Macau to reopen after Covid outbreak; bars, gyms, dining-in services to resume

The downturn has already seen the city lose its title as top gambling hub to Las Vegas. And China’s strict adherence to Covid Zero policies like lockdowns and movement curbs, which have become increasingly challenged in the face of highly transmissible variants, portends more pain to come.

Macau’s casinos suffered their worst month ever, with gaming revenue in July plunging to the lowest on record as the city cautiously eases Covid-19 curbs that have hammered the gambling hub.

Gross gaming revenue fell 95% to 398 million patacas ($49 million), the lowest since records began in 2009, according to the Gaming Inspection & Coordination Bureau. That’s better than analyst expectations for a 97% slump but is still 98% lower than pre-pandemic levels.

Authorities will further relax social-distancing rules from Tuesday after eliminating community spread of the virus, allowing venues such as bars and gyms to reopen and dining-in services at restaurants to resume. Still, patrons will need to show a negative nucleic acid test result to enter those venues. The border with the mainland remains shut.

That means little hope of revenue growth recovering from the slump it’s been in since March as virus outbreaks in China, Macau’s biggest source of visitors, led to a tightening of outbound travel, and a crackdown on cross-border gambling saw tougher rules around issuing visas. The situation deteriorated in mid-June when the gambling hub was hit by its largest ever flareup, prompting the mainland to suspend quarantine-free travel and throttling the city’s tourism lifeline.

While small by global standards, swelling case numbers spurred an almost two-week city-wide shutdown that was partially eased on July 23 and still leaves casinos with few gamblers and bleeding millions of dollars in cash every day.

The downturn has already seen the city lose its title as top gambling hub to Las Vegas. And China’s strict adherence to Covid Zero policies like lockdowns and movement curbs, which have become increasingly challenged in the face of highly transmissible variants, portends more pain to come. Macau needs infections to hold near zero to bolster the case for reopening the border and welcoming back tourists.

“You are stuck in this zero Covid situation where it’s unclear when the government’s actually going to do anything about it,” said Sanford C. Bernstein analyst Vitaly Umansky. Border restrictions are constraining the potential recovery for Macau, he said.

Although China also suspended quarantine-free travel with Macau for months in 2020, the city’s junket operators, which provided services and credit to high-rollers, were still bringing in some customers, said Umansky.

But that industry has been largely dismantled since late last year when China began its campaign against illegal gambling activities that facilitated capital flight, which saw two of the enclave’s top junket bosses arrested.

“The reality is right now there’s nobody in Macau,” Umansky said.

A Bloomberg gauge of Macau’s six gaming operators fell 1.5% on Monday, taking this year’s slump to 18%. Casinos’ dollar bonds rose further on Monday on the relaxation, extending an advance.

Las Vegas Sands Corp’s Macau operations posted a loss of $110 million before interest, taxes, depreciation and amortization in the quarter through June, which doesn’t capture the shutdown. That compares with a profit of $132 million a year earlier and $765 million in 2019. Its Singapore gaming resort reported $319 million in ebitda, which is 92% of pre-pandemic levels.

While other casino operators in Macau haven’t reported their results yet, analysts surveyed by Bloomberg estimated the industry could see a combined loss of about $500 million for last quarter. In the first six months of this year, the city recorded $3.3 billion in gaming revenue, compared with $4 billion for the Las Vegas Strip. Before the pandemic, the Chinese territory’s gambling market was six times the size of the Nevada city.