Macau’s six casino operators could end the second quarter with a collective US$1 billion in EBITDA losses for the second quarter.
The forecast, culled from a Bloomberg survey of analysts’ estimates, comes as the self-governing Chinese territory, for more than a decade the richest gaming revenue market in the world, continues to reel from Covid-19-related travel restrictions that have been in place for months and have combined to largely cut it off from its base of wealthy gamblers from mainland China.
The quarter has seen gaming revenue decline by more than 95 percent compared to the same period last year.
Mandatory quarantines on both sides of the border, together with similar restrictions imposed on travelers to and from Hong Kong, has resulted in a decline in visitation of 84 percent through the first half compared to the same period in 2019.
Last year, Macau recorded more than 39 million visits, 71 percent of them𑁋27.9 million𑁋originating in mainland China.
Through June, visitation from the mainland totaled 2.3 million. The total from Hong Kong, the territory’s second-largest feeder market, was 653,000. Taiwan contributed 82,000.
To stem the spread of Covid-19, entry to Macau is restricted currently to those three jurisdictions. Their total contribution in June amounted to 22,556 visitors, a decline of more than 90 per cent year on year, with visitation from the mainland down 99 percent. The daily average for the month was a mere 752.
But it was worse in May, when the daily average was just above 500, and observers see the market’s prospects slowly improving now that the neighboring mainland province of Guangdong, a major source of visitation, has removed a mandatory 14-day quarantine for anyone entering the province, including returning mainlanders.
What remains, they say, is for the central government to return to issuing visas for individual travel outside the country, a measure known as the Individual Visit Scheme. Prior to its suspension in January when the pandemic hit, the program was in force in 49 cities and was the most lucrative source of gamblers for Macau’s casinos.
The absence of IVS “remains the issue that bars our patrons from visiting our places, from what we have understood from them,” said Kwok Chi Chung, who heads a trade group representing the entities known as junkets that recruit high rollers on the mainland and provide them with credit and other perks.
China has not said when the program will be reinstituted.
“The timing of any restart (of IVS) and the phasing of IVS and group travel will determine when (gaming revenue) begins to pick up again significantly and at what pace,” analysts with brokerage Sanford Bernstein said in a recent client note.
As it stands, Sanford is looking to another disastrous month in July, with gaming revenue possibly down by 93 percent, but expects a recovery in the second half. For the year the firm is forecasting revenue to fall 44 percent from last year’s world-leading US$36.4 billion before roaring back by 96 percent in 2021.
Analysts with investment bank Morgan Stanley are less optimistic for 2020, forecasting revenue to be down 60 percent versus 2019, but they’re looking for a stronger recovery next year of 110 percent over 2020 and a 20 percent increase from there in 2022, which would bump the market back into the black.
Looking ahead in the near term, they’re looking for gaming revenue of US$3.6 billion in the third quarter, unless the IVS is reinstated sooner than expected, and they expect EBITDA market-wide to get back to break-even, mainly as a result of cost-cutting.
