Gaming revenue in Macau fell to its lowest level in 18 months after plunging 56% in March, according to data shared by the Gaming Inspection and Coordination Bureau. Income from gaming in the world’s largest gambling hub suffered from a Covid-19 outbreak in mainland China, which heavily reduced tourist arrivals to the city.
Gross gaming revenue (GGR) for the month was 4.67 billion patacas ($455 million), the lowest it’s been since September 2020. Revenue dropped 53% from the previous month, and was down 86% when compared to pre-pandemic 2019. For the first three months of the current year, combined GGR is down by 24.8% year-on-year to 17.77 billion patacas ($2.2 billion).
Additionally, the March results were slightly worse (a 55.8% drop) than the median analyst estimate, which predicted a 55% year-on-year decline. The disappointing GGR figures sent down shares of casino operators in the gaming hub, reports Bloomberg. The Bloomberg Intelligence index of Macau’s six casino licensees fell 7.6% in March.
Macau’s gaming operations have been negatively impacted by Covid-19 outbreaks across mainland China, which is the enclave’s largest source of visitors, including lockdowns in major cities such as Shenzhen and Shanghai. Hong Kong, Macau’s second-biggest source of tourists, has also been struggling with an outbreak.
The gaming hub is set to release full visitor data for March later in April, the cited source reports, although a note from Sanford C. Bernstein analyst Vitaly Umansky states average daily visitation in the first 16 days of the month was down 23% from February. Macau currently requires quarantine for travelers from more than 80 Chinese cities.
According to analysts, the impact of China’s virus outbreak could last until May, and operators have been described as having low expectations for a rebound in demand going forward, despite two major holidays -the Ching Ming Festival in early April and the Labor Day holiday in early May- taking place in the near future.
Macau license renewals
According to a report from the Macau Gaming Research Association, the gaming law amendments currently being discussed at the city’s Legislative Assembly (AL) could bring many “positive changes,” but operators should switch to direct VIP customers.
The association found it likely that the six existing operators will renew their concessions, leading to general stability in employment and investment. Additionally, the annual Gaming Service Index report predicted no massive impact on government revenue, reports Macau Business.
But the association has also suggested licensees switch focus to attracting former customers of junket VIP rooms and premium mass players to their own self-operated rooms. In December last year, concessionaires began cutting their ties with junket brands following a government crackdown on the sector, which led to the closure of all Suncity -the former top junket- rooms.
While the research department of investment bank China International Capital Corporation predicts the local VIP business could further decrease by 5% to 10%, the Macau Gaming Research Association believes there might be an opportunity for licensees there.
“From our perspective casino operators should draw from the experience of Las Vegas [and switch to direct VIP],” the report reads, according to the cited source. However, the mass market is set to gradually recover and occupy the largest market share eventually, and operators are more likely to target mass punters due to a larger profit margin and lower credit risk.
Macau’s six gaming concessionaires have already submitted their applications for a temporary license extension, which would grant them an additional six months, to end on December 31 of this year. Licenses were originally set to expire by June 26.
Authorities are confident they will complete the gaming law amendment process before the former expiration date of the current concessions, and launch the tendering process after that. The draft of the new gaming law bill was approved by the AL in January, and is currently under committee evaluation.
