In Macau, a recent increase in Covid-19 infections prompted the government to order all industrial and commercial businesses closed for a week, was extended for five days, now slated to end on July 22. This includes the city’s 35 casinos, which were last forced to close for 15 days at the start of the pandemic, in February 2020.
Essential operations were unaffected, such as telecommunications, public transportation, garbage collection and utilities. Casino hotels were allowed to stay open, but shopping malls inside the resorts closed, and restaurants were limited to takeout dining. The public has been instructed to stay home, with strict punishments promised for those who disobey.
In the wake of the shutdown, typically lively tourism spots in the city were deserted until Macau resembled a “ghost town,” reported Inside Asian Gaming, which noted that Macau’s inflexible Covid prevention policy hasn’t eased up in the past two and a half years.
As of late last week, approximately 19,000 people were in mandatory quarantine due to the policy, which curtails the activities of daily living whenever there’s a Covid surge. Other countries such as Singapore have come to understand that they must adapt to and co-exist with the virus without massively disrupting business each time new cases emerge.
Since June 18, more than 1,700 new Covid cases have been detected in Macau, but only two Covid-related deaths have been reported in the special administrative region since the start of the pandemic: two women, aged 100 and 94, who lived in the same nursing home.
For Macau, the shutdown of borders and casinos are especially problematic, as the gaming industry employs most of the population directly and indirectly and accounts for more than 80 percent of government revenues.
Gaming stocks tumbled on the latest news, with some analysts predicting that gaming revenue should not be expected to recover until the end of the third quarter or sometime during the fourth quarter. “We would probably need to write off July and likely August as well from the models,” said DS Kim, an analyst at J.P. Morgan.
Vitaly Umansky of Sanford C. Bernstein now expects gaming revenue to fall 98 percent for this month compared to July 2019, and 90 percent in August versus August 2019. That said, he remains confident in Macau’s long-term recovery, based on mass and premium-mass gaming.
Kenneth Fong of Credit Suisse also expects gaming revenue to be sluggish into August and September, with the recovery beginning in the first quarter of 2023.
Local media report that the local populace is growing restless under the restrictions, with fights breaking out at Covid testing centers and some residents having to stand in line for more than 20 hours to access healthcare.
Meanwhile, casino operators continue to burn cash to pay the bills. U.S.-based Las Vegas Sands has pumped another billion dollars into its Chinese operations, reported GGRAsia. Sands China said the parent’s loan would “support, among other things, the working capital and general corporate purposes of the group.” It added that the infusion “highlights both Las Vegas Sands’ and the company’s confidence in the long-term growth potential of Macau, and the availability of the loan further bolsters the company’s balance sheet position and liquidity.”
JP Morgan’s Kim and Livy Lyu said the loan would “extend Sands China’s liquidity runway by six months to a total of 15 months (by September 2023), even under the zero-revenue assumption (i.e., pure cash-burn with no gross gaming revenue).”
They said this should be “more than enough liquidity to weather through this downturn [in the Macau market], as we cautiously expect a meaningful easing of travel policy to gradually kick in from end-2022/early-2023.”
Last month, Wynn Resorts announced a $500 million loan to its Hong Kong-listed subsidiary Wynn Macau.
According to Asia Gaming Brief, there’s a “silver lining” behind all this gloom. Ben Lee of IGamiX Management & Consulting told the news outlet the shutdown will help Macau operators by limiting their expenditures in a zero-revenue environment. For one thing, they don’t have to pay staff during the suspension of business.
But that’s sparked concerns for employees in the sector. “Not every employee has a condition to stop their work for seven days,” Stephen Lau, president of Power of the Macao Gaming Association, told the Macao Daily.
Lau said without a paycheck, people may not be able to pay their bills or meet their daily needs. Lau added, “Many (employees) fear that the current rights that they have will diminish someday as their employers have been incessantly burning cash. They are afraid these rights will be gone once the gaming companies secure their new concessions, and they fear they might relive what had happened in 2008, when there were a lot of lay-offs and various labor issues surfaced.”
He also questioned the government’s zero-Covid policy, in the face of clear evidence that it doesn’t work. He said residents shouldn’t suffer due to the government’s “ineffective pandemic prevention works.”
