With Macau casinos opening on a limited basis, we’ll soon have some sense of how much damage the Covid-19 virus will have on immediate business and near-term prospects.
The long-term effect is harder to forecast. One fairly safe assumption is, the longer travel restrictions and fears of contagion continue, the longer the impact, even after normal travel and business operations resume.
The uncertainty, of course, is more than how long it will take to recover from the epidemic. We don’t even know if the epidemic is being contained, or whether we’re in the early stages of a pandemic.
On the reassuring side, Covid-19’s rate of spread has been slowing, especially in its home of Hubei Province in China.
On the other hand, epidemiologists say a pandemic is still possible, noting how highly contagious Covid-19 is, its ability to be transmitted by persons who have yet to suffer symptoms, and how widespread the disease already has become geographically, even if the number of cases outside China is very small.
What we do know is that the virus, or more accurately, the effort to stop its spread, is having a negative economic impact on companies as diverse as Apple and Wal-Mart, which have warned that their profits are being affected.
Economic slow-downs are not good for the gaming industry, regardless of the cause.
Still, there are efforts to quantify the impact.
Bernstein analyst Vitaly Umansky forecasts Macau’s first-quarter gaming revenues will decline 50 percent—or more than 60 percent if visa issuance is not resumed. For the full year, his optimistic case is an 11 percent decline in revenue, and 12 percent to 26 percent in EBITDA. His bear estimate is a 43 percent decline in revenue, and a 57 percent to 86 percent fall in EBITDA. As Bernstein rightfully cautions, “Our guess on the length or depth of the outbreak is as bad as any other layman’s.”
Andrew Lee of Jefferies sees first-quarter daily gaming win of $40 million growing to $69 million in the second quarter. That compares to $95 million daily win in November, and $92 million in December.
The impact isn’t just in Macau. Casinos throughout Asia and Australia are experiencing soft business as gamblers stay home. Even the big Las Vegas Strip operators expect an impact, as they lose Chinese baccarat players.
One of the unknowns is how long businesses will take to recover after the epidemic is contained. Our guess is that it will take longer than many now expect.
Psychology will be as important as virus containment in any gaming industry recovery.
Successful tourism has two requisites: cleanliness and safety.
Safety usually refers to crime as in the likelihood of being accosted by a panhandler or being robbed.
In this case, there might be a longer-term, lingering unease, as in, “What are the chances I will get sick? What are the chances I might die?”
By definition, tourists want to be care-free. Merely raising those questions could be problematic to a recovery. It will likely take a long time after the all-clear sounds for carefree attitudes to return.
