Macau’s hard-pressed casino industry got good news last week with the partial resumption in China of visas for individual travel. But bad news came out of Hong Kong with an announcement that Macau’s sister city is extending its border controls at least through July 7.
Authorities in the mainland city of Chongqing, a metropolis of more than 15 million people in southwestern China, said they’ve begun processing both individual and group travel visas, raising hopes that the 48 other mainland municipalities admitted to the Individual Visit Scheme (IVS), as it’s known, will soon follow.
Travelers on the IVS are the most lucrative segment of tourism for Macau, generating more than 13 million visits to the casino hub last year.
The central government suspended group visas and most visas for individual travel back in January to contain the spread of Covid-19, which was first identified in December in the mainland city of Wuhan.
The effects on Macau, whose gaming- and tourism-centric economy depends on travel from mainland China, have been devastating.
The city’s world-leading casino revenues, which topped US$36 billion in 2019, are down 74 percent through the first five months of this year, including two weeks in February when the industry was shut down by government order.
Visitation has fallen to a trickle over this period. It was down 99.7 percent year on year in April, a month when the number of mainland visitors declined by 99.6 percent to 10,500, only 87 of whom arrived on individual visas. Visitation from Hong Kong fell by 100 percent to 328.
The larger economy has suffered accordingly. Gross domestic product fell more than 48 percent year on year in the first quarter as exports of services declined 60 percent and the gaming and tourism sectors were down by 61.5 percent and 63.9 percent, respectively.
Gaming analyst Steven Wieczynski of Stifel Financial said it could take five to eight months after cross-border travel resumes, whenever that happens, for gaming revenues to stabilize and show improvement.
“Given the visa restrictions remain in place, and until those are removed, we don’t believe investors will really care what the market looks like,” he said in a client note last week. “We fully believe that investors understand what the Macau market is up against at this point and remain prepared for a horrific near-term time frame.”
The local government has been lobbying Beijing to resume issuing IVS visas and increase the number of cities whose residents can apply, but Hong Kong said it will continue through at least July 7 to require arrivals from Macau, Taiwan and mainland China to enter 14-day quarantine. It’s a decision that could complicate the process of reopening the borders, which ultimately relies on agreement and coordination between authorities in Hong Kong and Macau, in the neighboring mainland province of Guangdong and in Beijing.
As Jefferies gaming analyst David Katz noted, “Border reopening and quarantine relaxation could depend on Hong Kong.”
Guangdong, meanwhile, continues to require all mainland residents returning from Macau and Hong Kong to undergo a 14-day quarantine.
