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Macau casinos face delayed recovery amid citywide Covid-19 lockdown, high interest rate environment, rating companies say

byjohn paul
July 17, 2022
Macau casinos face delayed recovery amid citywide Covid-19 lockdown, high interest rate environment, rating companies say
Macau casinos face delayed recovery amid citywide Covid-19 lockdown, high interest rate environment, rating companies say
  • Moody’s expects gross gaming revenue for the mass segment to reach only 30 per cent of 2019 levels, before rising to 70 per cent in 2023
  • A surge in Covid-19 cases and strict control measures are likely to delay a recovery this year and next, S&P says

  • Macau’s casino industry faces a delayed recovery from the impact of a citywide lockdown and a higher interest rate environment, according to two global rating companies.

    Gaming operators in Macau face low tourist arrivals because of strict coronavirus travel restrictions and, most recently, business closures, according to a report published by Moody’s Investors Service on Thursday.

    Macau shut its casinos for the first time in two years on Monday, as the gambling hub suspended almost all business activities for a week in a bid to control a rising number of Covid-19 infections caused by the Omicron variant.

    Macau’s gambling industry has already been hit hard by economic disruptions caused by the coronavirus pandemic, with gaming revenues falling 62 per cent year on year to 2.5 billion patacas (US$306 million) in June. In contrast, revenues in June 2019 totalled 23.8 billion patacas.

    Moody’s expects the city’s gross gaming revenue (GGR) for the mass segment, the key contributor to gaming operators’ profits and cash flow, to remain weak at only 30 per cent of 2019 levels this year, before improving to 70 per cent in 2023.

    “A full recovery in the mass segment is likely only in 2024, which will lead to a significant improvement in operators’ credit metrics,” Gloria Tsuen, a senior credit officer at Moody’s, said in the report.

    People queue for Covid-19 testing in Macau in this photo from June 2022. Photo: Reuters
    People queue for Covid-19 testing in Macau in this photo from June 2022. Photo: Reuters

    Macau’s casino industry faces a delayed recovery from the impact of a citywide lockdown and a higher interest rate environment, according to two global rating companies.

    Gaming operators in Macau face low tourist arrivals because of strict coronavirus travel restrictions and, most recently, business closures, according to a report published by Moody’s Investors Service on Thursday.

    Macau shut its casinos for the first time in two years on Monday, as the gambling hub suspended almost all business activities for a week in a bid to control a rising number of Covid-19 infections caused by the Omicron variant.

    Macau’s gambling industry has already been hit hard by economic disruptions caused by the coronavirus pandemic, with gaming revenues falling 62 per cent year on year to 2.5 billion patacas (US$306 million) in June. In contrast, revenues in June 2019 totalled 23.8 billion patacas.

    All Macau casinos close in latest Covid-19 outbreak

    Moody’s expects the city’s gross gaming revenue (GGR) for the mass segment, the key contributor to gaming operators’ profits and cash flow, to remain weak at only 30 per cent of 2019 levels this year, before improving to 70 per cent in 2023.

    “A full recovery in the mass segment is likely only in 2024, which will lead to a significant improvement in operators’ credit metrics,” Gloria Tsuen, a senior credit officer at Moody’s, said in the report.
    Macau shuts down for mass testing after 31 people test positive for Covid-19

    A slower-than-expected GGR recovery, likely because of continued travel restrictions, is a key risk, especially for companies that operate solely in Macau, she added.

    “The surge in Covid-19 cases and strict control measures in Macau and mainland China have limited visitations in Macau, and we believe this disruption will likely delay the recovery for Macau not only for this year, but also next year,” Aras Poon, associate director at S&P Global Ratings, said in a webinar on Thursday.

    Last week, S&P lowered Macau’s GGR forecast for the year to between only 20 to 30 per cent of 2019 levels, from its previous estimate of between 30 and 40 per cent. In 2023, the agency expects GGR to recover to 50 to 70 per cent of 2019 levels, compared to an earlier forecast of 80 per cent

    “With the [Covid-19] waves that we’ve seen recently in China and our continuing open border to China, it was to an extent inevitable that we would get transmission. Looking forward, hopefully we can get this under control as quickly as possible,” Lee said.

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