Macao Initiates a Widespread Lockdown Forcing Casinos to Shut – Online-Casinos.com

COVID-19 lockdown park.

A surge in COVID infections across Macao has caused the government to initiate widespread lockdowns, affecting all commercial and leisure businesses in the city. That of course includes casinos throughout the city, many of which had been operating under heavy restrictions for the past few weeks whilst cases spiked. The lockdown in Macao is planned for one week only, but as always, there will be a review at the end of this period and a re-assessment as to whether the duration of the lockdown needs to be extended further.

COVID-19 lockdown park.

Many public services across Macao have had to close their doors this week as the government issues a snap 3-week lockdown – the measures affect all casinos and leisure resorts across the city. ©Queven/Pixabay

The lockdown has hit Macao at a difficult time, namely due to the constant disruptions rocking the biggest businesses throughout the city, and testing the fundamental drivers of revenue in this gaming model. Whilst it hasn’t been an easy few years for casinos in Macao, there had recently been positive breakthroughs with the regulatory struggles that many where facing. The Macao government, at the behest of Beijing, appears to be willing to tolerate the growth and libertarian business values that has underpinned the whole system for the previous couple of years.

China’s aggressive stance towards foreign tourism has also played a detrimental role in the declining cash-flows of the Macao casino industry. Strict laws on capital flight that have been implemented overseas have reared themselves in the financial problems of the entire sector. Without the free-flowing money via junket operators that the city had previously been able to bring in, there has been a major drawback in profits and long-term outlooks.

Financiers from the west own large stakes and equities in the region, a state of affairs that clearly China would work to dilute over the medium term. This imminent reality has spooked fresh capital investment from the west, as many portfolio managers wonder what use their stake will be in a sector that is vulnerable to punitive regulatory measures from Beijing, many of which are aimed at damaging the financial interests of western businesses.

Macao to Repurpose Casino Hotels into COVID-19 Medical Facilities

As they have already done previously in years gone by, the Chinese will initiate a series of wide-sweeping COVID-19 lockdown measures to stem the spread of the virus across the country. In the previous lockdown, casinos were forced to completely shut their doors – as well as losing the external interest of foreign customers entering the country. This double whammy on the customer flows into the casino is terrible for business, and has completely crippled the local industry of Macau.

The biggest casinos on the strip are all affected by this latest round of lockdown measures; those owned by Sands China, SJM Holdings, Melco Resorts, Wynn Macau, and MGM Resorts have been stuck without the freedom to operate for several weeks. Whilst they weren’t explicitly forced to shut their doors, an erosion in travel freedom privileges and a requirement for employees to work remotely has resulted in the casino having to close.

With the dire prospects currently facing the industry it is unlikely that a widespread re-opening will take place in the next two weeks. At least another 3 weeks are required before there are likely to be any changes on the laws that dictate travel into Macau. Given the length of this break, earnings for the quarter forecasts have already been slashed by a considerable level, meaning a slow recovery at least into the 3rd & 4th quarter. Even if we assume that the outbreak currently embroiling Macau is brought under control, there would still be a buffer of three weeks until the government decides to remove the quarantine restrictions.

In the coming months a lot of financial risk management work will need to be undertaken by the bosses in Macao to alleviate the pressure on the earnings. But with the economy of Macau facing massive macro difficulties too, finding a path back to the situation arising three years ago seems a highly unlikely occurrence. The Chinese government in Beijing have broader concerns regarding the implementation of lockdown measures – and have not given special treatment to the casinos.

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