China’s coronavirus outbreak has emptied casinos in the world’s biggest gambling hub during their peak season, battering gaming companies’ shares and threatening revenues.
More than $18bn has been wiped off the market value of the Macau operations of Las Vegas giants including Wynn, MGM and Sands since the start of the epidemic, which has killed more than 200 people in China and infected thousands more.
Las Vegas Sands’ giant Venetian Macau casino was almost deserted on Thursday evening as mask-wearing croupiers shuffled cards at vacant tables and a few gamblers dozed at slot machines.
Macau, a sleepy Portuguese colony before its return to China in 1999, is the only part of the country where casinos are legal. The industry exploded in the years after the handover — the territory surpassed Las Vegas in gambling revenues in 2006 and now dwarfs its US rival.
Chinese visitors normally account for about four-fifths of takings at Macau’s casinos, according to investment bank Bernstein. But the virus has prompted local authorities to ban most arrivals from the mainland. Official data show visitors from mainland China over the important lunar new year period at the end of January were down more than 90 per cent on the year before.
“I’ve never seen it so empty,” a visitor from nearby Hong Kong, who declined to give her name, said between hands of baccarat. “There are maybe 20 per cent as many people as normal.”
“Pretty dire, that’s the only way to describe it,” said Ben Lee, managing partner of IGamiX, a Macau-based gaming consultancy that estimates a fall in first-quarter casino revenues of up to 50 per cent.
The city has for years been a lucrative income stream for US-based casino operators.
US-listed Wynn earns almost three-quarters of its $6.7bn yearly revenue from its Macau casinos, while two-thirds of Las Vegas Sands’ annual revenues of $13.8bn comes from the city.
Analysts at Fitch Ratings think the coronavirus will knock $2bn from these companies’ combined earnings before interest, tax, depreciation and amortisation in 2020.
Shares in the city’s casino operators have been hammered as investors brace for a hit to earnings as a result of the coronavirus. Hong Kong-listed MGM China, Sands China, Wynn Macau and Galaxy Entertainment have all tumbled 15 to 25 per cent over the past two weeks as the coronavirus epidemic worsened.
Senior executives at the big Las Vegas groups say all they can do is wait for the crisis to subside.
“This storm will pass, [but] we don’t know when,” said Robert Goldstein, chief operating officer at Sands China, in an earnings call on Wednesday. “We do know when it passes, we will be first in line . . . to be the biggest investor, most aggressive in Macau.” The company is building a $2.2bn follow-on to The Parisian hotel— The Londoner.
The coronavirus is not the only threat to gaming groups in the territory. Japan is introducing casinos for the first time, while Vietnam is also developing its gambling industry. Macau’s casinos had already suffered a drop in visitors because of months of anti-government protests in neighbouring Hong Kong.
The sector has overcome big setbacks in recent years. Five years ago Macau’s gambling revenues were hit by Chinese president Xi Jinping’s broad crackdown on corruption, which discouraged government officials and businesspeople from travelling to the city. A year later, Beijing clamped down on capital outflows from China, making it harder for gamers to convert their cash from renminbi to Macau’s currency, the pataca.
The sector bounced back both times, in the first instance by shifting its focus away from high-rolling VIPs to mass-market gamers.
This time it has fewer options. “We’re not going to get an influx [of visitors] from Hong Kong, Taiwan, Korea” to make up for the shortfall in Chinese spenders, said Vitaly Umansky, senior research analyst at Bernstein. “In the best-case scenario, things are back to normal by late spring . . . If the virus gets worse, things will last longer.”
That would pose a big problem for Macau’s government, which draws roughly 80 per cent of its tax revenues from gambling. Authorities have recently tried to reorient the economy towards areas such as financial services, but the moves are yet to bear fruit.
In the meantime, it must largely rely on the hardcore punters ready to brave the virus for their next bet.
“There is nothing to be concerned about,” said William, a visitor from Hong Kong who declined to give his full name, as he sat playing virtual roulette in a surgical mask.