Macau’s casinos got a quick boost from the restoration earlier this month of individual tourist visas for residents of neighboring Zhuhai. But analysts remain guarded about any rapid recovery for gaming revenues.
Revenue jumped to US$7 million in the week ended August 23, a 67 percent increase over the previous two weeks as visitation rose from 5,600 to 7,100 after the visas were reinstituted in Macau’s sister city on the mainland.
Despite the boost, August revenue through the 23rd was down 95 percent year on year, and analyst Vitaly Umansky of brokerage Sanford Bernstein expects that to mostly hold for the full month, with signs of a recovery beginning to make themselves felt when the visas are restored nationwide in September.
However, analysts are bullish on Macau’s long-term recovery, they are pointing to problems in the near term they believe could slow the return en masse of traditional junket-controlled VIP play and an increasingly lucrative segment of gamblers at the top end of the mass market.
Part of this are the ongoing dislocations to travel resulting from the pandemic.
“The mainland authorities will likely be careful in managing the number of permits issued” for tourism visits to Macau, “in order not to swamp” the city, said Ben Lee, managing partner of IGamiX Management and Consulting, speaking with industry news site GGRAsia.
“I believe also that Macau will be extra-cautious in managing the risks of a resurgence in Covid-19 cases that might occur were there a sudden surge of mainland visitors (into the city),” he said.
There is another major obstacle as well, he said, in that it’s getting harder to move large amounts of money out of China for gambling purposes since the government in Beijing launched a crackdown on capital flight last year. Online and proxy gambling, both illegal in China, are being targeted as part of this effort, and it’s thrown an unwelcome political spotlight on the junkets and crimping their ability to extend credit to their VIP customers.
“I see the next battleground as credit issuance,” Lee said. “The junket operators will need recapitalization in the short to medium term. And that will probably have to come from the casino operators.”
“More importantly, I see the casino operators competing more aggressively in granting credit to their premium mass players,” he added.
“The problem is that, say, two years down the track, a significant percentage of that will probably become receivables and eventually bad debt. We have seen that in the Macau market previously.”
