in Asia, and beyond,” Zhu told GGB News. “If a player has to get on a plane to get to a destination, that destination is going to suffer.”
Analysts following the stocks of Macau’s six Hong Kong-listed operators and the U.S.-listed parents of three of them𑁋Las Vegas Sands, Wynn Resorts and MGM Resorts International𑁋struggled last week to get a handle on the potential fallout, with estimates of seasonal gaming revenue dropping in the range of 20 percent to 30 percent.
And it’s possible that this isn’t the worst of it.
“Last week, investor concerns focused on the magnitude and duration of gross gaming revenue declines,” Macquarie Securities analyst Edward Engel said in a client note. “However, more recent concerns have focused on the likelihood of operating losses or even casino closures.”
Meanwhile, the Hong Kong Maritime Department has suspended high-speed ferry service between Hong Kong and Macau, where seven cases of the disease had been confirmed as of the end of last week, and where individual and group travel from the mainland has been halted in conjunction with strenuous measures under way in China to try to contain the spread of the contagion from its epicenter in the east-central province of Hubei.
It’s believed the virus started in Wuhan, the capital of Hubei and the largest city in central China with a population of 11 million. It reportedly originated in one of the ubiquitous wet markets where wild animals are popular fare, as they are throughout the country, sold alongside domestic livestock, poultry and seafood for human consumption for their supposed benefits to health and virility.
Researchers suspect the virus may have been transmitted either to the market’s domestic animals or directly to people working or shopping in the market. Since then, human-to-human transmission has been confirmed𑁋at least one case of which has been identified in the U.S.𑁋and the virus has spread to every one of China’s 31 provinces, infecting almost 8,000 people as of last Thursday and claiming 170 lives, 162 of them in Hubei.
The central government has banned all travel into and out of Wuhan and a dozen surrounding cities in a bid to quarantine an area of some 25 million people roughly the size of the U.S. Midwest. Last week, those restrictions were extended via orders to travel agencies and online travel service providers across the country to suspend all group tours and travel packages that include flight tickets and hotels, effectively closing China’s vast borders.
The World Health Organization, which responded last Thursday by declaring the coronavirus a global health emergency, has praised the “monumental national response,” but reports are that efforts have been hampered by shortages of hospital beds, medical personnel and equipment in and around Wuhan, while across the country’s social media landscape authorities have come under sharp criticism for failing to respond early enough and decisively enough to prevent the crisis.
What is certain is that a critical period ensured after the initial outbreak in which the disease spilled with China’s prodigious outbound tourism trade into Hong Kong, Macau, South Korea, Vietnam, Thailand, Singapore, Malaysia, Japan and the Philippines and farther still into Australia, India, Germany and the United States, where five cases had been reported as of last week. Russia has closed its 2,600-mile border with China and shut down all rail service apart from one Moscow-to-Beijing train.
“A conservative look at the situation leads one to conclude that it will likely be worse than SARS,” said gaming analysts with the brokerage Sanford Bernstein team.
SARS, which occurred in 2002-2003, infected more than 8,000 people worldwide and claimed 774 fatalities.
It also occurred at a time when Macau gaming was in its infancy, before it grew into the territory’s principal industry, a decade-long transformation that rendered the economy of the self-governing city almost entirely dependent on China, which provides some 90 percent of its casino customers.
“Pessimism rose on how long it could take for business to recover (which, history tells us, it will),” said analyst Harry Curtis of Nomura Instinet, reporting on his conversations with casino executives. “Some operators commented that it could take upward of a month to resolve, as the virus is not close to being contained.”
For Zhu, that would qualify as almost a best-case scenario.
“I think the whole situation will last longer,” he said. “If I were to take a guess, I would say end of Q2. You need the whole situation to subside, and then time to readjust to a leisure mindset that will allow those activities to resume. There will be a psychological impact.”
Dozens of airlines have cancelled or reduced service to mainland China, although flights to Hong Kong and Macau have yet to be impacted.
