The global outbreak of COVID-19 has seen the gaming industry grind to a halt with little indication of when a recovery might begin, even as all eyes turn to Macau – one of the few jurisdictions in which casinos continue to operate.
We anticipate Macau to be very, very quiet for quite a long time,” said Melco Resorts & Entertainment CEO Lawrence Ho during the company’s fourth quarter earnings call.
The call, conducted on 20 February, came less than 24 hours after Macau’s casinos had been granted permission to re-open following an unprecedented 15-day government-ordered closure to stop the spread of the novel coronavirus, now officially known as COVID-19.
Even at that relatively early stage, the impact on Macau’s visitor and revenue numbers had been staggering. Between 27 January and 10 February just 187,000 visitors arrived in Macau, representing a 90% year-on-year decline and decimating the hugely important Chinese New Year Golden Week. The closure of Macau’s casinos, implemented on 5 February after confirmation of a 10th positive test in the SAR, and tightened border restrictions saw visitor numbers fall even further to a low of just 2,800 on Saturday 8 February – at that stage the lowest single-day total since the Public Security Police Force began keeping records. To put that into perspective, average daily visitation to Macau through all of 2019 was 108,000.
Little did Lawrence Ho know during Melco’s earnings call that the impact on Macau’s casino industry was just the tip of the iceberg.
By now the origins of the novel coronavirus – believed to be a wet market in Wuhan – have been well documented. First identified in December 2019, but not widely reported until late January 2020, at time of writing the virus is known to have infected over 1.2 million people worldwide and caused more than 65,000 deaths. Considering the low level of testing worldwide, the true numbers are likely much more.
Inside Asian Gaming first reported on COVID-19 on 6 January after officials from Macau’s Gaming Inspection and Coordination Bureau had met with representatives of the SAR’s six casino concessionaires to brief them on new measures aimed at preventing the outbreak of disease. That meeting was, IAG reported at the time, in response to a recent outbreak of pneumonia in nearby Wuhan and ensuing warnings from the Health Bureau that some local residents may have carried the virus back to Macau.
Two days later, the DICJ said it would assist operators in the purchase of temperature detection equipment after Macau medical institutions revealed eight cases of patients who had recently traveled to and from Wuhan presenting with respiratory symptoms.
It was 22 January when Macau announced its first confirmed case of what was now known to be a coronavirus, and only another 13 days until Macau’s Chief Executive made the stunning declaration that all 41 casinos (and all other gaming operations) in the Macau SAR would be closed for a period of 15 days to prevent the viral spread.
Most have since re-opened, but with little resemblance to the thriving gaming floors that have typified Macau almost daily since the opening of Sands Macao signaled a new world order for the global casino industry in 2004.

In the first month after casinos re-opened on 20 February, just 250,000 visitors entered Macau – a 92% decline on the average number of visitors to the city each month in 2019.
LONG AND WINDING ROAD
The news that Macau’s casino industry was shutting down, even if “only” for 15 days, was met with widespread incredulity and it was no surprise to see IAG’s breaking news story of that historic day quickly become our most viewed article of all time, with over 21,000 page views and being shared across social media around 7,500 times — staggering numbers for a B2B news website designed solely for industry professionals. But it soon became apparent that Macau was not alone.
On Sunday 15 March, Philippines gaming regulator PAGCOR announced it was shutting down all gaming operations in Manila, effective immediately, for a full month in response to community quarantine measures implemented across the city. Forty-eight hours later PAGCOR extended the closures to cover the Philippines’ entire main island of Luzon, including the online POGO industry.
Within days, having seen the “Big 4” Las Vegas operators in MGM Resorts, Wynn Resorts, Las Vegas Sands and Caesars Entertainment Corp close their Las Vegas Strip properties, the governor of Nevada issued an unprecedented order for all non-essential businesses in the state to close for one month, essentially shutting down hundreds of casinos on the spot. As of midday on 25 March, all 465 commercial casinos and 508 of 534 tribal casinos nationwide had closed their doors, leaving around 649,000 casino employees out of work.
By the end of the month, casino closures had become the norm from Europe to Australia and everywhere in between – Korea, Malaysia, Saipan, India, Nepal and beyond.
And yet, to this day, the industry finds itself with one eye still fixed on Macau, not only as the leader of the global casino world but, ironically, as one of the very few jurisdictions in which casinos are still operating.
Just as Macau was the first to shut its doors, this tiny yet highly lucrative 30 square kilometer slice of land could well be the one to provide a much-needed glimmer of hope that brighter days lie ahead. The lingering question, given China’s cancellation of tour groups to Macau, as well as the Individual Visit Scheme (IVS) which accounted for 47% of all visitors in 2019, is exactly when that might be.
“I think it all really depends on when things come back on line and there are two facets to that,” offers Vitaly Umansky, Senior Research Analyst – Global Gaming for brokerage Sanford C Bernstein.
“One is the visas and a whole host of issues with that, and the second is all the transport activity. It’s hard to say whether things will come back in May and everything is back to where it was by November or December. It’s purely guesswork, right? And the timing is guesswork. Even the ramp up process is guesswork because we don’t know what the ramp up will look like from the perspective of visa issuance and transport activity. Those are kind of Macau specific.
“Right now the ferries are not running, the planes are not flying, there are no IVS schedules, there are no group visas, no authorized group travel so all of that needs to come online and nobody has any insight into that. I don’t, the operators don’t and even the government doesn’t know.”
Before the DICJ released its February GGR figures in early March, Bernstein issued a note in which it outlined three possible scenarios for Macau’s recovery. The first “bull” case scenario assumes a more optimistic outcome in which the rebound began strongly in 2H20, leaving GGR to fall 11% in 2020 and EBITDA by between 12% and 26%. More conservative is a scenario in which infections peak around early summer followed by a 3Q20 recovery, pushing GGR for the year down around 21% and EBITDA by 33% to 42%.
Finally, the “bear” case scenario in which softness carries throughout the year would result in a 43% fall in 2020 GGR and EBITDA declines of 57% to 86%.
Looking back on those scenarios weeks later, Umansky notes, “It could be materially worse, I doubt it is going to be materially better.
“But those pathways are all pretty different. You go from GGR being down for the year by low teens to GGR being down in the 20s to GGR being down 50+. All of those are possible, so it just becomes guesswork – if you talk to 10 people you get 10 different answers.”
Complicating attempts to predict how and when the coronavirus impact might ease has been the rapid speed with which the situation is changing globally – not so much day to day but more often hour by hour. China, for example, had begun easing restrictions on local residents, including those in Wuhan, by mid-March due to a massive decline in newly confirmed cases but was at the same time intensifying border controls due to new cases being imported from overseas. Indeed, in the days before publication it had become clear that the epicenter of COVID-19 was now the US and Europe, with most nations around the world now implementing their own variations on either the shutdown of non-essential services or a complete lockdown of its citizens.

But in Macau, there has been talk behind the scenes that entry restrictions to mainland Chinese visitors may be eased sooner rather than later.
Andrew Lee, Equity Analyst at Jefferies Equity Research, observed in a 23 March research note that the Chinese provinces of Hunan, Fujian and Jiangsu had gone 17, 19 and 27 days respectively at that time without any new COVID-19 cases and suggested an opening of the borders may be possible soon.
“With Chinese IVS and tour groups still suspended, we maintain our view that this could be relaxed on an individual region basis, albeit dependent on the number of ‘clean COVID-19 free days’,” Lee said.
“Of the 10 top Chinese regions for Macau visitors, six regions have recent confirmed new cases. Guangdong is key, given visitors from the province account for 33% of total Chinese visitors of which 73% entered via IVS.”
Lee estimated a 45% decline in Macau GGR for 2020, rebounding by around 33% in 2021, yet even those estimates may need revising: shortly before we went to print with this issue, Guangdong Province issued a requirement for all arrivals from Macau and Hong Kong, including provincial residents, to undergo a mandatory 14-day quarantine upon crossing the border, prompting a sudden and mass exodus out of Macau in order to beat the curfew.
Clearly making any far looking predictions right now is easier said than done.
INDUSTRY IMPACT
While the unprecedented closure of casinos worldwide has seen attention largely diverted to operators, few in the industry have escaped the COVID-19 pain. Among the most critically endangered have been SMEs (small and medium-sized enterprises), many of whom have been forced to actively seek government assistance in order to survive a lack of business. In early March, the Macau Economic Bureau revealed it had received around 2,500 applications for financial assistance from SMEs in the space of one month, some requesting the provision of interest-free loans, others adjustments to loan repayments.
Recognizing the problem, MGM China introduced in early March a series of relief measures for local Macau SMEs, including a revolutionary “Down Payment for Future Business” initiative by which it will provide advance payment to eligible vendors for future orders or services from MGM.
Bigger suppliers have been hit too, with stock prices decimated.
As reported by IAG on 20 March, Scientific Games Corp saw its share price fall 84.4% in the space of a week from a high of US$30.24 on 12 February to just US$4.71 eight days later, IGT from US$14.73 to US$4.12 in two days and Australian slot machine giant Aristocrat from AU$37.69 to AU$18.00 in the space of a month.
Aristocrat’s General Manager – Asia-Pacific, Lloyd Robson, says there is a lesson to be learned on the importance of industry participants working together.

“We have analyzed impacts through a number of lenses including employees, customers, supply chain and external stakeholders such as the government and our community partners,” he tells IAG.
“Given a number of our materials are sourced from the APAC region, a challenge has been understanding supply impacts. Customer wise there has been some impact given the fact so many casinos are closed.
“We are doing everything we can to support the community such as providing masks and hygiene products in Macau and food supplies in the Philippines. This is a challenge for the entire industry and we need to work together so that we can return bigger and better to help play our role in supporting jobs and growth in this dynamic region.”
SHIFTING SANDS
As it stands, the lingering uncertainty over what lies ahead promises to cause more headaches for some than others.
“If we’re sitting here in June and the numbers look like they look now then we’re in more serious problems,” says Umansky of the plight of Macau’s operators.
“I don’t think we’re going to be in that position – even in our bear case scenario we’re not getting to that point – so I think that things will gradually improve but from the operators’ perspectives, they are in different financial positions. You’ve got some operators that have more debt, more interest payments they have to make, they are larger companies with larger fixed costs and the amount of business coming in right now is very small, so those larger companies with larger outflows and more debt that needs to be serviced are going to be more impacted.
“Consider Wynn, Studio City (Melco Resorts & Entertainment), MGM to some extent, these operators have more debt so if this thing drags into the second half of the year and cash is being depleted I’m sure the CFOs are going to get nervous, as they should.
“Now I don’t think that any of these companies are going to be in financial distress at this stage – I think they can weather the storm – but dividends for some companies are going to become questionable in terms of paying the same level as last year. Every operator is a little bit different when it comes to this risk horizon that we might be looking at for different reasons.”
Steve Gallaway, Managing Partner of Global Market Advisors, believes those companies whose debt situation places them in a more precarious position may well learn a valuable lesson once they emerge from the crisis.
“For those that were over leveraged, it will remind them of the importance of being in a strong cash position, including availability of credit lines, to weather storms as they come, as we always know that storms do come,” he says.
Likewise, COVID-19 may well spark a new era of cost management within the industry.
“Each casino resort operator will seek to lower their fixed costs so they can react more quickly to future revenue shocks,” explains Kevin Clayton, a Senior Management Consultant and former Chief Marketing Officer of Galaxy Entertainment Group.
“The daily cash burn for leading operators during COVID-19 closures was reported as US$3 million to US$4 million per day which is a real burden on the balance sheet and something to be mindful of going forward.
“Not unlike the Global Financial Crisis in 2008-09, the latest crisis to hit Macau will present each gaming operator with an ideal opportunity to reengineer its internal processes and simplify its organizational structures.
“A crisis can shock a business into taking action that may not have been previously considered. During a period of sustained growth organizations frequently suffer from increased layers of complexity and costs that can choke the business. There’s no time like the present to look much closer at all casino resort operations in realizing cost efficiencies, while also mapping customer journeys in more detail to improve the effectiveness of customer facing operations, particularly with competition likely to intensify.”
Ultimately, says Clayton, the coronavirus pandemic will serve as a test not only of the financial resolve of operators but also the values by which they stand – a potentially key attribute for Macau’s six concessionaires as they prepare for their next big challenge: the re-tendering of gaming licenses.
“The world will have changed post COVID-19,” Clayton explains.
“Gaming operators are members of a global community and central to the local community in which they operate. Actions taken by each resort and gaming operator during a crisis are judged immediately through social media and news channels.
“Gaming companies and resort brands are beacons during a crisis and this is much more than simply being local employers. Pride in resort brands is significantly enhanced when witnessed as having values that are consistent with being caring and inclusive.
“Successful resort brands go that extra mile in protecting their employees, supporting local communities and putting longer term brand health ahead of short term profits.”