The good news is that the Macau casinos reopened fully this week, with some of the familiar Covid restrictions dropped for nearby provinces. The bad news is few gamblers are showing up. July revenues tumbled to just $49 million, a 95 percent decrease from July 2021 and the lowest point in more than 2 years.
Macau reopened its borders with neighboring Zhuhai on Wednesday with no quarantine policy. Visitors from Zhuhai only had to show a negative nucleic test result no older than 24 hours and explain where they will stay of their travel history. Border crossings were up substantially with the relaxation of the quarantine requirement. The policy applies to several provinces of China, but visitors from other areas will still be required to quarantine.
The lack of visitation can be attributed mostly to China’s zero-Covid policies, which were the culprit for the complete lockdown of the city for mor than 10 days and then a gradual reopening of businesses soon thereafter. All residents and visitors to Macau were required to get tested multiple times. Visitors to Macau were required to quarantine for 14 days, but that was reduced to 7 days last week, except for the approved provinces.
The future looks dim if China continues to insist on the zero-Covid. Another outbreak could trigger another shutdown at any time.
“There are no clear indicators as to when the Chinese market will fully ease their restrictive Covid measures, which should help drive the return of ‘normal’ business patterns to Macau,” Stifel Financial gaming analyst Steven Wieczynski wrote in a note to clients. “At this point, Macau operators are working on reimagining or reengineering their business models for when the market opens back up.”
Even if the borders reopen to Macau it’s not likely to result in a rush back to the casinos. JP Morgan analyst DS Kim believes it will take a while before players are comfortable in returning and says the October Golden Week could be the first solid earnings of the year.
But Credit Suisse analysts Kenneth Fong, Lok Kan Chan and Sardonna Fong think there are other concerns.
“The pace of GGR ramping up may also be slow as players’ confidence may have been impaired and could take time to rebuild,” they wrote.
“The players may choose not to return in the near term, fearing that they may not be able to return to their hometown if additional new cases are discovered.”
Despite the doom-and-gloom business conditions right now, Las Vegas Sands Chairman and CEO Rob Goldstein says he still has faith in the market, where his company has already invested $15 billion.
“We retain great optimism and our ability to perform to pre-pandemic levels and beyond in Macau once visitation returns,” Goldstein said on the LVS second-quarter earnings conference call. “We would welcome the opportunity to invest billions of additional dollars in Macau. We continue to believe Macau is an outstanding market for additional investment.”
All this comes with a backdrop of the new gaming laws and concessions go into effect. The six concessions and sub-concessions—SJM Resorts, Wynn Resorts (Macau) and Galaxy Casino, and subconcessionaires MGM Grand Paradise, Melco Resorts (Macau), and Venetian Macau—will all be treated as equal and all signs indicate the current operators will be granted a 10-year concession (down from the first term of 20 years). Some expect bids from new concessionaires, which the Macau government welcomes. But all bidders must file an extensive application which will required.
Secretary for Administration and Justice André Cheong, will chair the Commission for Gaming Licenses Tender, says December 31 is the deadline for awarding the concessions but all bids are due by September 14. Then a complicated process of weighing the bids, along with negotiations with the bidder will commence.
An increased tax rate, near elimination of junket operators, fewer “satellite casinos—operated under the concessionaire’s license—and strict requirements to develop non-gaming attractions are some of the negatives of the new law.
