Macau Revenues Decreasing Sharply In First Half of August
Month-on-month revenues in Macau have fallen sharply compared to July as the island economy battles new lockdowns following the Delta outbreak. With more than 30 casinos in the city producing over half the entire GDP of Macau, city authorities decided to make the casinos exempt from the restrictions, and yet there has been a drop in revenues of some 48% in the first half of August. The general lockdown measures have clearly had an indirect impact on the casino’s financial performance.
The city of Macau has been hit with a series of revenue hits since opening up post-pandemic, with new strains of Covid circulating the city’s authorities have made the casinos exempt from the most severe lockdown measures due to their enormous provision of local GDP. ©leongkinkeong1/Pixabay
There are several reasons the casino business may be experiencing a downturn in gross gaming revenues in Macau, but none are more pronounced than the new outbreak of the Delta Covid variant. The reports of several confirmed positive cases in Macau at the beginning of August had slashed first week revenues across the city’s casinos by $15 million. With border restrictions now reversed following no new confirmed positive cases, shortfalls are expected to be narrowed to just 30% less than July’s total takings.
Initial reports regarding the significant losses being made by Macau’s casinos were first tabled by the financial investment and analytics firm Sanford C. Bernstein Ltd. The group found that Macau was on course to make a massive 48% shortfall in total revenues for the upcoming period. The forecasts based entirely on the first week’s revenue of August found that the first week of the month was the lowest since September 2020.
Gross gaming revenue is everything for casino business, as it underpins the financial stability of the enterprise and its ability to reinvest the cash into other business units. Growth of the top line is an essential indicator for further investments, and when these numbers fall there is always a degree of panic and introspection that follows.
Delta Variant to Blame for Revenue Shortfalls in Macau
There are a couple of reasons for the significant drop in financial performance for the opening week of August, none more prominent than the small outbreak of Delta-variant Covid cases. This strain of the virus is known to be more transmissible and authorities around the world have been adopting an over-cautious mitigation strategy whenever it is detected. Avoiding a larger outbreak is a key priority for the Macau government.
However, with over seven days now having passed since the last signs of an outbreak were detected, the government has now lifted its initial measures from immediate prevention to a less severe containment protocol. Following the downturn of case numbers, there is far less panic circulating and tourists are expected to begin circulating the key drivers of economic activity in Macau.
During the period of prevention, the freedom of movement across the border was the biggest factor affecting the downturn in revenues. Cross-border travel was heavily restricted to and from Macau during the first weeks of August. Special security measures were also re-introduced, with the requirement for all travelers to present a negative Covid test upon arrival to the border reimposed.
Macau also launched again its mass testing program to gather essential insights into the mobility of the virus throughout the local population. General measures were also once again reintroduced, having a profound knock-on effect for the casino industry which suffered a major reduction in footfall as an indirect consequence.
Macau Casinos Provide Half of Local GDP
The profound financial importance of the Macau casinos cannot be overlooked. With some 36 casinos in operation providing more than half of all local GDP, any restriction measures applied that affect normal business operations of these venues must be carefully considered. As such, casinos were not obliged to comply with the strictest government lockdown measures in the most recent action, under the condition that any casino detecting a direct case at one of its venues would immediately close if a case was found.
Previous restrictions placed on movement across the border have now been reversed, and there is once again a much broader entry surface for customers to take advantage of. All in all, the city of Macau is still operating under a status of prevention, and it is believed the situation is now back in a more manageable position. All this positive news means that casinos should return to pre-pandemic revenue levels over the course of the next few months.
To bring the financial reporting full-circle and look at this in a wider context, it is expected that the total gross gaming revenues for August will be around 30% lower than the previous month of July (which was the second-best since the start of the pandemic) and 70% less than the year-on-year comparison with pre-pandemic revenue figures.
